10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

Commission file number: 0-19771

ACORN ENERGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-2786081
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
4 West Rockland Road Montchanin, Delaware	19710
(Address of principal executive offices)	(Zip Code)

(302) 656-1708

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at May 16, 2008
Common Stock, $0.01 par value per share	11,222,481 shares

ACORN ENERGY, INC.

Quarterly Report on Form 10-Q

for the Quarterly Period Ended March 31, 2008

TABLE OF CONTENTS

PART I. Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 31, 2007 and March 31, 2008	1
	Consolidated Statements of Operations for the three month periods ended March 31, 2007 and 2008	2
	Consolidated Statement of Changes in Shareholders’ Equity for the three month period ended March 31 2008	3
	Consolidated Statements of Cash Flows for the three month periods ended March 31, 2007 and 2008	4
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26
PART II. Other Information
Item 6.	Exhibits	27
Signatures		28

Certain statements contained in this report are forward-looking in nature. These statements are generally identified by the inclusion of phrases such as “we expect”, “we anticipate”, “we believe”, “we estimate” and other phrases of similar meaning. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Many of these factors are described in our most recent Annual Report on Form 10-K as filed with Securities and Exchange Commission.

ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

	As of December 31, 2007			As of March 31, 2008
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,644		$	10,509
Restricted cash		—			1,533
Accounts receivable, net		1,775			2,697
Unbilled work-in-process		1,784			965
Inventory		119			219
Other current assets		1,391			1,759
Total current assets		24,713			17,682
Property and equipment, net		1,335			1,355
Available for sale - Investment in Comverge		55,538			18,219
Investment in GridSense		—			1,119
Investment in Paketeria		1,439			1,273
Other investments		668			668
Funds in respect of employee termination benefits		1,607			1,774
Restricted cash		1,517			1,372
Other intangible assets, net		5,987			5,823
Goodwill		3,945			3,945
Other assets		218			1,441
Total assets	$	96,967		$	54,671
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term bank credit	$	590		$	754
Current maturities of long-term debt		171			116
Convertible debt, net		4,237			—
Trade accounts payable		910			834
Accrued payroll, payroll taxes and social benefits		1,118			909
Other current liabilities		3,844			2,302
Total current liabilities		10,870			4,915
Long-term liabilities:
Long-term debt		12			11
Liability for employee termination benefits		2,397			2,637
Deferred taxes		16,038			465
Other liabilities		325			247
Total long-term liabilities		18,772			3,360
Minority interests		—			1,955
Shareholders’ equity:
Common stock - $0.01 par value per share:
Authorized - 20,000,000 shares; Issued -11,134,795 shares and 11,966,762 at December 31, 2007 and March 31, 2008		111			119
Additional paid-in capital		49,306			51,280
Warrants		1,330			1,322
Accumulated deficit		(9,692	)		(12,281	)
Treasury stock, at cost – 777,371 shares for December 31, 2007 and March 31, 2008, respectively		(3,592	)		(3,592	)
Accumulated other comprehensive income		29,862			7,593
Total shareholders’ equity		67,325			44,441
Total liabilities and shareholders’ equity	$	96,967		$	54,671

The accompanying notes are an integral part of these consolidated financial statements.

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ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

	Three months ended March 31,
	2007			2008
Sales
Projects	$	812		$	1,908
Catalytic regeneration services		—			2,249
Services		206			119
Other		21			19
		1,039			4,295
Cost of sales
Projects		581			1,307
Catalytic regeneration services		—			1,491
Services		173			99
Other		—			—
		754			2,897
Gross profit		285			1,398
Operating expenses:
Research and development expenses		130			51
Selling, marketing, general and administrative expenses		810			2,553
Total operating expenses		940			2,604
Operating loss		(655	)		(1,206	)
Gain on early redemption of convertible debentures		—			1,259
Finance expense, net		(26	)		(2,988	)
Loss before taxes on income		(681	)		(2,935	)
Tax benefit (expense) on income		(2	)		642
Loss from operations of the Company and its consolidated subsidiaries		(683	)		(2,293	)
Minority interests		—			(9	)
Share in losses of Paketeria		(187	)		(287	)
Net loss	$	(870	)	$	(2,589	)
Basic and diluted loss per share:
Net loss per share – basic and diluted	$	(0.09	)	$	(0.23	)
Weighted average number of shares outstanding - basic and diluted		9,507			11,050

The accompanying notes are an integral part of these consolidated financial statements.

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ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders’ Equity (unaudited)

(in thousands)

	Number  of Shares		Common  Stock		Additional Paid-In Capital			Warrants			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income			Total
Balances as of  December 31, 2007		11,135	$	111	$	49,306		$	1,330		$	(9,692	)	$	(3,592	)	$	29,862		$	67,325
Net loss		—		—		—			—			(2,589	)		—			—			(2,589	)
FAS 115 adjustment on Comverge shares, net of deferred taxes		—		—		—			—			—			—			(22,392	)		(22,392	)
Differences from translation of financial statements of subsidiaries		—		—		—			—			—			—			123			123
Comprehensive loss		—		—		—			—			—			—			—			(24,858	)
Intrinsic value of beneficial conversion feature of convertible debentures at extinguishment		—		—		(1,259	)		—			—			—			—			(1,259	)
Exercise of options and warrants		52		—		129			(8	)		—			—			—			121
Conversion of Debentures		780		8		2,955			—			—			—			—			2,963
Stock option compensation		—		—		149			—			—			—			—			149
Balances as of March 31, 2008		11,967	$	119	$	51,280		$	1,322		$	(12,281	)	$	(3,592	)	$	7,593		$	44,441

The accompanying notes are an integral part of these consolidated financial statements.

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ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

	Three months ended March 31,
	2007			2008
Cash flows provided by (used in) operating activities:
Net loss	$	(870	)	$	(2,589	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		32			290
Share in losses of Paketeria		168			287
Increase (decrease) in liability for employee termination benefits		(252	)		240
Deferred income taxes		—			(646	)
Amortization of stock-based deferred compensation		289			149
Amortization of beneficial conversion feature, debt origination costs and value of warrants in private placement of Debentures		—			3,064
Gain on early redemption of Debentures		—			(1,259	)
Provision of loan and accrued interest to investee company		—			248
Minority interests		—			9
Other		1			9
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable, unbilled work-in process and other current and other assets		(172	)		40
Increase in inventory		—			(100	)
Increase (decrease) in accounts payable and other liabilities		38			(978	)
Net cash used in operating activities		(766	)		(1,236	)
Cash flows provided by (used in) investing activities:
Investment in GridSense		—			(1,153	)
Restricted cash		—			(1,388	)
Loans to investee and potential investee companies		—			(2,877	)
Transaction costs in 2007 acquisition of SCR Tech		—			(927	)
Amounts funded for employee termination benefits		73			(167	)
Utilization of employee termination benefits		(46	)		—
Acquisitions of property and equipment		(76	)		(110	)
Net cash used in investing activities		(49	)		(6,622	)
Cash flows provided by (used in) financing activities:
Short-term debt borrowings (repayments), net		(302	)		164
Proceeds from long-term debt		107			—
Proceeds from convertible debentures with warrants net of transaction costs		3,685			—
Redemption of convertible debentures		—			(3,443	)
Repayments of long-term debt		(35	)		(67	)
Issuance of shares to minority shareholders in consolidated subsidiary		—			1,948
Proceeds from employee stock option and warrant exercises		114			121
Net cash provided (used in) by financing activities		3,569			(1,277	)
Net increase (decrease) in cash and cash equivalents		2,754			(9,135	)
Cash and cash equivalents at beginning of period		1,521			19,644
Cash and cash equivalents at end of period		4,275			10,509

The accompanying notes are an integral part of these consolidated financial statements.

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ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

Non-cash items:
Unrealized loss from Comverge shares		37,319
Reduction of deferred tax liability with respect to unrealized loss from Comverge shares		14,927
Non-cash financing and investing items
Conversion of Debentures to common stock and additional paid-in-capital		2,963
Value of beneficial conversion feature upon issuance of convertible debentures	2,125
Adjustment of retained earnings and other current liabilities with respect to the adoption of FIN 48	305

The accompanying notes are an integral part of these consolidated financial statements.

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ACORN ENERGY, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(dollars in thousands)

Note 1: Basis of Presentation

The accompanying unaudited consolidated financial statements of Acorn Energy, Inc. (“AEI”) and subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Note 2: New Accounting Standards

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”) and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 141(R) requires the acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-date fair values and changes other practices under SFAS 141. SFAS 141(R) also requires additional disclosure of information surrounding a business combination, such that users of the entity’s financial statements can fully understand the nature and financial impact of the business combination. SFAS 160 requires entities to report non-controlling (minority) interests in subsidiaries as equity in the consolidated financial statements. The Company is required to adopt SFAS 141(R) and SFAS 160 simultaneously in its fiscal year beginning January 1, 2009. The provisions of SFAS 141(R) will only impact the Company if it is party to a business combination after the pronouncement has been adopted. The Company is currently evaluating the effects, if any, that SFAS 160 may have on its financial position, results of operations and cash flows.

In June 2006, the Emerging Issues Task Force (EITF), reached a consensus on Issue No. 06-01, “Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service from the Service Provider” (EITF No. 06-01). EITF 06-01 provides guidance on the accounting for consideration given to third party manufacturers or resellers of equipment which is required by the end-customer in order to utilize the service from the service provider. EITF 06-01 is effective January 1, 2008 for the Company. The adoption of EITF 06-01 did not have a material impact on the Company’s results of operations and financial position.

In June 2007, the Emerging Issues Task Force (EITF) reached Issue No. 07-03, "Accounting for Nonrefundable Advance Payments for Goods or Services Received to Be Used in Future Research and Development Activities" (EITF No. 07-03). EITF No. 07-03 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. The provisions of EITF 07-03 are effective January 1, 2008 for the Company. The adoption of EITF 07-03 had no material impact on the Company’s results of operations and financial position.

6

In December 2007, the FASB ratified EITF Issue No. 07-01, "Accounting for Collaborative Arrangements" ("EITF 07-01"). EITF 07-01 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. EITF 07-01 also establishes the appropriate income statement presentation and classification for joint operating activities and payments between participants, as well as the sufficiency of the disclosures related to these arrangements. EITF 07-01 is effective for fiscal years beginning after December 15, 2008 (January 1, 2009, for the Company). EITF 07-01 shall be applied using modified version of retrospective transition for those arrangements in place at the effective date. An entity should report the effects of applying this Issue as a change in accounting principle through retrospective application to all prior periods presented for all arrangements existing as of the effective date, unless it is impracticable to apply the effects the change retrospectively. The Company does not expect the adoption of EITF 07-01 to have a material impact on its results of operations and financial position.

Note 3: Investment in Comverge Inc. (Comverge)

As of March 31, 2008, all of the Company’s 1,763,665 Comverge shares are accounted for as “available-for-sale” under SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities”. Accordingly the Company recorded its investment in Comverge based on Comverge’s share price of $10.33 at March 31, 2008 and reflected a decrease of $37,319 to its investment balance by recording those shares at fair market value (to $18,219). In addition, the Company reduced the previously recorded deferred tax liability associated with the recording of those shares at fair market value by $14,927. The net reduction of $22,392 was recorded to Accumulated Other Comprehensive Income.

Note 4: Investment in GridSense Systems Inc. (GridSense)

On January 2, 2008, the Company participated in a private placement financing for gross proceeds of C$1,700 (approximately $1,700) for GridSense Systems Inc. (CDNX: GSN.V) (“GridSense”). The placement consisted of 24,285,714 units at $0.07 per unit, each unit being comprised of one common share and one share purchase warrant. Each warrant entitles the holder to acquire an additional common share at $0.10 per share until July 2, 2008. The shares, and any shares acquired on exercise of the warrants, are subject to a four month hold period expiring May 3, 2008.

The Company was the lead investor in the placement acquiring 15,714,285 shares and 15,714,285 warrants for C$1,100 (approximately $1,100) plus transaction costs of approximately $53. The 15,714,285 shares acquired by the Company in the placement represent 24.52% of GridSense's issued and outstanding shares. If the Company exercises all of the 15,714,285 warrants acquired in the placement, it will own 31,428,570 GridSense common shares, representing 39.37% of GridSense's issued and outstanding shares.

The Company’s investment in GridSense is accounted for using the equity method in accordance with APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock”. The Company has not recorded its share of income/losses in GridSense for the period from January 2, 2008 to March 31, 2008 of as the Company has not been able to receive timely financial information. This will result in a lag period of three months in the reporting of the Company's share of income or losses in GridSense. The Company has not yet allocated the purchase price of its investment in GridSense to identifiable intangibles as it is awaiting finalization of its preliminary independent appraisal for the allocation of its purchase price. The Company will begin to amortize any acquired intangibles identified in the independent appraisal beginning in the second quarter of 2008.

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Note 5—Investment in Paketeria AG (Paketeria)

The Company currently owns approximately 31% of Paketeria’s outstanding shares and accordingly, records 31% of Paketeria’s losses as equity loss in Paketeria.

The Company’s Share of losses in Paketeria is comprised of the following:

	Three months ended March  31, 2007			Three months  ended March  31, 2008
Equity loss in Paketeria	$	(133	)	$	(258	)
Amortization expense associated with acquired non-compete and franchise agreements		(35	)		(29	)
Stock compensation expense		(19	)		—
Share of losses in Paketeria	$	(187	)	$	(287	)

During the three months ended March 31, 2008, the Company lent Paketeria€503 ($762, based upon the then current exchange rates) on a series of promissory notes. The promissory notes bear interest at the rate of 8.0%. The promissory notes are due on the earlier of December 31, 2008 or upon the completion of any transaction in which Paketeria raises funds through the any equity and/or debt financing. The promissory note balances are included in Other Current Assets in the Consolidated Balance Sheets. The Company is to receive additional warrants as a result of its loans to Paketeria. The number of warrants and their terms have not yet been determined.

Note 6: Goodwill and Other Intangible Assets

There were no acquisitions or impairments of goodwill recorded during the three-month period ended March 31, 2008. The Company’s goodwill is related to both its SCR segment ($3,714) and its RT Solutions segment ($231).

The Company’s amortizable intangible assets consisted of SCR technologies and RT Solutions intangibles (see below). The changes in the carrying amounts and accumulated amortization of intangible assets from December 31, 2007 to March 31, 2008 were as follows:

	SCR Technologies					RT Solutions Intangibles
	Cost		Accumulated amortization			Cost		Accumulated amortization			Net
Balance at December 31, 2007	$	5,511	$	(81	)	$	557		—		$	5,987
Amortization		—		(137	)		—		(27	)		(164	)
Balance at March 31, 2008	$	5,511	$	(218	)	$	557	$	(27	)	$	5,823

All intangible assets are being amortized over their estimated useful lives, which were estimated to be ten years for SCR Technologies and seven years for RT Solutions intangibles. Amortization expense for each of the three months ended March 31, 2007 and 2008 amounted to $6 and $164, respectively. Amortization expense with respect to intangible assets is estimated to be $631 per year for each of the years ending March 31, 2009 through 2013.

Note 7: Other Assets

At March 31, 2008, Other Assets includes a $1,000 secured promissory note from Software Innovation, Inc., a Canadian company with whom the Company has entered into a letter of intent to acquire. The promissory note bears interest at a rate of 12% per year and is due on December 31, 2010. Software Innovation is the developer of Coreworx™ a world-leading software tool for capital project collaboration. Coreworx™ is currently utilized to manage the construction of hundreds of major capital projects, including offshore oil wells, refineries, mining operations and power plants around the world. Completion of the transaction remains subject to due diligence and execution of definitive documentation. During the three month period ended March 31, 2008, the Company recorded interest income of $5 with respect to the promissory note.

8

At March 31, 2008, Other Assets also includes a $200 on a convertible promissory note from Environmental Energy Services, Inc. (EES) in contemplation of the Company’s CoaLogix subsidiary’s acquisition of substantially all the assets of EES. As CoaLogix did not enter into a definitive agreement with EES by the defined target date in the convertible promissory note, the initial interest rate on the convertible promissory note was increased from 8% per year to 11% per year and the due date was fixed at February 28, 2011. CoaLogix may convert the $200 into 2.0% of the common stock of EES until May 31, 2008.

During the first quarter of 2008, the Company lent an affiliated company $245 on a promissory note that was to bear interest at a rate of 8% per year and was due on January 30, 2010. At the end of the first quarter of 2008, the Company took a provision against the loan due to questionable collectibility and included the expense in selling, marketing and general administrative expense in the first quarter.

Note 8: Redemption of Convertible Redeemable Subordinated Debentures

On January 29, 2008 the Company completed the redemption of all of its outstanding 10% Convertible Redeemable Subordinated Debentures due March 2011. Subsequent to the Company’s announcement of redemption, the holders of the debentures elected to convert approximately $2,963 into approximately 780,000 shares of the Company’s common stock, at a conversion price of $3.80 per share. The remaining $3,443 principal amount of Debentures was redeemed in accordance with the notice of redemption. As a result of the early redemption of the Debentures, the remaining balance of unamortized beneficial conversion features, warrants and debt origination costs of $3,064 was written off to interest expense in the first quarter of 2008. In accordance with applicable accounting standards, the Company recorded a non-cash gain of $1,259 on the redemption of the Debentures from the reacquisition of the beneficial conversion feature.

Note 9: Minority Interests

On February 29, 2008, the Company entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”) with the Company’s wholly-owned CoaLogix Inc. subsidiary (“CoaLogix”) and EnerTech Capital Partners III L.P. (“EnerTech”) pursuant to which EnerTech purchased from CoaLogix a 15% interest in CoaLogix for $1,948. Such interest was reflected in the Company’s Consolidated Balance Sheets as Minority Interests. The Company owns 85% of CoaLogix following the transaction. The Company recorded a gain of $3 as a result of the investment by EnerTech. Such gain is included in Selling, Marketing, General and Administrative expenses. The minority interests’ share of CoaLogix’s first quarter 2008 net income was $9.

In connection with completing the transaction under the Stock Purchase Agreement, the Company, CoaLogix, EnerTech and the senior management of CoaLogix entered into a Stockholders’ Agreement dated as of February 29, 2008 (the “Stockholders’ Agreement”). Under the Stockholders’ Agreement, EnerTech is entitled to a designate a member of the Board of Directors of CoaLogix. In addition, the Stockholders’ Agreement provides the Company and EnerTech with reciprocal rights of first refusal and co-sale in connection with proposed transfers of their CoaLogix stock.

Pursuant to the Stockholders’ Agreement, EnerTech also has a right to purchase additional stock to maintain its percentage interest in CoaLogix in the event of dilutive transactions. The right may be exercised until such time as the Company’s ownership in CoaLogix is reduced to 75% or CoaLogix completes an initial public offering.

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Note 10: Stock Options and Warrants

(a) Acorn Stock Options

A summary of stock option activity for the three months ended March 31, 2008 is as follows:

	Number of  Options (in shares)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate  Intrinsic Value
Outstanding at December 31, 2007		1,684,000			3.09		3.1 years
Granted at market price		285,000			5.21
Exercised		(47,500	)		2.28			$	125
Forfeited or expired		—			—
Outstanding at March 31, 2008		1,921,500			3.42		3.4 years	$	2,821
Exercisable at March 31, 2008		1,349,498			2.99		2.8 years	$	2,526

The weighted average grant date fair value of the 285,000 stock options granted during the first three months of 2008 was $3.35 per share. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Volatility	74	%
Expected term (years)	5.7 years
Risk free interest rate	2.5	%
Expected dividend yield	0.0	%

Total stock-based compensation expense included in the Company’s statements of operations for the three months ended March 31, 2007 and 2008, respectively, was:

	Three months ended March 31, 2007		Three months ended March 31, 2008
Cost of sales	$	21	$	—
Selling, marketing, general and administrative expenses		249		149
Share of losses in Paketeria		19		—
Total stock based compensation expense	$	289	$	149

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(b) Warrants

A summary of stock warrants activity for the three months ended March 31, 2008 is as follows:

	Number of Warrants (in shares)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding at December 31, 2007		986,506			3.89		4.01
Granted		—
Exercised		(4,717	)		2.78
Forfeited or expired		—
Outstanding and exercisable at March 31, 2008		981,789			3.89		3.76

Note 11: Warranty Provision

The following table summarizes the changes in accrued warranty liability from the period from December 31, 2007 to March 31, 2008:

	Gross Carrying Amount
Balance at December 31, 2007	$	107
Warranties issued and adjustment of provision		—
Warranty claims		—
Balance at March 31, 2008	$	107

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Note 12: Fair Value Measurement

In September 2006, the FASB issued SFAS 157 which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair-value measurements. The Company adopted SFAS 157 effective January 1, 2008 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis. Although the adoption of SFAS 157 did not materially impact the Company’s financial condition, results of operations or cash flows, the company is required to provide additional disclosures within its condensed consolidated financial statements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer the liability (an exit price) in an orderly transaction between market participants and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy within SFAS 157 distinguishes between three levels of inputs that may be utilized when measuring fair value including level 1 inputs (using quoted prices in active markets for identical assets or liabilities), level 2 inputs (using inputs other than level 1 prices such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability) and level 3 inputs (unobservable inputs supported by little or no market activity based on the company’s own assumptions used to measure assets and liabilities). A financial asset’s or liability’s classification within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company also adopted FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). This standard permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years after November 15, 2007. The Company did not elect to apply the fair value option available under SFAS 159 for any of its eligible instruments.

Financial assets and liabilities measured at fair value on a recurring basis as at March 31, 2008 consisted of the following:

	Level 1		Level 2		Total
Available for sale securities		18,219		—		18,219

Marketable securities that are classified in level 1 consist of available-for-sale securities for which market prices are readily available. Unrealized gains or losses from available-for-sale securities are recorded in accumulated other comprehensive (loss) income.

Note 13: Segment Information

The Company’s current operations are based upon two operating segments:

· RT Solutions whose activities are focused on two areas - naval solutions and other real-time and embedded hardware & software development. RT Solutions activities are provided through the Company’s DSIT Solutions Ltd. subsidiary.

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· SCR (Selective Catalytic Reduction) Catalyst and Management Services conducted through the Company’s recently created CoaLogix subsidiary which provides catalyst regeneration technologies and management services for selective catalytic reduction (SCR) systems used by coal-fired power plants to reduce nitrogen oxides (NOx) emissions. As these activities were acquired in November 2007, there are no comparative results reported for these activities for the three months ended March 31, 2007.

Other operations include various operations in Israel that do not meet the quantitative thresholds of SFAS No. 131.

	RT Solutions		SCR		Other			Total
Three months ended March 31, 2008:
Revenues from external customers	$	1,682	$	2,249	$	364		$	4,295
Intersegment revenues		—		—		—			—
Segment gross profit		564		758		76			1,398
Segment income (loss)		83		183		(35	)		231
Three months ended March 31, 2007:
Revenues from external customers	$	700		—	$	339			1,039
Intersegment revenues		—		—		—			—
Segment gross profit		196		—		89			285
Segment income (loss)		57		—		(83	)		(26	)

Reconciliation of Segment Income (Loss) to Consolidated Net Loss

	Three months ended March 31,
	2007			2008
Total income for reportable segments	$	57		$	266
Other operational segment loss		(83	)		(35	)
Total operating income (loss)		(26	)		231
Share of losses in Paketeria		(187	)		(287	)
Minority interests		—			(9	)
Gain on early redemption of Debentures		—			1,259
Net loss of corporate headquarters and other unallocated costs*		(657	)		(3,783	)
Total consolidated net loss	$	(870	)	$	(2,589	)

* In 2008, includes $3,064 of interest expense recorded associated with the early redemption of the Company’s Convertible Debentures (see Note 8) and $646 of tax benefits.

Note 14: Subsequent Events

Strategic Alliance and License Agreement with Solucorp Industries, Ltd.

On May 9, 2008, the Company’s CoaLogix subsidiary signed an agreement to pay an upfront $2,000 license fee and subsequent royalties on net sales (as defined) to obtain the exclusive worldwide commercialization and marketing rights to Solucorp Industries, Ltd. (SLUP.PK) IFS-2C technology for the fixation of heavy metals, such as mercury, for the electric power generation industry. The agreement grants CoaLogix exclusive worldwide marketing rights for the technology for a period of ten years with on option to extend for an additional five years. The Company had paid a $650 deposit for the license fee in the first quarter of 2008 which is included in other current assets.

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Value of the Company’s Investment in Comverge

As of May 9, 2008, the total market value of the Company’s 1,763,665 Comverge shares was approximately $24.5 million based on a May 9, 2008 closing market price of $13.89 per share.

Income Taxes

In April 2008, the Company received a notification confirming the Company’s exemption from corporate income tax from the State of Delaware. The Company is therefore only subject to Federal income taxes at rate of 34%. In future periods, the Company will determine the value of all deferred tax assets and liabilities at that rate. In addition, as a result of the notification, the Company will eliminate a $225 tax provision previously recorded with respect to the corporate income tax from the State of Delaware in the second quarter of 2008.

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ACORN ENERGY, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Certain of these factors are discussed in this report and in our Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Developments

Strategic Alliance and License Agreement with Solucorp Industries, Ltd.

On May 9, 2008, our CoaLogix subsidiary signed an agreement to pay an upfront $2 million license fee and subsequent royalties on net sales (as defined) to obtain the exclusive worldwide commercialization and marketing rights to Solucorp Industries, Ltd. (SLUP.PK) IFS-2C technology for the fixation of heavy metals, such as mercury, for the electric power generation industry. The agreement grants CoaLogix exclusive worldwide marketing rights for the technology for a period of ten years with on option to extend for an additional five years.

Redemption of Convertible Debentures

In January 2008, we completed our previously announced redemption of our outstanding 10% Convertible Redeemable Subordinated Debentures due March 2011. Prior to the redemption, the debenture holders converted the $3.44 million convertible portion of the debentures into approximately 900,000 shares of our common stock and the remaining $3.44 million of debentures were redeemed in accordance with the notice of redemption. In accordance with applicable accounting standards, we recorded a non-cash gain of approximately $1.3 million on the redemption of our debentures.

Sale of 15% of CoaLogix to EnerTech

On February 29, 2008, we entered into a Common Stock Purchase Agreement (the “Agreement”) with CoaLogix and EnerTech Capital Partners III L.P. (“EnerTech”) pursuant to which EnerTech purchased from CoaLogix a 15% interest in CoaLogix for $1.95 million. Following the transaction, we own 85% of CoaLogix.

In connection with the transaction under the Agreement, the Company, CoaLogix, EnerTech and the senior management of CoaLogix entered into a Stockholders’ Agreement dated as of February 29, 2008 (the “Stockholders’ Agreement”). Under the Stockholders’ Agreement, EnerTech is entitled to designate a member of the Board of Directors of CoaLogix. In addition, the Stockholders’ Agreement provides the Company and EnerTech with reciprocal rights of first refusal and co-sale in connection with proposed transfers of their CoaLogix stock.

Pursuant to the Stockholders’ Agreement, EnerTech also has a right to purchase additional stock to maintain its percentage interest in CoaLogix in the event of dilutive transactions. The right may be exercised until such time as the Company’s ownership in CoaLogix is reduced to 75% or CoaLogix completes an initial public offering.

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Comverge

The market value of our 1,763,665 common shares of Comverge on March 31, 2008 was approximately $18.2 million based on a market share price of $10.33 on that date. Since March 31, 2008, the share price of Comverge’s shares have risen and currently (as of May 9, 2008) our shares in Comverge have a value of $24.5 million based on a market share price of $13.89 per share.

Paketeria

In April 2008, Paketeria announced that it would shortly open five new branches in a trial project together with the Association of the German Volksbanken and Raiffeisenbanken (BVR) to compete with the Deutsche Post. The purpose of this project is to fill the gap left by Deutsche Post when it closed their branches. If the project is successful, the concept will be extended to over one-thousand Volksbanks.

Thus far in 2008, we have provided Paketeria with approximately $1 million of loans in order to provide it with additional temporary financing to help it support its operations until it is able to raise funds through the sale by existing shareholders of shares through the escrow arrangement from Paketeria’s listing on the Frankfurt Stock Exchange (see our Annual Report on Form 10K) or other sources.

GridSense

On January 2, 2008, we participated in a transaction where we were the lead investor in a private placement by GridSense Systems Inc. (“GridSense”), acquiring 15,714,285 shares and 15,714,285 warrants for C$1.1 million (approximately $1.1 million). The 15,714,285 shares acquired by us in the placement represent 24.52% of GridSense's issued and outstanding shares. If we exercise all of the 15,714,285 warrants acquired in the placement, we will own 31,428,570 GridSense common shares, representing 39.37% of GridSense's issued and outstanding shares.

Restricted Cash

In January 2008, we transferred $1 million (in addition to the $1.5 million transferred in 2007) to a bank in Israel as security for a guarantee the bank has provided to the Israel Ministry of Defense in connection with a $7.5 million naval project being performed by our DSIT subsidiary. The cash is restricted and is expected to be unavailable to us until early 2009 at which time we expect a significant portion to be released.

Corporate

Under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the rules thereunder, we would be deemed to be an investment company if the “value” of “investment securities” we own accounts for more than 40% of the total “value” of our assets, exclusive of “government securities,” cash and certain cash items. The shares of Comverge common stock we own are “investment securities” under the Act and account for significantly more than 40% of the value of our total assets.

Pursuant to a “safe harbor” provision under the Investment Company Act rules, we would be exempt from regulation as an investment company, if, among other things, we were deemed to primarily control Comverge. In order to primarily control Comverge, we would need to own more than 25% of its voting securities and be Comverge’s single largest shareholder. As a result of (1) the Comverge IPO in April 2007 which resulted in the substantial dilution of our equity position, and (2) the resulting termination of our voting agreements with other shareholders, we are likely to be deemed to no longer have primary control of Comverge. As a result, as of the end of our fiscal quarter ending June 30, 2007, we may have fallen within the definition of an investment company, without any applicable exemption.

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We have availed ourselves of the provision under Rule 3a-2 under the Investment Company Act that exempts an issuer from investment company status for up to one year, so long as it has a bona fide intent to be engaged primarily, as soon as is reasonably possible (and in any event by the termination of the one-year period), in a business other than that of investing, reinvesting, owning, holding or trading in securities.

Our management and Board of Directors has formulated plans and is implementing plans for returning the Company to compliance with the numerical tests for exemption from investment company status as soon as possible and no later than June 30, 2008. These plans include the acquisition of one or more wholly-owned, majority-owned, or primarily-controlled operating businesses and the sale of a substantial portion of our Comverge shares. Our 2007 purchase of SCR-Tech, our sale of Comverge shares and our additional investment in our majority-owned and primarily-controlled subsidiary has significantly reduced the percentage of the total value of our assets represented by investment securities. The Board has not yet performed a valuation of our assets after giving effect to such transactions.

We remain committed to coming into compliance with the numerical tests for exemption from investment company status as soon as possible and no later than June 30, 2008. We may need to sell and/or distribute additional Comverge shares, acquire a suitable operating business or businesses and take other actions to come into compliance with the Investment Company Act. There is no assurance that we will be able to successfully complete those steps by June 30, 2008. While we could request an order from the SEC to give us additional time beyond the one year period allowed by Rule 3a-2 to take the actions necessary to come into compliance with the Investment Company Act, the Board of Directors has not yet determined the need to request such an order and there is no assurance that such an order would be granted.

If we are unable to come into compliance with the Investment Company Act before June 30, 2008 (or any later date to which that may be extended by the SEC), we may be in violation of the Investment Company Act. If we were deemed to be operating as an illegally unregistered investment company, the consequences could potentially be severe. Among other things, the Company would be prohibited from engaging in business in the United States (including non-investment company business) and all of its contracts would become voidable at the election of the counterparty.

Overview and Trend Information

Acorn Energy is a holding company that specializes in acquiring and accelerating the growth of emerging ventures that promise improvement in the economic and environmental efficiency of the energy sector. We aim to acquire primarily controlling positions in companies led by promising entrepreneurs and we add value by supporting those companies with financing, branding, positioning, and strategy and business development.

Through our majority-owned operating subsidiaries we provide the following services:

· RT Solutions. Real time software consulting and development services provided through the Company’s DSIT subsidiary, with a focus on port security for strategic energy installations.

· SCR Catalyst and Management Services for coal-fired power plants that use selective catalytic reduction (“SCR”) systems to reduce nitrogen oxide (“NOx”) emissions, provided through CoaLogix and its subsidiary SCR-Tech LLC. These services include SCR catalyst management, cleaning and regeneration as well as consulting services to help power plant operators to optimize efficiency and reduce overall NOx compliance costs.

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Our equity affiliates and entities in which we own significant equity interests are engaged in the following activities:

· Comverge Inc. Energy intelligence solutions for utilities and energy companies through demand response.

· Paketeria AG. Owner and franchiser of a full-service franchise chain in Germany that combines eight services (post and parcels, electricity, eBay dropshop, mobile telephones, copying, printing, photo processing and printer cartridge refilling) in one store.

· GridSense Systems Inc. Provides remote monitoring and control systems to electric utilities and industrial facilities worldwide.

· Local Power, Inc. Consultation services for Community Choice Aggregation.

During the periods included in this report, we had operations in two reportable segments: providing catalyst regeneration technologies and management services for SCR systems and RT Solutions which is conducted through our DSIT subsidiary. The following analysis should be read together with the segment information provided in Note 12 to the interim unaudited consolidated financial statements included in this quarterly report, which information is hereby incorporated by reference into this Item 2.

RT Solutions

Segment revenues increased by $1.1 million or 140% in the first quarter of 2008 as compared to the first quarter of 2007. The increase in sales was the result of the acquisition of two significant projects in mid-2007.

· A NIS 30 million (approximately $7.9 million at March 31, 2008) order for a sonar and underwater acoustic system for the Israeli Ministry of Defense, and

· An order to supply what we believe to be the world’s first underwater surveillance system to protect a strategic coastal energy installation.

Our increased sales are a direct result of our progress in those projects. Segment revenues for the first quarter of 2008 were also approximately $0.6 million higher than those of the fourth quarter of 2007. The increased sales compared in the fourth quarter of 2007 were due to increased sales in both our abovementioned naval projects and increases in our embedded hardware and software development projects. Our gross profits also increased (from $0.2 million in the first quarter of 2007 and $0.4 million in the fourth quarter of 2007 to $0.6 million in the first quarter of 2008) as a result of the increased sales from our two significant projects. Our gross margins increased from the first quarter of 2007 from 28% to 34% in the first quarter of 2008, but decreased slightly from 36% in the fourth quarter of 2007. The increase in gross margin from the first quarter of 2007 was due the previously mentioned naval projects.

Our projected growth in sales in 2008 is expected to come primarily from our naval solutions projects with sales from our embedded hardware and software development projects expected to be at least at the level of 2007 sales. In the first quarter of 2008, we received new orders for embedded hardware and software development projects of over $2 million. We anticipate our 2008 sales to increase based on our abovementioned contract with the Israeli MOD for which we currently have a backlog of approximately $5.8 million. In addition, we anticipate receiving in the second half of 2008 a number of significant naval solutions contracts for additional underwater surveillance systems to protect strategic coastal energy installations.

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CoaLogix/SCR

CoaLogix is focused on providing cutting edge services to coal-fired generating facilities to reduce their environmental footprint through technology, optimization and efficiency improvements. CoaLogix currently owns SCR-Tech which provides SCR (selective catalyst reduction) services to power plants, including a proprietary technology to regenerate catalyst. We acquired SCR-Tech and began consolidating its results in November 2007. As such, we have not presented comparative data for SCR-Tech’s results. In the first quarter of 2008, SCR-Tech secured new contracts from major U.S. companies representing more than double its entire 2007 sales. Included in these contracts are a three year and a five year contract bundling selective catalytic reduction (SCR) management services and time sensitive regeneration during planned outages. The contracts represent three new and five repeat customers. SCR-Tech’s sales of $2.2 million during the first quarter of 2008 were their highest quarterly sales ever. At the end of the first quarter, SCR-Tech had a backlog of approximately $9.3 million which we expect to realize over the next two years.

In March 2008, CoaLogix announced its CoalVision 360º strategy and the addition of a strategic partner, EnerTech Capital III, which acquired a 15% interest in CoaLogix. We currently own 85% of CoaLogix following EnerTech’s investment. CoalVision 360º is CoaLogix’s strategy for creating value for its customers and shareholders while fulfilling our industry’s obligations to our ever tightening clean air laws. CoaLogix’s recent agreement with Solucorp Industries, Ltd. to obtain the exclusive worldwide marketing rights to their IFS-2C technology for the fixation of heavy metals is another step in fulfilling the CoalVision 360º strategy.

Comverge

In January 2008, Comverge’s Enerwise subsidiary entered into a strategic alliance with Eaton Corporation to bring demand response and managed energy service offerings to Eaton and its customers. The offerings include a combination of strategic consulting and energy efficiency solutions. The relationship establishes Eaton's Electrical Group as a recognized channel which will offer Comverge solutions to their customers. Eaton's Electrical Group had sales of $4.2 billion in 2006 and is a recognized leader in electrical control, power distribution, uninterruptible power systems and industrial automation products and services.

In February 2008, Comverge’s subsidiary, Public Energy Solutions, was awarded a demand side management energy efficiency contract with Con Edison aimed at reducing base load energy requirements of commercial customers of Con Edison in Lower Manhattan.

The limited program build out will begin in the third quarter of 2008 followed by a full scale roll out of the program in 2009 through 2012. If the contract is performed as contemplated, Comverge is expected to recognize revenues of approximately $67 million over the installation and build out phase as customers sign up and equipment is installed. Public Energy Solutions, a Comverge company, is responsible for customer solicitation, assessment of energy reduction potential, and equipment and its installation.

In April 2008, Comverge entered into a Virtual Peaking Capacity(R) (VPC) contract with Southern Maryland Electric Cooperative (SMECO) to provide up to 75 megawatts of clean electricity capacity. With a demand response program in place, SMECO will be able to use the program to reduce its peak capacity needs and better control the energy costs that it charges to its retail customers. This contract brings the total contracted revenues for Comverge to $357 million and total megawatts to 1,880.

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Paketeria

We own a 31% equity interest in Paketeria AG, a company registered in Germany and headquartered in Berlin that innovated the “Super Services Market”, a retail concept that promotes savings in logistics and transport, two of the largest consumers of fuel worldwide. Paketeria’s stores and franchises are located throughout Germany with a concentration in the area in and around Berlin.

Paketeria’s network of owned and franchised stores has doubled since our initial investment in August 2006. Paketeria provides green services by delivering mail by bicycle and offering recycling services such as eBay merchandising and toner cartridge refilling. The stores also provide office supplies, photo processing, photocopy, and Internet pharmacy services in Germany. Paketeria was established to take advantage of the privatization and subsequent substantial reduction in retail outlets of the German post office, which has stranded many communities without convenient access to postal services.

In December 2007, Paketeria’s shares were listed under the symbol “AOSTYL” on the Open Market (Freiverkehr) of the Frankfurt Stock Exchange and became eligible for trading. In connection with the listing and the escrow arrangements the Paketeria shareholders agreed to lock up certain of their shares for up to one year from the listing date. Under the lock-up agreement, shareholders may not offer, pledge, allot, sell or otherwise transfer or dispose of directly or indirectly any shares of Paketeria.

There is currently a limited market for Paketeria’s shares on this market. From the listing date to May 9, 2008, 930 shares of Paketeria were sold by the German investment bank responsible for the initial listing.

Thus far in 2008, we have provided Paketeria with approximately $1 million of loans in order to provide it with additional temporary financing to help it support its operations until it is able to raise funds through the sale by existing shareholders of shares through the escrow arrangement from Paketeria’s listing on the Frankfurt Stock Exchange (see our 10K filing) or other sources. These advances are to be repaid by December 31, 2008.

In April 2008, Paketeria announced that it would shortly open five new branches in a trial project together with the Association of the German Volksbanken and Raiffeisenbanken (BVR) to compete with the Deutsche Post. The purpose of this project is to fill the gap left by Deutsche Post when it closed their branches. If the project is successful, the concept will be extended to over one-thousand Volksbanks.

Paketeria continues to look for additional outside equity or debt financing to assist it in its expansion.

GridSense

GridSense Systems Inc. is an industry leader in providing remote monitoring and control systems to electric utilities and industrial facilities worldwide. The company's offerings, developed in collaboration with utilities, provide superior power quality/reliability monitoring and demand-side management capabilities. Electric companies deploy these systems primarily in metropolitan, suburban, and rural electricity grids for the detection, prevention, and mitigation of disturbances and irregularities in the supply of electricity. Through its wholly owned subsidiaries in Australia, CHK GridSense Pty Ltd. and GridSense Inc in USA, GridSense has been serving a growing base of customers for over 25 years, and currently in Australasia, North America, and Western Europe. GridSense is a reporting issuer in British Columbia and Alberta and trades on the TSX Venture Exchange under the symbol "GSN."

In January 2008, GridSense closed on a non-brokered private placement financing for gross proceeds of C$1.7 (approximately $1.7 million) originally announced on October 15, 2007. The placement consisted of 24,285,714 units at $0.07 per unit, each unit being comprised of one common share and one share purchase warrant. Each warrant entitles the holder to acquire an additional common share at $0.10 per share until July 2, 2008. The shares, and any shares acquired on exercise of the warrants, are subject to a four month hold period which expires May 3, 2008.

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Net proceeds of the private placement will be applied towards accelerating product enhancements, completing commercialization of new products in the development pipeline, buttressing the sales and support organization to meet increasing demand especially in the North American market, expansion into the China marketplace, and general working capital.

In January 2008, GridSense also announced that it entered into an asset purchase agreement, subject to regulatory approval, to acquire 100% of Transformer Contracting, Inc., a California corporation specializing in transformer and substation monitoring. As consideration for this transaction, Gridsense agreed to deliver cash and a promissory note for a combined total of approximately $325,000 and to issue 3,000,000 shares of GridSense common stock.

The acquisition combines GridSense's proven transmission and distribution offerings and its global utility distribution channels with the commercial-ready, advanced monitoring systems developed by Transformer Contracting, Inc for transformers and substations.

We account for our GridSense investment the equity method and, as such, we will record approximately 25% of its income/loss in our consolidated results. We have not recorded our share of GridSense results for the first quarter of 2008 as we have not yet received their results. We will record GirdSense’s first quarter results in the second quarter of 2008.

Local Power

Over the past months, Local Power has developed several previously identified business opportunities.  In Sonoma County Local Power has recently been retained by the Sonoma Climate Action Campaign (SCAC) to procure for a CCA a data request from PG&E.  Local Power has proposed another contract with the Sonoma County Water Agency. Local Power also has a number of significant contract proposals outstanding in San Francisco for which they expect to be retained for either monitoring or implementation contracts the coming quarters.

Corporate

In January 2008, we completed the redemption of our outstanding 10% Convertible Redeemable Subordinated Debentures due March 2011. Prior to the redemption, the debenture holders converted the entire $3.44 million convertible portion of the debentures into approximately 900,000 shares of Acorn common stock and the remaining $3.44 million of debentures were redeemed in accordance with the notice of redemption. In accordance with applicable accounting standards, we recorded a non-cash gain of approximately $1.3 million on the redemption of our debentures. Following the debenture redemption, we have no corporate debt and approximately $8.7 million in unrestricted cash (at the end of April 2008). We continue to have significant corporate cash expenses and will continue to expend in the future, significant amounts of funds on professional fees and other costs in connection with our strategy to seek out and invest in companies that fit our target business model.

In February 2008, we entered into a letter of intent to acquire Software Innovation, Inc. of Waterloo, Ontario. Software Innovation is the developer of Coreworx^(TM) a world-leading software tool for capital project collaboration Coreworx^(TM) is currently utilized to manage the construction of hundreds of major capital projects, including offshore oil wells, refineries, mining operations and power plants around the world. In connection with the letter of intent, we lent Software Innovation $1 million. The contemplated acquisition is part of Acorn's goal of improving the productivity of global energy infrastructure. Completion of the transaction remains subject to our due diligence and execution of definitive documentation.

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Results of Operations

The following table sets forth certain information with respect to the consolidated results of operations of the Company for the three months ended March 31, 2007 and 2008, including the percentage of total revenues during each period attributable to selected components of the operations statement data and for the period to period percentage changes in such components. Our results for the three months ended March 31, 2008 include the results of our newly acquired SCR-Tech subsidiary. As such, results for the three months ended March 31, 2008 may not be comparable to the results for the three months ended March 31, 2007 without negating the effect of SCR-Tech’s results.

	Three months ended March 31,												Change  from 2007 to
	2007						2008						2008
	($,000)			% of sales			($,000)			% of sales			%
Sales	$	1,039			100	%	$	4,295			100	%		313
Cost of sales		754			73			2,897			67			284
Gross profit		285			27			1,398			33			391
R&D expenses		130			13			51			1			(61	)
SMG&A expenses		810			78			2,553			59			215
Operating loss		(655	)		(63	)		(1,206	)		(28	)		84
Gain on early redemption of Debentures		—			—			1,259			29
Finance expense, net		(26	)		(3	)		(2,988	)		(70	)
Loss before taxes on income		(681	)		(66	)		(2,935	)		(68	)		331
Tax benefit (expense) on income		(2	)		0			642			15
Loss from operations of the Company and its consolidated subsidiaries		(683	)		(66	)		(2,293	)		(53	)		236
Minority interests		—			—			(9	)		0
Share in losses of Paketeria		(187	)		(18	)		(287	)		(7	)		53
Net loss	$	(870	)		(84	)	$	(2,589	)		(60	)		198

Sales. Sales in the first quarter of 2008 increased by $3.3 million or 313% from $1.0 million in the first quarter of 2007 to $4.3 million in the first quarter of 2008. The increase in sales is attributable to SCR-Tech sales in the first quarter of 2008 of $2.3 million and an increase in DSIT sales of 97% or $1.0 million. The increase in DSIT sales was wholly attributable to an increase in RT Solutions segment sales which was the primarily due to two naval projects being performed by our DSIT subsidiary which began in the third quarter of 2007.

Gross profit. Gross profits in the first quarter of 2008 increased by $1.1 million or 391% as compared to the first quarter of 2007. The increase in gross profits is attributable to SCR-Tech gross profits in the first quarter of 2008 of $0.8 million and an increase in DSIT gross profits of 128% or approximately $0.3 million. The increase in DSIT gross profits was wholly attributable to the abovementioned increase in RT Solutions segment sales. Gross margin also increased from 27% in the first quarter of 2007 to 33% in the first quarter of 2008. The increased gross margin is attributable to SCR-Tech’s gross margin of 34% as well as DSIT’s increased gross margin of 31%. DSIT’s increased gross margin in the first quarter of 2008 is due to the increased gross margin in its RT Solutions segment (34% in the first quarter of 2008 as opposed to 28% in the first quarter of 2007) and to the increased margins in its naval solutions projects in particular.

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Selling, marketing, general and administrative expenses (“SMG&A”). SMG&A in the first quarter of 2008 increased by $1.7 million as compared to the first quarter of 2007. A portion of the increase is attributable to SCR-Tech’s SMG&A costs of $0.6 million. In addition, in 2007, senior management in our DSIT subsidiary waived approximately $0.2 million of liabilities DSIT had to them in order to shore up its results and maintain its working relationship with its banks. The remaining increase in our SMG&A costs is due to increased professional fees reflecting a higher level of corporate activity in connection with our strategy to seek out and invest in companies that fit our target business model combined with the provision of $0.2 million against a loan to an affiliated company

Gain on early redemption of Debenture. In accordance with applicable accounting standards, we recorded a non-cash gain of approximately $1.3 million in connection with the January 2008 redemption of our Convertible Debentures.

Finance expense, net. The increase in finance expense in the first quarter of 2008 compared with the first quarter of 2007 is due to the interest expense of $3.1 million recorded with respect to the write-off of the remaining balances of debt origination costs, warrants value and beneficial conversion features in the early redemption of our convertible debentures.

Taxes on income. In the first quarter of 2008, we had an income tax benefit of $0.6 million due to the recording of a deferred tax assets.

Share of losses in Paketeria. In the first quarter of 2008, we recorded a loss of $258,000 representing our approximately 31% share of Paketeria’s losses for the period. In addition, we also recognized additional losses totaling $29,000 with respect to amortization related to the acquired value of a non-compete agreement and franchises.

Liquidity and Capital Resources

As of March 31, 2008, we had working capital of $12.8 million, including $10.5 million of cash and cash equivalents not including restricted cash of $2.9 million (of which approximately $0.4 million has already been released and of which we expect to an additional $1.1 million to be released in the first quarter of 2009). Net cash used in the three months ended March 31, 2008 was $9.1 million. Net cash of $1.2 million was used in operating activities during the first three months of 2008. The primary use of cash in operating activities during the first three months of 2008 was our corporate cash operating expenditures of approximately $1.0 million. Net cash of $6.6 million was used in investing activities, primarily due to our $2.9 million of loans made to Paketeria, Software Innovations and other parties, $1.2 million with respect to our investment in GridSense, $1.0 million with respect to an additional deposit in an Israeli bank as a guarantee for a project being performed by our DSIT subsidiary, approximately $0.4 million of additional restricted cash deposits (which have already been released) and $0.9 million of costs related to our November 2007 acquisition of SCR Tech. Net cash of $1.3 million was used in financing activities, primarily from the redemption of our debentures ($3.4 million). This use of cash was partially offset by the $1.9 million investment made by Enertech in CoaLogix.

As of May 12, 2008 the Company’s corporate operations had an aggregate of approximately $7.4 million in cash and cash equivalents (not including the $2.5 million deposited in an account as a security for a guarantee for DSIT), reflecting a $3.1 million decrease from the balance as of March 31, 2008.

We believe that the cash available and the cash potentially available from any sales of our holdings in Comverge will provide more than sufficient liquidity to finance Acorn’s activities for the foreseeable future and for the next 12 months in particular.

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At March 31, 2008, DSIT had approximately $265,000 in Israeli credit lines available to DSIT by an Israeli bank, all of which was then being used. In addition, the bank has allowed DSIT to utilize an additional $114,000 of credit which is secured by deposits made by the Acorn.

At March 31, 2008, DSIT was in technical violation of covenants under its line of credit. This bank is continuing to provide funding to DSIT despite the technical violation and has not formally notified DSIT of any violation or any contemplated action. Acorn has agreed to be supportive of DSIT’s liquidity requirements over the next 12 months.

Contractual Obligations and Commitments

Our contractual obligations and commitments at March 31, 2008 principally include obligations associated with our outstanding indebtedness, future minimum operating lease obligations and potential severance obligations to Israeli employees and are set forth in the table below.

	Cash Payments Due During Year Ending March 31,
	(amounts in thousands)
Contractual Obligations	Total		2009		2010- 2011		2012- 2013		2014 and thereafter
Long-term debt	$	127	$	116	$	8	$	3	$	—
Operating leases (1)		1,281		636		472		173		—
Potential severance obligations to Israeli employees (2)		2,637		—		—		—		2,637
Investment in EnerTech Capital Partners III L.P. (3)		4,600		4,600		—		—		—
Total contractual cash obligations	$	8,645	$	5,352	$	480	$	176	$	2,637

We expect to finance these contractual commitments from cash on hand and cash generated from operations.

(1) As part of the sale of our Databit computer hardware subsidiary in 2006, we assigned all of the US leases to Databit and no longer have rental expense for facilities in the US. However, the landlords of the properties have not consented to the assignments and we therefore continue to be contingently liable on these leases, which have an annual cost of approximately $120,000 until November 2008. Such costs are included in the table above. Databit has agreed to indemnify us for any liability in connection with these leases.

(2) Under Israeli law and labor agreements, DSIT is required to make severance payments to dismissed employees and to employees leaving employment under certain other circumstances. The obligation for severance pay benefits, as determined by the Israeli Severance Pay Law, is based upon length of service and ending salary. These obligations are substantially covered by regular deposits with recognized severance pay and pension funds and by the purchase of insurance policies. As of March 31, 2008, we accrued a total of $2.6 million for potential severance obligations of which approximately $1.8 million was funded with cash to insurance companies.

(3) In August 2007, we committed to invest up to $5 million over a ten-year period in EnerTech Capital Partners III L.P. (“EnerTech III”), a proposed $250 million venture capital fund targeting early and expansion stage energy and clean energy technology companies that can enhance the profits of the producers and consumers of energy.

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Our obligation under this commitment is presented as a current liability, though it is uncertain as to when actual payments may be made. To date, we have received and funded a capital call of $400,000 to EnerTech III.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to fluctuations in interest rates on lines-of-credit incurred to finance our operations in Israel, whose utilization at March 31, 2008 stood at approximately $379,000. Additionally, our non-US dollar monetary assets and liabilities (net liability of approximately $1.2 million) in Israel are exposed to fluctuations in exchange rates. In addition, $3.0 million, $0.1 million and $0.2 million of our backlog of projects are contracts and orders that are linked to an Israeli Ministry of Defense Index, denominated in Euros and denominated in NIS, respectively. We do not employ specific strategies, such as the use of derivative instruments or hedging, to manage our interest rate or foreign currency exchange rate exposures. Our DSIT subsidiary is examining ways to reduce its foreign currency exposure risks.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act’)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level at end of the period covered by this report to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 6.Exhibits.

3.1	Certificate of Ownership and Merger dated December 21, 2007 effecting the name change to Acorn Energy, Inc. (incorporated by reference to Exhibit 3.1 to the Acorn Energy, Inc. Current Report on Form 8-K filed on January 3, 2008).
10.1	Employment Agreement, dated as of March 4, 2008, by and between Acorn Energy, Inc. and John A. Moore.
10.2	Common Stock Purchase Agreement, dated as of February 29, 2008, by and between Acorn Energy, Inc. and EnerTech Capital Partners III L.P.
10.3	Stockholders’ Agreement, dated as of February 29, 2008, by and among CoaLogix, Inc., Acorn Energy, Inc. and the other stockholders named therein.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by its principal financial officer thereunto duly authorized.

	ACORN ENERGY, INC.
Dated: May 20, 2008
	By: /s/ Michael Barth
	Michael Barth
	Chief Financial Officer

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EX-10.1

EMPLOYMENT AGREEMENT

Employment Agreement dated as ofMarch 4, 2008, between ACORN ENERGY, INC., a Delaware corporation (with its successors and assigns, referred to as the “Corporation”) and JOHN A. MOORE (hereinafter referred to as “MOORE”).

PRELIMINARY STATEMENT

The Corporation desires to employ MOORE as Chief Executive Officer of the Corporation, and MOORE wishes to be employed by the Corporation in that capacity, upon the terms and subject to the conditions set forth in this Agreement. The Corporation and MOORE also wish to enter into the other agreements set forth in this Agreement, all of which are related to MOORE’s employment under this Agreement.

AGREEMENT

MOORE and the Corporation therefore agree as follows:

1. Commencement of Employment: Term. The parties acknowledge that MOORE commenced employment with the Corporation as Chief Executive Officer prior to the date hereof and shall continue to serve in that capacity until the earlier of the third anniversary of the date hereof or the date his employment is terminated by either or both of the parties in accordance with the provisions of this Agreement (the “Term”). The termination of the Term for any reason shall end MOORE’s employment under this Agreement, but, except as otherwise set forth herein, shall not terminate MOORE’s or the Corporation’s other rights and obligations under this Agreement.

2. Position and Duties. MOORE has been serving, and shall continue to serve, as the Chief Executive Officer (“CEO”) of the Corporation and shall carry out such duties and responsibilities consistent with his title, and shall perform and discharge such additional duties and responsibilities as may be determined by time to time by the Board of Directors of the Corporation (the “Board”). MOORE shall also hold such additional positions and titles with the Corporation and its subsidiaries as the Board may determine from time to time. MOORE shall report to the Board. During the Term, MOORE shall devote substantially all of his full time and attention to performing his duties as CEO of the Corporation; provided, however, that MOORE shall not be precluded from spending time on personal business and investment matters that do not interfere with his duties and responsibilities hereunder. Additionally, MOORE may also serve as a member of the board of directors of privately-held and publicly-held companies, subject only to his obtaining prior approval from the Board, which approval shall not be unreasonably withheld, conditioned or delayed. MOORE will be based at the Corporation’s corporate headquarters, which is currently located at Montchanin, Delaware.

3. Compensation.

(a) Base Salary. The Corporation shall pay MOORE a base salary of $325,000 per annum, retroactive to January 1, 2008, payable in accordance with the Corporation’s regular pay cycle for professional employees. Commencing January 1, 2009, the base salary shall be increased to $350,000 per annum, and the base salary commencing January 1, 2010 through the end of the Term shall be increased to $375,000 per annum. The Board, in accordance with its customary review of executive management compensation, may from time to time review MOORE’s base salary and make adjustments the Board (or any committee of the Board delegated authority over employee compensation matters) feels are appropriate, but in any event MOORE’s base salary shall not be lower than the amounts referred to above.

(b)Other and Additional Compensation.

(i)Annual Bonus. During the Term, MOORE shall receive an annual cash bonus of up to $200,000, based upon the attainment of agreed upon personal and company performance goals and milestones for the preceding fiscal year, as determined by the Board (and any committee of the Board delegated authority over employee compensation matters) in its sole discretion. The Board (or any such committee) shall negotiate, in good faith, with MOORE the applicable targets for the applicable fiscal year during the period commencing thirty (30) days prior and completing thirty (30) days after the start of such fiscal year (with the first year target to be agreed within thirty (30) days of the date hereof). Payment of the annual bonus to MOORE will be made within ten (10) days following completion of the Corporation’s financial audit or relevant peer group comparison, as applicable, and determination by the Board of whether the targeted performance goals and milestones have been met or exceeded.

(ii)Stock Options. Effective as of the date hereof (the “Award Date”), the Corporation has granted MOORE ten (10) year non-qualified options for the purchase of up to 200,000 shares of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”) under the Corporation’s 2006 Stock Incentive Plan (“Plan”) at an exercise price of $5.11 per share, which represents the closing stock price of the Corporation’s Common Stock on the trading date immediately prior to the Award Date (the “Stock Option Grant”). The terms of the Stock Option Grant, including the vesting schedule, shall be as set forth in a separate option agreement executed by and between the parties. Such option agreement shall provide, among other things, that the options shall vest pro rata on a quarterly basis (commencing 90 days from the date hereof) over a period of four years, subject to acceleration as provided herein. Any subsequent stock option grants will be determined annually by the Board (and any committee of the Board delegated authority over employee compensation matters). The Corporation hereby represents and warrants to MOORE that the shares of Common Stock issuable upon exercise of the options referred to herein are covered by an existing effective registration statement of the Corporation on Form S-8 (a “Form S-8”). Notwithstanding anything to the contrary contained in the foregoing, if at any time such shares of Common Stock issuable upon exercise of the options referred to herein are not covered by an existing effective Form S-8, (a) the Corporation agrees that if, at any time, and from time to time, it shall authorize the filing of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the proposed offer of any of its securities by it or any of its stockholders, the Corporation shall: (1) promptly notify MOORE that such registration statement to cover all such shares of Common Stock issuable upon exercise of the options referred to herein will be included in such registration statement at MOORE’s request, (2) cause such registration statement to cover all such shares of Common Stock issuable upon exercises of the options referred to herein for which MOORE requests inclusion, (3) use best efforts to cause such registration statement to become effective as soon as practicable, and (4) take all other reasonable action necessary under any federal or state law or regulation of any governmental authority to permit all such shares of Common Stock issuable upon exercise of the options referred to herein to be sold or otherwise disposed of, and will maintain such compliance with each such federal and state law and regulation of any governmental authority for the period necessary for MOORE to promptly effect the proposed sale or other disposition; and (b) MOORE may make a written request that the Corporation effect a registration under the Securities Act covering such shares of Common Stock issuable upon exercise of the options referred to herein and the Corporation shall (1) use best efforts to cause such registration statement to become effective as soon as practicable, and (2) take all other reasonable action necessary under any federal or state law or regulation of any governmental authority to permit all such shares of Common Stock issuable upon exercise of the options referred to herein to be sold or otherwise disposed of, and will maintain such compliance with each such federal and state law and regulation of any governmental authority for the period necessary for MOORE to promptly effect the proposed sale or other disposition.

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(c)Additional Compensation. The foregoing establishes the minimum compensation during the Term and shall not preclude the Board, in its discretion, from awarding MOORE a higher salary or any additional bonuses, stock options or stock awards based upon MOORE’s performance during a fiscal year and/or other criteria as the Board may deem appropriate.

4. Employee Benefits.

(a)General. During the Term, MOORE shall be entitled to the employee benefits generally made available to the Corporation’s executive officers, including four-weeks paid vacation and all U.S. national holidays, dental insurance benefits, participation in the Corporation’s 401(k) plan and other plans that may be made available from time to time to the Corporation’s executive officers and health insurance benefits.

(b)Disability Insurance. The Corporation shall also obtain at its expense short-term and long-term disability insurance for the benefit of MOORE, provided that MOORE complete a physical examination to the Corporation’s satisfaction.

(c)Corporation Automobile. MOORE shall have an automobile expense allowance of $1,000 per month, to be used for his leasing of an automobile in connection with his employment hereunder and the payment of insurance, maintenance and gasoline expenses, to be paid either directly by the Corporation or to be reimbursed to MOORE upon his presentation of reasonable documentation to the Corporation, in accordance with the Corporation’s controls and procedures and consistent with applicable law.

(d)Indemnification; Liability Insurance. The Corporation hereby represents that its By-Laws currently provide for the indemnification of its officers, employees and directors, subject to the terms thereof, and MOORE acknowledges having received a copy of the By-Laws and having reviewed such section to his satisfaction. The Corporation agrees to obtain and maintain directors’ and officers’ liability insurance on terms and amounts customary for similarly situated public companies.

5. Expenses. During the Term, the Corporation shall reimburse MOORE for actual out-of-pocket expenses incurred by him in the performance of his services for the Corporation upon the receipt of appropriate documentation of such expenses.

6. Termination.

(a) General. The Term shall end immediately upon MOORE’s death, or upon termination by the Corporation for Cause or Disability or by MOORE for Good Reason, each as defined in Section 7. Upon termination of the Term due to MOORE’s death, all compensation due MOORE under this Agreement will cease. In all other cases, (i) the Corporation may terminate this Agreement upon sixty (60) days prior written notice, and (ii) MOORE may terminate this Agreement upon sixty (60) days written notice. The parties agree that the mere act of providing notice to the other party of termination shall not in any event be deemed to provide such other party the right to immediately terminate this Agreement. For all purposes of this Agreement, a termination of employment shall be considered to have occurred if and only if there has been a “termination of employment” as defined in Treasury Reg. §1.409A-1(h)(1)(ii).

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(b) Notice of Termination - Generally. Any termination by the Corporation of MOORE’s employment hereunder shall be in writing and delivered to MOORE at the address set forth herein or at such address kept in the records of the Corporation and shall specify the reasons for such termination.

(c)Termination by the Corporation for Cause; Termination by Moore without Good Reason. Any written notice of termination of employment by the Corporation of MOORE for Cause shall, to the extent the Cause is curable, allow MOORE the opportunity to cure, but in any event no more than twenty (20) calendar days. Such notice of termination shall also state in reasonable detail the Board’s understanding of the facts leading to the determination of Cause. Upon the Corporation’s final termination of the Term and Moore’s employment for Cause and upon Moore’s final termination of the Term and his employment without Good Reason (pursuant to the notice provisions of Section 6(a) hereof), all compensation due to MOORE under this Agreement shall cease, except that MOORE shall receive the following:

(i) all accrued but unpaid base salary up to the date of termination (payable in accordance with the Corporation’s payroll practices);

(ii) reimbursement of all previously unreimbursed expenses pursuant to Section 5;

(iii) all vested and unexercised options granted by the Corporation as of the date of termination shall be exercisable in accordance with the terms of the Plan and applicable stock option agreements; provided that MOORE shall have only three (3) months to exercise such previously vested options; and

(iv) all options that as of the date of termination have not vested as of such date shall terminate.

(d)Termination by the Corporation upon a Change of Control or Termination by MOORE for Good Reason following a Change of Control. In the event that within three (3) months prior to or one year following a “Change of Control”, as defined in Section 7(c), either (i) the Corporation terminates the employment of MOORE, other than for Cause (pursuant to the notice provisions of Section 6(a) hereof), or (ii) MOORE terminates the Term and his employment for Good Reason (pursuant to the notice provisions of Section 6(a) hereof), MOORE shall receive the following (except as otherwise provided in Section 6(g)):

(i)an amount equal to (A) twenty four (24) months of then-current base salary (which is in addition to the base salary paid to MOORE after the Corporation’s delivery of notice of termination pursuant to Section 6(a) and the actual date of termination) and (B) two (2) times his most recent annual bonus (but if termination of employment occurs prior to determination of his bonus for fiscal year 2008, such bonus amount shall equal two (2) times the target bonus of $200,000, or $400,000), such amount to be payable as provided in Section 8; and

(ii)reimbursement of all previously unreimbursed expenses pursuant to Section 5;

(iii)the full vesting of any and all stock options granted to MOORE by the Corporation prior to such termination, and extended exercisability thereof until their respective expiration dates; provided, however, that any stock option grant that constitutes an “Incentive Stock Option” that is not exercised within three (3) months of the date of termination shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the date that is three (3) months and one (1) day following such date of termination; and

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(iv)the continuation of all medical and dental benefits at the Corporation’s sole expense for a period of one year after termination.

For the avoidance of doubt, MOORE shall be entitled to the foregoing benefits once notice of termination is given by the Corporation or by MOORE pursuant to this Section 6(d) and his employment has terminated, regardless of his subsequent Death or Disability.

(e) Termination by the Corporation other than upon Change of Control, Death, Disability or Cause or termination by MOORE for Good Reason. In the event that (i) the Corporation terminates the employment of MOORE (including a non-renewal of this Agreement at the end of the three year Term provided herein, but not including the non-renewal following any subsequent renewal of the Term) , other than upon a Change of Control, Death, Disability or Cause (pursuant to the notice provisions of Section 6(a) hereof), or (ii) MOORE terminates the Term and his employment for Good Reason (pursuant to the notice provisions of Section 6(a) hereof), other than in connection with a Change of Control, MOORE shall receive the following (except as otherwise provided in Section 6(g)):

(i)an amount equal to (A) twelve (12) months of then-current base salary (which is in addition to the base salary paid to MOORE after the Corporation’s delivery of notice of termination pursuant to Section 6(a) and the actual date of termination) and (B) his most recent annual bonus (but if termination of employment occurs prior to determination of his bonus for fiscal year 2008, such bonus amount shall equal the target bonus of $200,000), such amount to be payable as provided in Section 8;

(ii)reimbursement of all previously unreimbursed expenses pursuant to Section 5;

(iii)accelerated vesting of all unvested options that otherwise would have vested within 24 months of the date of termination, with such accelerated options and all other vested and unexercised options granted by the Corporation as of the date of termination to be exercisable for a period of one year from the date of termination of employment in accordance with the terms of the Plan and applicable stock option agreements; provided, however, that any stock option grant that constitutes an “Incentive Stock Option” that is not exercised within three (3) months of the date of termination shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the date that is three (3) months and one (1) day following such date of termination; and

(iv)the continuation of all medical and dental benefits at the Corporation’s sole expense for a period of one year after termination.

For the avoidance of doubt, MOORE shall be entitled to the foregoing benefits once notice of termination is given by the Corporation or by MOORE pursuant to this Section 6(e) and his employment has terminated, regardless of his subsequent Death or Disability.

(f) Vesting of Stock Options in event of Change of Control. Notwithstanding any other provisions of this Section 6, in the event of any Change of Control, all stock options granted to MOORE prior to such Change of Control shall vest and remain exercisable until their respective expiration dates; provided, however, that any stock option grant that constitutes an “Incentive Stock Option” that is not exercised within three (3) months of the date of termination shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the date that is three (3) months and one (1) day following such date of termination.

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(g)Excess Parachute Payments. If the amounts payable by the Corporation pursuant to Section 6(d) or Section 6(e) in connection with a termination of employment of MOORE would constitute to any extent an “excess parachute payment” as defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the “Code”), then the amount payable by the Corporation to MOORE under those provisions of this Agreement shall be an amount equal to the lesser of: (A) the amounts payable pursuant to Section 6(d) or Section 6(e), as applicable; or (B) the amounts described in clause (A) as reduced to the extent necessary to cause the aggregate of all amounts paid to MOORE in connection with (x) a change in ownership or effective control of the Corporation or (y) a change in the ownership of a substantial portion of the assets of the Corporation (if any of the foregoing constitutes an event described in clause (b)(2)(A)(i) of Code Section 280G) not to exceed two hundred ninety-nine percent (299%) of the “base amount” paid to MOORE as such term is defined in Section 280G(b)(3) (or any successor provision). The reduction described in clause (B) of the preceding sentence shall not be made, however, if the effect of the reduction would be to cause MOORE to retain, from the sum of all "parachute payments" as defined in Code Section 280G(b) payable to him or for his benefit, on an after-tax basis (that is, after payment of all applicable income taxes and of any tax imposed by Section 4999 of the Code by reason of the receipt of such payments) and taking into account such reduction, an aggregate amount that is less than what MOORE would retain, on an after-tax basis, if the reduction described in clause (B) of the preceding sentence were not made.For the avoidance of doubt, this Section 6(g) shall be applied by taking into account any “parachute payment” (as defined in Code Section 280G(b)) payable to MOORE in connection with the change in ownership or effective control of the Corporation or change in the ownership of a substantial portion of its assets, including, without limitation, any parachute payment attributable to stock options granted to MOORE by the Corporation.

(h)Release. The obligation of the Corporation to make any payments or provide any benefits to MOORE under this Section 6 shall be subject to MOORE signing and not revoking a release of all claims in reasonable form provided to MOORE by the Corporation.

7. Definitions.

(a) "Cause" Defined.“Cause” means (i) the failure by MOORE to perform his duties hereunder after written notice thereof and time to cure; (ii) his failure to follow the written legal directions of the Board after written notice thereof; (iii) his conviction of, or pleading guilty or nolo contendere, to a felony or a crime involving moral turpitude, fraud or embezzlement; (iv) willful misconduct with regard to the Corporation (including violations of securities laws) having a material adverse impact on the Corporation; or (v) an uncured material breach by MOORE of this Agreement or material breach by MOORE of his fiduciary duties; in each case, unless cured within twenty (20) calendar days’ of MOORE’s receipt of written notice by the Board of its determination to terminate MOORE with Cause, to the extent curable.

(b) “Disability” Defined.“Disability” shall mean MOORE’s incapacity due to physical or mental illness, as determined by a qualified independent physician, that results in his being unable to substantially perform his duties hereunder for three consecutive months (or for three months out of any six-month period) (in either event, the “Disability Period”). During the Disability Period, MOORE shall continue to receive his base salary hereunder, provided that if the Corporation provides MOORE with disability insurance coverage, payments of MOORE’s base salary shall be reduced by the amount of any disability insurance payments received by MOORE due to such coverage. Upon termination of employment, after the end of the Disability Period, all compensation due MOORE under this Agreement shall cease.

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(c) “Change of Control” Defined. “Change of Control” shall mean the occurrence of any one or more of the following events:

(i)An acquisition (whether directly from the Corporation or otherwise) of any voting securities of the Corporation (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as amended (the “1934 Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of more than fifty percent (50%) of the combined voting power of the Corporation’s then outstanding Voting Securities;

(ii)A majority of the members of the Board of Directors of the Corporation is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s Board of Directors before the date of the appointment or election; or

(iii) An acquisition by any Person, at any time during the 12-month period ending on the date of the most recent acquisition by such Person or Persons, of assets from the Corporation that have a total Gross Fair Market Value equal to or more than eighty percent (80%) of the total Gross Fair Market Value of all of the assets of the Corporation immediately before such acquisition; provided, however, that the Gross Fair Market Value of any assets of the Corporation acquired by a Person that is controlling, controlled by or under common control with the Corporation or any of its stockholders shall not be taken into account in determining whether a Change of Control has occurred.

(d) “Good Reason” Defined. “Good Reason” shall mean the occurrence of any of the conditions described below, provided that such condition arises without the consent of MOORE:

(i)a material diminution in MOORE’s authority, duties, or responsibilities;

(ii)a material diminution in the authority, duties, or responsibilities of the supervisor or corporate body to whom Moore is required to report, including a requirement that Moore report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation (or similar governing body with respect to an entity other than a corporation).

(iii)a material diminution in Moore’s base compensation;

(iv)any material breach by the Corporation of any provision of this Agreement; or

(v)a material change in the geographic location at which MOORE must perform his services.

Notwithstanding the above, a termination of employment shall not be considered to have occurred for “Good Reason” unless: MOORE provides notice of the condition within 90 days after the initial existence of the condition; the Corporation fails to cure such condition within 30 days after such notice; and the termination of employment occurs within two years following the initial existence of the condition.

(e)“Gross Fair Market Value” Defined. “Gross Fair Market Value” shall mean the fair market value without regard to liabilities associated with the assets valued.

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8.Payment Terms. Payment of any amounts to which MOORE shall be entitled pursuant to the provisions of Section 6 shall be made in 12 equal installments commencing no later than thirty (30) days following the six month anniversary of the date of termination of employment. Payment of any amounts to which MOORE shall be entitled pursuant to the provisions of Section 11(c) shall be made in equal monthly installments commencing in the month after the completion of the Initial Non-Competition Term (as defined in Section 11(a)), through calendar year-end, and continuing for the months of January and February of the following calendar year. Any amounts payable pursuant to Sections 6 and 11 which are not made within the period specified in this Section 8 shall bear interest at a rate equal to the lesser of (i) the maximum interest rate allowable pursuant to applicable law or (ii) five points above the “prime rate” of interest as published from time-to-time in the Eastern Edition of the Wall Street Journal.

9.Post-Termination Benefits. Upon termination of MOORE’s employment hereunder for any reason, in addition to any payments to which MOORE may be entitled upon termination of his employment pursuant to any provision of this Agreement, MOORE shall be entitled to any benefits under any pension, supplemental pension, savings, or other employee benefit plan (other than life or disability insurance and automobile allowance) in which MOORE was participating on the date of any such termination.

10. Confidentiality.

(a) “Corporation Information” Defined.“Corporation Information” means all information, knowledge or data of or pertaining to (i) the Corporation, its employees and all work undertaken on behalf of the Corporation, and (ii) any other person, firm, corporation or business organization with which the Corporation may do business during the Term, that is not in the public domain (and whether relating to methods, processes, techniques, discoveries, pricing, marketing or any other matters).

(b)Confidentiality. MOORE hereby recognizes that the value of all trade secrets and other proprietary data and all other information of the Corporation not in the public domain disclosed by the Corporation in the course of his employment with the Corporation is attributable substantially to the fact that such confidential information is maintained by the Corporation in strict confidentiality and secrecy and would be unavailable to others without the expenditure of substantial time, effort or money. MOORE therefore, except as otherwise provided in this Section 10(b), covenants and agrees that all Corporation Information shall be kept secret and confidential at all times during and after the end of the Term and shall not be used or divulged by him outside the scope of his employment as contemplated by this Agreement, except as the Corporation may otherwise expressly authorize by action of the Board. In the event that MOORE is requested in a judicial, administrative or governmental proceeding to disclose any of the Corporation Information, MOORE will promptly so notify the Corporation so that the Corporation may seek a protective order or other appropriate remedy and/or waive compliance with this Agreement. If disclosure of any of the Corporation Information is required, MOORE may furnish the material so required to be furnished, but MOORE will furnish only that portion of the Corporation Information that legally is required. Notwithstanding anything to the contrary contained in the foregoing, MOORE shall not be prevented from disclosing Corporation Information that (i) was or becomes generally available to the public through no fault of MOORE; (ii) was available to MOORE on a non-confidential basis prior his employment with the Corporation; or (iii) was developed independent of the information derived from the Corporation Information.

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11.Non-Competition and Non-Solicitation Covenants.

(a)Non-Competition. The Corporation and MOORE acknowledge that: (i) the Corporation has a special interest in and derives significant benefit from the unique skills and experience of MOORE; (ii) MOORE will use and have access to proprietary and valuable Corporation Information (as defined in Section 10 hereof) during the course of his employment; and (iii) the agreements and covenants contained herein are essential to protect the business and goodwill of the Corporation or any of its subsidiaries, affiliates or licensees. Accordingly, except as hereinafter noted, MOORE covenants and agrees that during the Term, and for a period of one year following the termination of MOORE’s employment (two years if such termination was either by the Corporation or by MOORE in connection with a Change of Control pursuant to Section 6(d)) (in either event, the “Initial Non-Competition Term”), MOORE shall not provide any labor, work, services or assistance (whether as an officer, director, employee, partner, agent, owner, independent contractor, stockholder or otherwise) to a “Competing Business.” For purposes hereof, “Competing Business” shall mean any business engaged in the business engaged in by the Corporation during the Term. In consideration of all of the compensation provisions in this Agreement, MOORE agrees to the provisions of this Section 11 and also agrees that the non-competition obligations imposed herein are fair and reasonable under all the circumstances.

(b)Non-Solicitation of Employees. MOORE covenants and agrees that during the Term, and for a period of one year following termination of employment hereunder for any reason whatsoever (two years if such termination was either by the Corporation or by MOORE in connection with a Change of Control pursuant to Section 6(d)), MOORE shall not directly or indirectly solicit any other employee of or consultant to the Corporation, or any of its subsidiaries or affiliates to terminate such employee’s employment or consultant’s relationship with the Corporation, or any of its subsidiaries or affiliates, as the case may be, or to become employed by or a consultant to a Competing Business.

(c)Extension of Covenants. The Corporation, at its sole option, may elect to extend the non-solicitation and non-competition covenants of this Section 11 for one (1) additional year, by notice to MOORE within 30 days before the expiration of such covenants. If such election is made, the Corporation shall pay to MOORE in accordance with Section 8 an amount equal to the base salary at the time of MOORE’s termination and the previous year’s annual bonus (but if MOORE’s termination occurs prior to determination of his bonus for fiscal year 2008, the bonus amount will be the target bonus of $200,000).

(d)Remedies. MOORE acknowledges that any such breach of the provisions of Section 10 and this Section 11 is likely to result in immediate and irreparable harm to the Corporation for which money damages are likely to be inadequate. Accordingly, MOORE acknowledges that in the event of any such breach, the Corporation may obtain injunctive and other appropriate equitable relief in any forum where proper jurisdiction can be obtained upon the institution of proceedings therefor by the Corporation in order to protect its rights hereunder. Such relief in the event of such breach may include, without limitation, an injunction to prevent: (i) the breach or continuation of MOORE’s breach of Section 10 or Section 11 hereof; (ii) MOORE from disclosing any trade secrets or Corporation Information; (iii) any Competing Business from receiving from MOORE or using any such trade secrets or Corporation Information; and/or (iv) any such Competing Business from retaining or seeking to retain any employees of the Corporation. The provisions of this Section 11(d) shall survive the termination of this Agreement and the Term.

(e)Early Termination of Restrictive Covenants. Notwithstanding the foregoing, the restrictive covenants set forth in Sections 11(a) and (b) shall terminate if any payments required by Sections 6 and 11(c) hereof to be made by the Corporation to MOORE are not made within the periods specified in Section 8.

12.Successors and Assigns; Expenses.

(a)The Employee. This Agreement is a personal contract, and the rights and interests that the Agreement accords to MOORE may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him. All rights and benefits of MOORE shall be for the sole personal benefit of MOORE, and no other person shall acquire any right, title or interest under this Agreement by reason of any sale, assignment, transfer, claim or judgment or bankruptcy proceedings against MOORE. Except as so provided, this Agreement shall inure to the benefit of and be binding upon MOORE and his personal representatives, distributees and legatees.

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(b)The Corporation. This Agreement shall be binding upon the Corporation and inure to the benefit of the Corporation and its successors and assigns.

(c)Expenses. The Corporation shall either reimburse MOORE or pay directly to his counsel, Reitler Brown & Rosenblatt LLC, an amount of up to $9,000 for its costs related to the negotiation, preparation and review of this Agreement.

13.Entire Agreement. This Agreement, together with the Stock Option Grant, represents the entire agreement between the parties concerning MOORE’s employment with the Corporation and supersedes all prior negotiations, discussions, understandings and agreements, whether written or oral, between MOORE and the Corporation relating to the subject matter of this Agreement.

14.Amendment or Modification; Waiver. No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing signed by MOORE and by a duly authorized officer of the Corporation. No waiver by any party to this Agreement of any breach by another party of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.

15.Notices. Any notice to be given under this Agreement shall be in writing and delivered personally or sent by overnight courier or registered or certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below, or to such other address of which such party subsequently may give notice in writing:

If to MOORE:	John A. Moore
	403 Marsh Lane
	Wilmington, DE 19804
with a copy to:	Reitler Brown & Rosenblatt LLC
	800 Third Avenue
	New York, NY 10022
	Attention: Scott H. Rosenblatt, Esq.
If to the Corporation:	Acorn Energy, Inc.
	4 West Rockland
	Montchanin, Delaware 19710
	Attention: Chairman of the Compensation Committee
with a copy to:	Eilenberg Krause & Paul LLP
	11 East 44th Street
	New York, NY 10017
	Attention: Sheldon Krause , Esq.

Any notice delivered personally or by overnight courier shall be deemed given on the date delivered and any notice sent by registered or certified mail, postage prepaid, return receipt requested, shall be deemed given on the date mailed.

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16.Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable shall not be affected, and each provision of this Agreement shall be validated and shall be enforced to the fullest extent permitted by law. If for any reason any provision of this Agreement containing restrictions is held to cover an area or to be for a length of time that is unreasonable or in any other way is construed to be too broad or to any extent invalid, such provision shall not be determined to be entirely null, void and of no effect; instead, it is the intention and desire of both the Corporation and MOORE that, to the extent that the provision is or would be valid or enforceable under applicable law, any court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and such other constraints or conditions (although not greater than those contained currently contained in this Agreement) as shall be valid and enforceable under the applicable law.

17.Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

18.Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience of reference, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.

19.Withholding Taxes. All salary, benefits, reimbursements and any other payments to MOORE under this Agreement shall be subject to all applicable payroll and withholding taxes and deductions required by any law, rule or regulation of and federal, state or local authority.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together constitute one and same instrument.

21.Applicable Law; Jurisdiction. The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement, without reference to rules relating to conflicts of law. Except as otherwise provided in Section 11(d), any suit, action or proceeding against MOORE with respect to this Agreement, or any judgment entered by any court in respect thereof, may be brought in any court of competent jurisdiction in the State of Delaware, as the Corporation may elect in its sole discretion, and MOORE hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment.

[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

JOHN A. MOORE
ACORN ENERGY, INC.
By:
	Name: Sheldon Krause
	Title: Secretary, General Counsel
By:
	Name: Richard Giacco
	Title: Director, on behalf of the Board of Directors

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EX-10.2

COALOGIX INC.

COMMON STOCK PURCHASE AGREEMENT

TABLE OF CONTENTS

			Page
1.	PURCHASE AND SALE OF COMMON STOCK		1
	1.1.	Sale and Issuance of Common Stock	1
	1.2.	Closing; Delivery	1
	1.3.	Defined Terms Used in this Agreement	1
2.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		2
	2.1.	Organization, Good Standing, Corporate Power and Qualification	3
	2.2.	Capitalization	3
	2.3.	Subsidiaries and Affiliates	4
	2.4.	Authorization	4
	2.5.	Valid Issuance of Shares	4
	2.6.	Governmental Consents and Filings	4
	2.7.	Litigation	4
	2.8.	Compliance with Other Instruments	5
	2.9.	Rights of Registration and Voting Rights	5
	2.10.	No Company Operations or Material Liabilities	5
	2.11.	Changes	5
	2.12.	Corporate Documents	6
	2.13.	Offering	6
	2.14.	Preemptive Rights	6
	2.15.	Consents	6
	2.16.	Employment and Non-Competition Agreements	6
3.	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		7
	3.1.	Authorization	7
	3.2.	Compliance with Other Instruments	7
	3.3.	Purchase Entirely for Own Account	7
	3.4.	Disclosure of Information	7
	3.5.	Restricted Securities	8
	3.6.	No Public Market	8
	3.7.	Suitability of Investment	8
	3.8.	Legends	8

-i-

TABLE OF CONTENTS

(continued)

			Page
	3.9.	Accredited Investor	9
	3.10.	Foreign Investors	9
	3.11.	Residence	9
4.	CONDITIONS TO THE PURCHASER’S OBLIGATIONS AT CLOSING		9
	4.1.	Qualifications	9
	4.2.	Representations and Warranties of Company	9
	4.3.	Opinion of Company Counsel	9
	4.4.	Covenants of the Company	9
	4.5.	Stockholders’ Agreement	9
	4.6.	Secretary’s Certificate	9
	4.7.	Management Rights	10
	4.8.	Board of Directors	10
5.	CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING		10
	5.1.	Qualifications	10
	5.2.	Representations and Warranties of the Purchaser	10
6.	COVENANTS OF THE COMPANY		10
	6.1.	Proceedings and Documents	10
	6.2.	Securities Laws Compliance	10
	6.3.	Use of Proceeds	10
	6.4.	Pre-Closing Access and Information	10
	6.5.	Conduct of the Company's Business.	11
	6.6.	Notices to Purchaser	11
	6.7.	Exclusivity	11
7.	SURVIVAL PERIOD; INDEMNIFICATION		11
	7.1.	Survival of Representations, Warranties and Covenants	11
	7.2.	Indemnification	12
	7.3.	Limitations on Indemnification	12
8.	MISCELLANEOUS		12
	8.1.	Transfer; Successors and Assigns	12
	8.2.	Governing Law	12

-ii-

TABLE OF CONTENTS

(continued)

 

		Page
8.3.	Counterparts	12
8.4.	Titles and Subtitles	13
8.5.	Notices	13
8.6.	No Finder’s Fees	14
8.7.	Fees and Expenses	14
8.8.	Amendments and Waivers	14
8.9.	Severability	14
8.10.	Delays or Omissions	14
8.11.	Entire Agreement	14
8.12.	Publicity	15
8.13.	Right to Conduct Activities	15
8.14.	Termination	16

-iii-

TABLE OF CONTENTS

	Page
Exhibit A	Schedule of Purchaser
Exhibit B	Disclosure Schedule
Exhibit C	Form of Stockholders’ Agreement
Exhibit D	Form of Management Rights Letter
Exhibit E	Form of Legal Opinion of Company Counsel

-i-

COMMON STOCK PURCHASE AGREEMENT

This Common Stock Purchase Agreement (the “Agreement”) is made as of February 29, 2008 by and among CoaLogix Inc., a Delaware corporation (the “Company”), Acorn Energy, Inc., a Delaware corporation (the “Parent”), and the investor listed on Exhibit A attached to this Agreement (the “Purchaser”).

The parties hereby agree as follows:

1.Purchase and Sale of Common Stock.

1.1.Sale and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to the Purchaser at the Closing that number of shares of the Company’s Common Stock, $0.001 par value per share (the “Common Stock”) set forth opposite the Purchaser's name on Exhibit A, at a purchase price of $126.1566 per share, payable as set forth on Exhibit A. The shares of Common Stock issued to the Purchaser pursuant to this Agreement shall be referred to in this Agreement as the “Shares.”

1.2.Closing; Delivery.

(a)Thepurchase and sale of the Shares shall take place at 10:00 a.m., on the date on the business day on which the last of the conditions set forth in Sections 4 and 5 of this Agreement that are capable of being satisfied before the Closing are fulfilled or waived in accordance with this Agreement, at the offices of Dechert LLP, counsel to EnerTech Capital Partners III L.P., 2929 Arch Street, Philadelphia, PA 19104-2808 or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).

(b)At the Closing, the Company shall deliver to the Purchaser a certificate representing the Shares being purchased by the Purchaser at such Closing against payment of the purchase price therefor by wire transfer to a bank account designated by the Company.

1.3.Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.

“Affiliate” means with respect to any person or entity (a “Person”) any Person which, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any partner, officer, director, or member of such Person and any venture capital fund now or hereafter existing which is controlled by or under common control with one or more general partners or shares the same management company with such Person.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company Intellectual Property” means all trademarks, service marks, tradenames, copyrights, trade secrets, licenses, information and proprietary rights and processes and all patents and patent rights owned or possessed by the Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Key Employee” means any executive-level employee (including Vice President level positions) as well as any employee who either alone or in concert with others develops, invents, programs or designs any Company Intellectual Property.

“Management Rights Letter” means the agreement between the Company and EnerTech Capital Partners III L.P., in the form of Exhibit D attached to this Agreement.

“Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospectsor results of operations of the Company or any of the SCR-Tech Entities.

“Purchaser” means the Purchaser who is a party to this Agreement.

“SCR-Tech Entities” means CESI-TECH Technologies, CESI-SCR, Inc. and SCR Tech LLC.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means the shares of Common Stock of the Company issued at the Closing.

“Stockholders’ Agreement” means the agreement between the Company, Parent and the Purchaser, dated as of the date hereof, in the form of Exhibit C attached to this Agreement.

“Transaction Agreements” means this Agreement, the Stockholders’ Agreement, the Management Rights Letter, and any other agreements, instruments or documents entered into in connection with this Agreement.

2.Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser that, except as set forth on the Disclosure Schedule attached to this Agreement which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof and will be true and correct as of the Closing, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 2, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

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For purposes of these representations and warranties, the phrase “to the Company’s knowledge” shall mean the knowledge after reasonable investigation of the Key Employees of the Company.

2.1.Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

2.2.Capitalization. The authorized capital of the Company consists, immediately prior to the Closing (unless otherwise noted), of:

(a)150,000shares of Common Stock, 87,500 shares of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. The Company holds no treasury stock.

(b)Section 2.2(c) of the Disclosure Schedule sets forth the options that the Company is committed to granting following the Closing.

(c)Section 2.2(c) of the Disclosure Schedule sets forth the capitalization of the Company immediately following the Closing including the number of shares of the following: (i) issued and outstanding Common Stock; (ii) the name of each holder of options for Common Stock, together with the number of shares for which such options are exercisable with respect to each holder, the applicable vesting schedule, if any, and the applicable exercise price; (iii) stock options not yet issued but reserved for issuance; and (iv) warrants or stock purchase rights, if any. Except for (A) the rights provided in Sections 4 and 5 of the Stockholders’ Agreement, and (B) the securities and rights described in Section 2.2(b) of this Agreement and Section 2.2(c) of the Disclosure Schedule, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company, or sell to the Company, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue Common Stock or any securities convertible into or exchangeable for shares of Common Stock. Except as set forth on Section 2.2(c) of the Disclosure Schedule, no current or former shareholder of the Company's capital stock has, or with the giving of notice or any other actions may have, any appraisal rights or the right to obtain payment of the fair value of that shareholder's shares of Common Stock. Except for as provided in the Stockholders’ Agreement, no shareholder of the Company or other person has any right to designate members to serve on the Company's board of directors or any committee thereof.

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(d)Except as set forth on Section 2.2(d) of the Disclosure Schedule, all outstanding shares of the Company’s Common Stock and all shares of the Company’s Common Stock underlying outstanding options are subject to a right of first refusal in favor of the Company upon any proposed transfer (other than transfers for estate planning purposes). Except as set forth on Section 2.2(d) of the Disclosure Schedule, none of the Company’s stock purchase agreements or stock option documents contains a provision for acceleration of vesting (or lapse of a repurchase right) upon the occurrence of any event or combination of events. Except as set forth on Section 2.2(d) of the Disclosure Schedule, the Company has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means.

2.3.Subsidiaries and Affiliates. Except as set forth on Section 2.3 of the Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity ownership in any business.

2.4.Authorization. All corporate action required to be taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into the Transaction Agreements, and to issue the Shares at the Closing, has been taken or, in the case of the stockholders, will be taken prior to the Closing. All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained in the Stockholders’ Agreement may be limited by applicable federal or state securities laws.

2.5.Valid Issuance of Shares. The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, the Stockholders’ Agreement, applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser. Assuming the accuracy of the representations of the Purchaser in Section 3 of this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws.

2.6.Governmental Consents and Filings. Assuming the accuracy of the representations made by the Purchaser in Section 4 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for filings, if any, pursuant to Regulation D of the Securities Act, and applicable state securities laws, which have been made or will be made in a timely manner.

2.7.Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to the Company’s knowledge, currently threatened that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements.

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2.8.Compliance with Other Instruments. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any instrument, judgment, order, writ, decree, contract or agreement to which the Company is a party or by which it is bound or (ii) an event which results in the creation of any lien, charge or encumbrance upon any property or assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any permit or license applicable to the Company.

2.9.Rights of Registration and Voting Rights. Except as provided in the Stockholders’ Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. Except as contemplated in the Stockholders’ Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.

2.10.No Company Operations or Material Liabilities. The Company is a holding company without operations other than the ownership of stock of its subsidiaries. The Company, excluding its subsidiaries, has no material liabilities or obligations, contingent or otherwise, other than liabilities (i) under that certain Stock Purchase Agreement, dated November 7, 2007, by and among the Company, Parent, Catalytica Energy Systems, Inc. and with respect to Article 11 thereof only, Renegy Holdings, Inc., (ii) under this Agreement, or (iii) as set forth on Section 2.10 of the Disclosure Schedule.

2.11.Changes. To the Company’s knowledge, since November 7, 2007, there has not been:

(a)any change in the assets, liabilities, financial condition or operating results of the SCR-Tech Entities, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on the SCR-Tech Entities;

(b)any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on the SCR-Tech Entities;

(c)any waiver or compromise by the Company of a valuable right or of a material debt owed to any of the SCR-Tech Entities;

(d)any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect on the SCR-Tech Entities;

(e)any material change to a material contract or agreement by which the SCR-Tech Entities or any of their assets is bound or subject;

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(f)any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of the material properties or assets of the SCR-Tech Entities, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Company’s or the SCR-Tech Entities’ ownership or use of such property or assets;

(g)any sale, assignment or transfer of any Company Intellectual Propertythat could reasonably be expected to result in a Material Adverse Effect to the SCR-Tech Entities;

(h)receipt of notice that there has been a loss of, or material order cancellation by, any major customer of any of the SCR-Tech Entities; or

(i)any other event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could reasonably be expected to result in a Material Adverse Effect to the SCR-Tech Entities.

To the Company’s knowledge, since November 7, 2007 (x) the SCR-Tech Entities have carried on and operated their business in the ordinary course of business and (y) the SCR-Tech Entities have not suffered a Material Adverse Effect.

2.12.Corporate Documents. The Certificate of Incorporation and Bylaws of the Company are in the form provided to the Purchaser. The copy of the minute books of the Company provided to the Purchaser contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since November 7, 2007 and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes.

2.13.Offering. Subject in part to the truth and accuracy of the Purchaser’s representations set forth in Article III of this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act of 1933, as amended, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

2.14.Preemptive Rights. The Company has fully satisfied (including with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its securities.

2.15.Consents. All consents, approvals, releases, filings, terminations and waivers by third parties necessary to complete the transactions contemplated hereby that are set forth in Section 2.15 of the Disclosure Schedule have been obtained and delivered to the Purchaser and such consents, approvals, releases, filings, terminations and waivers have not expired or been withdrawn.

2.16.Employment and Non-Competition Agreements. William McMahon, Michael Mattes, Frank Wenz and Michael Cooper are bound by and have executed employment agreements with the Company and the SCR-Tech Entities. All other employees of the SCR-Tech Entities have entered into non-competition agreements with the SCR-Tech Entities.

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3.Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that:

3.1.Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (b) to the extent the indemnification provisions contained in the Stockholders’ Agreement may be limited by applicable federal or state securities laws.

3.2.Compliance with Other Instruments. The execution and delivery of this Agreement by the Purchaser, and the performance by the Purchaser of its obligations hereunder, will not conflict, or result in any violation of, or default under, any provision of any charter, bylaws, trust agreement, partnership agreement or other governing instrument applicable to the Purchaser, or any agreement or other instrument to which the Purchaser is a party or by which the Purchaser or any of its properties are bound, or any permit, franchise, judgment, decree, order, rule or regulation applicable to the Purchaser or the Purchaser’s business or properties.

3.3.Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Shares to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares. The Purchaser has not been formed for the specific purpose of acquiring the Shares.

3.4.Disclosure of Information. The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Shares with the Company’s management. Except as set forth in the Transaction Agreements, no representations or warranties, whether written or oral, have been made to the Purchaser by the Company or any officer, employee, affiliate or agent of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely thereon.

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3.5.Restricted Securities. The Purchaser understands that the Shares have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold theShares indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Shares for resale except as set forth in the Stockholders’ Agreement. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligationand may not be able to satisfy.

3.6.No Public Market. The Purchaser understands that no public market now exists for the Shares, and that the Company has made no assurances that a public market will ever exist for the Shares.

3.7.Suitability of Investment. The Purchaser has such knowledge and experience in financial, business and tax matters that the Purchaser is capable of evaluating the merits and risks relating to the Purchaser’s investment in the Shares and making an investment decision with respect to the Company. The Purchaser acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel. The Purchaser is not relying on any statements or representations of the Company or any of its agents for legal advice with respect to this investment or the transactions contemplated by this Agreement other than as set forth in the Transaction Agreements.

3.8.Legends. The Purchaser understands that the Shares and any securities issued in respect of or exchange for the Shares, may bear one or all of the following legends:

(a)“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, UNLESS SUCH TRANSFER SHALL (I) CONSTITUTE A ROUTINE SALE UNDER RULE 144 OF THE ACT OR (II) BE OF SHARES THAT ARE ELIGIBLE FOR RESALE UNDER RULE 144(B)(1) OF THE ACT.”

(b)Any legend set forth in, or required by, the other Transaction Agreements.

(c)Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate so legended.

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3.9.Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.10.Foreign Investors. If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Code), such Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. Such Purchaser’s subscription and payment for and continued beneficial ownership of the Shares, will not violate any applicable securities or other laws of the Purchaser’s jurisdiction.

3.11.Residence. The office or offices of the Purchaser in which its principal place of business is located at the address or addresses of the Purchaser set forth on Exhibit A.

4.Conditions to the Purchaser’s Obligations at Closing. The obligations of the Purchaser to purchase Shares at the Closing are subject to the fulfillment, on or before Closing, of each of the following conditions, unless otherwise waived:

4.1.Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of such Closing.

4.2.Representations and Warranties of Company. The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects as of Closing, except that any such representation and warranties shall be true and correct in all respects where such representation and warranty is qualified with respect to materiality in Section 2, and the Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before Closing.

4.3.Opinion of Company Counsel. The Purchaser shall have received from Eilenberg Krause & Paul LLP, counsel for the Company, an opinion, dated as of the Closing, in substantially the form of Exhibit E (but without assumptions related to issuance of the Shares).

4.4.Covenants of the Company. The Company shall have in all material respects performed the obligations and complied with the covenants required by this Agreement to be performed or complied with by it at or prior to the Closing.

4.5.Stockholders’ Agreement. The Company and the Purchaser and the other stockholders of the Company named as parties thereto have executed and delivered the Stockholders’ Agreement.

4.6.Secretary’s Certificate. The Secretary of the Company has delivered to the Purchaser at the Closing a certificate certifying (i) the Certificate of Incorporation and Bylaws of the Company and (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements.

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4.7.Management Rights. A Management Rights Letter has been executed by the Company and delivered to EnerTech Capital Partners III L.P.

4.8.Board of Directors. The Company’s Board of Directors shall be comprised of John A. Moore, Scott Ungerer and William McMahon.

5.Conditions to the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchaser at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

5.1.Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Stock pursuant to this Agreement shall be obtained and effective as of the Closing.

5.2.Representations and Warranties of the Purchaser. The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects as of Closing, except that any such representation and warranties shall be true and correct in all respects where such representation and warranty is qualified with respect to materiality in Section 3, and the Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before Closing.

6.Covenants of the Company.

6.1.Proceedings and Documents. The Purchaser shall receive all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.

6.2.Securities Laws Compliance. The Company shall make in a timely manner any filings required by applicable federal or state securities or Blue Sky laws, or those of any other applicable jurisdiction.

6.3.Use of Proceeds. As set forth on Section 6.3 of the Disclosure Schedule, the Company agrees that the purchase price paid by the Purchaser shall be used by it for working capital expenses only, and shall not be used to reduce any outstanding indebtedness of the Company or to make payments to any stockholder or affiliate of the Company.

6.4.Pre-Closing Access and Information. From the date hereof to the Closing, the Company will give the Purchaser and their authorized representatives (including accountants, legal counsel and environmental consultants) full access at all reasonable times, upon reasonable notice, to all of the offices and other facilities of the Company, to all contracts, agreements, commitments, books and records of the Company, to the personnel (including auditors) of the Company and to the customers and suppliers of the Company.

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6.5.Conduct of the Company's Business.

(a)Except as contemplated by this Agreement, during the period from the date of this Agreement to the Closing Date, the Company shall conduct the operations of the Company according to its ordinary course of business and consistent with past practice, and shall use commercially reasonable efforts to preserve intact its business organization, keep available the services of its officers and employees, and maintain satisfactory relationships with suppliers, contractors, distributors, customers and others having business relationships with the Company. During the period from the date of this Agreement to the Closing Date, the Company agrees that it will not take any action reasonably within its control, or omit to take any action reasonably within its control, which would cause any of the representations and warranties of the Company in this Agreement to become untrue.

(b)Without limiting the foregoing, during the period from the date of this Agreement to the Closing Date, the Company shall not take any of the actions specified in Section 2.11 without the prior written consent the Purchaser.

6.6.Notices to Purchaser. Prior to the Closing, the Company shall give prompt written notice to the Purchaser of: (a) any breach or default by the Company of the representations, warranties, covenants or agreements hereunder or under any document or instrument contemplated hereby; (b) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement; (c) any notice or other communication from any governmental authority in connection with the transactions contemplated by this Agreement; (d) any Material Adverse Effect; and (e) any claim, action, or proceeding against the Company which could reasonably be expected to have a Material Adverse Effect.

6.7.Exclusivity. From the date hereof to the Closing, the Company shall not, nor shall it authorize or permit any officer, director or employee of or any investment banker, broker, attorney, accountant, or other representative retained by the Company to, solicit, initiate or encourage (including by way of furnishing information) submission of any proposal or offer from any person which constitutes, or may reasonably be expected to lead to, a Financing Proposal. As used herein, a “Financing Proposal” shall mean any proposal for a merger or other business combination involving the Company, or any proposal or offer to acquire in any manner an equity interest in or a material portion of the assets of the Company (other than sales in the ordinary course of business consistent with past practice) or to extend indebtedness to the Company. If the Company receives a Financing Proposal prior to the Closing, the Company shall notify the Purchaser immediately and shall provide to the Purchaser a copy of any written documentation of such Financing Proposal.

7.Survival Period; Indemnification.

7.1.Survival of Representations, Warranties and Covenants. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Purchaser contained in or made pursuant to this Agreement (x) shall survive the execution and delivery of this Agreement and the Closing until the date that is one year after the Closing Date, except that the representations and warranties in Sections 2.1, 2.2, 2.3, 2.4 and 2.5 shall survive the Closing indefinitely, and (y) shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Purchaser or the Company and shall bind the parties’ successors and assigns (including, without limitation, any successor to the Company by way of acquisition, merger or otherwise), whether so expressed or not. This Section 7 shall survive the Closing and the covenants contained in this Agreement shall survive the Closing for the periods contemplated by their terms.

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7.2.Indemnification. The Company and the Purchaser shall, with respect to the representations, warranties and agreements made by them herein, indemnify, pay, defend and hold the Company or the Purchaser, as the case may be, and each of the Company or the Purchaser’s officers, directors, partners, employees and agents and their respective Affiliates, as the case may be, (the “Indemnitees”) harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding (collectively, “Losses”), whether or not such Indemnitees shall be designated a party thereto, which may be (a) imposed on such Indemnitee, or (b) incurred by such Indemnitee, as a result of (i) the violation or breach of any representation, warranty or covenant of the Company or the Parent or the Purchaser, as the case may be, under this Agreement or the Stockholders’ Agreement; (ii) the Purchaser’s investment in or ownership of the Shares; or (iii) actions or omissions by any agent, representative or employee of the Company or the Parent or the Purchaser, as the case may be.

7.3.Limitations on Indemnification. The Company or the Purchaser, as the case may be, shall not have liability under Section 7.2 until the aggregate amount of Losses of the Indemnitees exceeds $50,000, in which case the Indemnitees shall be entitled to Losses in an amount up to the purchase price of $1,947,983.55 in the aggregate.

8.Miscellaneous.

8.1.Transfer; Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of a majority of the Shares. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

8.2.Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to its principles of conflicts of laws.

8.3.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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8.4.Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

8.5.Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 8.5.

If notice is given to the Company or Parent, it shall be sent to:

CoaLogix

11701 Mt. Holly Road

Charlotte, NC 28214

Acorn Energy, Inc.

4 W. Rockland Road

P.O. Box 9

Montchanin, Delaware 19710

A copy shall also be sent to:

Eilenberg Krause & Paul LLP

11 East 44th Street, 19th Floor

New York, New York 10017

Fax No. (212) 986-2399

Attention: Sheldon Krause, Esq.

Womble Carlyle Sandridge & Rice, PLLC

One Wachovia Center, Suite 3500

301 South College Street

Charlotte, NC 28202-6037

Fax No. (704) 338-7819

Attention: Joe B. Cogdell

If notice is given to the Purchaser, it shall be sent to the address sent forth on Exhibit A. A copy shall also be sent to:

Dechert LLP

Cira Centre

2929 Arch St.

Philadelphia, PA 19104-2808

Fax No. (215) 994-2222

Attention: Ian A. Hartman, Esq.

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8.6.No Finder’s Fees. Except as set forth in Section 8.6 of the Disclosure Schedule, each party represents that it neither is nor will be obligated for any finder’s fee, commission or other compensation in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

8.7.Fees and Expenses. At Closing, the Company shall pay the reasonable fees and expenses of Dechert LLP, special counsel to EnerTech Capital Partners III L.P., as well as other costs and expenses incurred by EnerTech Capital Partners III L.P., in connection with the financing.

8.8.Amendments and Waivers. Any term of this Agreement may be amended, terminated or waived only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 8.8 shall be binding upon the Company, the Purchaser, and each transferee of the Shares, each future holder of all such securities and the Company. In the event a nonmaterial provision of this Agreement is required to be amended by the Purchaser after the Closing, the Company will not unreasonably withhold its consent to such amendment.

8.9.Severability. The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

8.10.Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

8.11.Entire Agreement. This Agreement (including the Exhibits hereto, if any), and the other Transaction Agreements constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

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8.12.Publicity. The Company may disclose the existence of the financing, as well as the investment in the Company by the Purchaser, solely to the Company’s investors, investment bankers, lenders, accountants, legal counsel, bona fide prospective investors and employees, in each case only where such persons or entities were under appropriate nondisclosure obligations. In addition, the Company may disclose to third parties that the Purchaser is an investor in the Company without the requirement for nondisclosure agreements. The Company is permitted to issue a press release within 60 days of the Closing disclosing that the Purchaser has invested in the Company; provided that the release does not disclose the amount or other specific terms of the investment and the final form of the press release is approved in advance in writing by the Purchaser. The Company may not use the name of the Purchaser, or any of its Affiliates in any trade publication, in any marketing materials or otherwise to the general public without the prior written consent of the Purchaser, which consent may be withheld in the sole discretion of the Purchaser. Notwithstanding the foregoing, nothing in this Section 8.12 shall prevent the Company from taking any action required to assist Parent in complying with its obligations under the Exchange Act or under the rules or regulations of any stock exchange or other market on which the Parent’s securities are listed for trading.

8.13.Right to Conduct Activities. The Company acknowledges and agrees that (i) the Purchaser and its respective partners, affiliates and affiliates of its partners engage in a wide variety of activities and have investments in many other companies, some of which may be competitive with the business of the Company; (ii) subject to any fiduciary obligations of the Purchaser’s designees to the Company’s Board of Directors, except as waived by the Company pursuant to this Section, it is critical that the Purchaser be permitted to continue to develop its current and future business and investment activities without any restriction arising from an investment by the Purchaser in the Company, the right of the Purchaser to designate directors of the Company or any other relationship, contractual or otherwise, between the Purchaser, on the one hand, and the Company or any of its affiliates, on the other hand; and (iii) from time to time, in connection with the foregoing activities of the Purchaser (collectively, the “Activities”), the Purchaser may have information that may be useful to the Company or its other stockholders (which information may or may not be known by the member of the Company’s Board of Directors designated by the Purchaser), and neither the Purchaser nor any director so designated shall have any duty to disclose any information known to such person or entity to the Company or any of its other stockholders. In addition, the Purchaser shall not be liable for any claim arising out of, or based upon, (i) the investment by the Purchaser in any entity competitive to the Company, (ii) actions taken by any partner, officer or other representative of the Purchaser to assist any such competitive company, whether or not such action was taken as a board member of such competitive company, or otherwise, and whether or not such action has a detrimental effect on the Company, unless such claim arises directly from the Purchaser’s misuse of confidential information in material breach of Section 3.4 of the Stockholders’ Agreement.

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8.14.Termination. Except with respect to provisions that expressly survive the termination of this Agreement, this Agreement may be terminated at any time prior to Closing: (a) by the Purchaser if a court of competent jurisdiction or governmental or regulatory body shall have issued an order, decree or ruling, or taken any other action, restraining, enjoining or otherwise prohibiting the Closing of the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and non-appealable; or (b) by either the Purchaser or the Company if the Closing shall not have occurred by 8:00 p.m., New York City Time, on March 3, 2008 and the terminating parties are not in material breach of this Agreement.

[Remainder of Page Intentionally Left Blank]

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The parties have executed this Common Stock Purchase Agreement as of the date first written above.

COALOGIX INC.
By:	/s/William J. McMahon
Name: William J. McMahon
Title:   President & CEO
ACORN ENERGY, INC.
By:	/s/John A. Moore
Name: John A. Moore
Title:   CEO

PURCHASER:
ENERTECH CAPITAL PARTNERS III L.P.
By:	ECP III Management L.P.,
	Its general partner
By:	ECP III Management LLC,
	Its general partner

By:	/s/ Scott Ungerer
Name: Scott Ungerer
Title:   CEO

EX-10.3

COALOGIX INC.

STOCKHOLDERS’ AGREEMENT

TABLE OF CONTENTS

			Page
1.	Definitions.		1
2.	Registration Rights.		3
	2.1.	Participation in Subsequent Registration Rights.	3
3.	Information Rights		3
	3.1.	Delivery of Financial Statements	3
	3.2.	Inspection.	5
	3.3.	Termination of Information and Inspection Covenants	5
	3.4.	Confidentiality	6
4.	Right of First Offer on Company Offerings		6
	4.1.	Right of First Offer.	6
	4.2.	Termination.	7
5.	Rights of Refusal and Co-Sale		8
	5.1.	Company Right of First Refusal	8
	5.2.	Secondary Refusal Right of Key Holders	8
	5.3.	Consideration; Closing	9
	5.4.	Right of Co-Sale.	9
	5.5.	Drag-Along Right	10
	5.6.	Effect of Failure to Comply	11
	5.7.	Assistance with Pledging of Interests	12
6.	Exempt Transfers.		12
	6.1.	Transfers to Affiliates, Etc	12
	6.2.	Public Offering	13
7.	Key Holder Buy/Sell		13
	7.1.	Triggering Notice	13
	7.2.	Response Notice	13
	7.3.	Cure Period	13
	7.4.	Closing	13
8.	Management Option Plan		14
9.	Additional Covenants		14
	9.1.	Insurance.	14
	9.2.	Employee Agreements.	14

	9.3.	Employee Vesting	14
	9.4.	Board of Directors	14
	9.5.	Meetings of the Board of Directors	15
	9.6.	Successor Indemnification	15
	9.7.	Transactions with Related Parties	15
	9.8.	Actions Requiring Majority Stockholder Approval	15
	9.9.	Actions Requiring Super-Majority Stockholder Approval	15
	9.10.	Termination of Covenants.	16
10.	Miscellaneous		16
	10.1.	Transfers, Successors and Assigns.	16
	10.2.	Governing Law.	17
	10.3.	Counterparts.	17
	10.4.	Titles and Subtitles.	17
	10.5.	Notices	17
	10.6.	Amendments and Waivers.	18
	10.7.	Severability.	18
	10.8.	Additional Stockholders	18
	10.9.	Entire Agreement.	18
	10.10.	Transfers of Rights	18
	10.11.	Delays or Omissions	19
	10.12.	Effectiveness	19
	10.13.	Legend on Stock Certificates	19
Schedule A       -       Schedule of Investors

STOCKHOLDERS’ AGREEMENT

THIS STOCKHOLDERS’ AGREEMENT (the “Agreement”) is made as of February 29, 2008 by and among CoaLogix Inc., a Delaware corporation (the “Company”), and each of the stockholders or option holders listed on Schedule A hereto, each person to whom the rights of a Stockholder are assigned pursuant to Section 10.1 and each person who hereafter becomes a signatory to this Agreement pursuant to Section 10.9 (each, a “Stockholder” and, collectively, the “Stockholders”).

RECITALS

WHEREAS, the Company and EnerTech (as defined below) are parties to the Common Stock Purchase Agreement of even date herewith (the “Purchase Agreement”); and

WHEREAS, in order to induce EnerTech to enter into the Purchase Agreement and to induce EnerTech to invest funds in the Company pursuant to the Purchase Agreement, the Stockholders and the Company hereby agree that this Agreement shall govern the rights of the Stockholders to receive certain information from the Company, to participate in future equity offerings by the Company and certain other matters as set forth in this Agreement;

1.Definitions.For purposes of this Agreement:

“Acorn Energy” shall mean Acorn Energy, Inc and it Affiliates.

“Affiliate” shall mean with respect to any individual, corporation, partnership, association, trust, or any other entity (in each case, a “Person”), any Person which, directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation any general partner, officer or director of such Person and any venture capital fund now or hereafter existing which is controlled by or under common control with one or more general partners or shares the same management company with such Person.

“Common Stock” shall mean shares of the Company’s common stock, $0.001 par value per share.

“Company Notice” means written notice from the Company notifying a selling Stockholder that the Company intends to exercise its Right of First Refusal as to some or all of the Transfer Stock with respect to any Proposed Transfer.

“EnerTech” shall mean EnerTech Capital Partners III L.P. and its Affiliates.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“GAAP” shall mean U.S. generally accepted accounting principles.

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“IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

“Key Holders” means Acorn Energy and EnerTech, so long as they are Stockholders owning at least five percent (5.0%) of the issued and outstanding capital stock of the Company. If either Acorn Energy or EnerTech no longer owns at least five percent of the issued and outstanding capital stock of the Company, but still owns some capital stock of the Company, such former Key Holder shall still be a Stockholder.

“Key Holder Secondary Notice” means written notice from a Key Holder notifying the Company and the selling Key Holder or Stockholder, as the case may be, that such Key Holder intends to exercise its Secondary Refusal Right as to a portion of the Transfer Stock with respect to any Proposed Transfer.

“Key Holder Stock” means any Common Stock now owned or subsequently acquired by any Key Holder or such Key Holder’s permitted transferees or assigns.

“Management Stockholder” means a Stockholder currently employed in the management of the Company, for so long as such Stockholder is employed in such a capacity.

“New Securities” shall mean equity securities of the Company, whether now authorized or not, or rights, options, or warrants to purchase said equity securities, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for said equity securities (collectively “New Securities”).

“Proposed Transfer” means any proposed assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any other like transfer or encumbering of any Common Stock (or any interest therein) proposed by any of the Stockholders; provided that Proposed Transfer shall not include any merger, consolidation or like transfer effected pursuant to a vote of the Stockholders of Common Stock of the Company.

“Proposed Transfer Notice” means written notice from a Stockholder setting forth the terms and conditions of a Proposed Transfer.

“Prospective Transferee” means any Person to whom a Stockholder proposes to make a Proposed Transfer.

“Registrable Securities” means (i) the Common Stock owned by either Key Holder, and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in clause (i), excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which such Person’s rights under Section 2 hereof are not assigned or any shares for which registration rights have terminated.

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“Right of Co-Sale” means the right, but not an obligation, of a Key Holder or Management Stockholder to participate in a Proposed Transfer on the terms and conditions specified in the Proposed Transfer Notice.

“Right of First Refusal” means the right, but not an obligation, of a Key Holder or the Company, as the case may be, or his, her or its permitted transferees or assigns, to purchase some or all of the Transfer Stock with respect to a Proposed Transfer, on the terms and conditions specified in the Proposed Transfer Notice.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Secondary Notice” means written notice from the Company notifying the selling Key Holder and the other Key Holder that the Company does not intend to exercise its Right of First Refusal as to all shares of Transfer Stock with respect to any Proposed Transfer.

“Secondary Refusal Right” means the right, but not an obligation, of each Key Holder to purchase up to its pro rata portion (based upon the total number of shares of Common Stock then held by all Key Holders) of Transfer Stock not purchased pursuant to the Company’ s Right of First Refusal, on the terms and conditions specified in the Proposed Transfer Notice.

“Transfer Stock” means shares of Common Stock subject to a Proposed Transfer.

2.Registration Rights. The Company covenants and agrees as follows:

2.1.Participation in Subsequent Registration Rights. So long as either Key Holder remains a Key Holder, from and after the date of this Agreement, the Company shall not, without the prior written consent of each Key Holder, enter into any agreement with any stockholder or prospective stockholder of any securities of the Company which would grant such stockholder or prospective stockholder registration rights in respect of Registrable Securities, unless the Company shall thereunder grant each Key Holder registration rights identical to the most favorable registration rights provided to any other stockholder or prospective stockholder of any securities of the Company.

3.Information Rights.

3.1.Delivery of Financial Statements. So long as EnerTech owns one percent (1.0%) of the issued and outstanding capital stock of the Company, the Company shall deliver to EnerTech or its Affiliate, as the case may be:

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(a)as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, a balance sheet and income statement as of the last day of such year; a statement of cash flows for such year and a comparison between the actual figures for such year, the comparable figures for the prior year and the comparable figures included in the Budget (as defined below) for such year, with an explanation of any material differences between them and a schedule as to the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with GAAP, of the Company;

(b)as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, schedule as to the sources and application of funds for such fiscal quarter, an unaudited balance sheet and a statement of stockholder’s equity as of the end of such fiscal quarter;

(c)as soon as practicable, but in any event with forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the number of common shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for common shares and the exchange ratio or exercise price applicable thereto and number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit EnerTech or its Affiliate to calculate its percentage equity ownership in the Company and certified by the Chief Financial Officer or Chief Executive Officer of the Company as being true, complete and correct;

(d)as soon as practicable, but in any event within thirty (30) days of the end of each month, an unaudited income statement, an unaudited profit or loss statement;

(e)as soon as practicable, but in any event thirty (30) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), prepared on a monthly basis, including balance sheets and sources and applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company;

(f)with respect to the financial statements called for in subsections (a) and(b) of this Section 3.1, an instrument executed by the Chief Financial Officer and President or Chief Executive Officer of the Company and certifying that such financials were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the financial condition of the Company and its results of operation for the periods specified therein, subject to year-end audit adjustment;

(g)such other information relating to the financial condition, business, prospects or corporate affairs of the Company as EnerTech or any assignee of EnerTech may from time to time reasonably request, provided, however, that the Company shall not be obligated under this subsection (g) or any other subsection of Section 3.1 to (i) provide information which the Company reasonably deems in good faith to be a trade secret or similar confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) would adversely affect the attorney-client privilege between the Company and its counsel;

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(h)if for any period the Company shall have any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

(i) notices describing in reasonable detail any claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the knowledge of the Company threatened against the Company or any officer or director of the Company involving the Company or any default or breach by any party under any agreement of the Company as soon as practicable, but in any event within five (5) days after the Company becomes aware of such litigation or contract default.

3.2.Inspection.So long as EnerTech owns one percent (1.0%) of the issued and outstanding capital stock of the Company, the Company shall permit, at EnerTech’s expense, EnerTech to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be reasonably requested by at EnerTech; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information (unless covered by an enforceable confidentiality agreement in a form acceptable to the Company) or would adversely affect the attorney-client privilege between the Company and its counsel.

3.3.Termination of Information and Inspection Covenants. The covenants set forth in Section 3.1 and Section 3.2 shall terminate as to EnerTech and be of no further force or effect immediately prior to the consummation of the sale of shares of Common Stock in the Company’s IPO or when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act, unless EnerTech ceases to own one percent (1.0%) of the issued and outstanding capital stock of the Company prior to the occurrence of such events, in which case the covenants shall terminate as of the date that EnerTech no longer owns one percent (1.0%) of the issued and outstanding capital stock of the Company.

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3.4.Confidentiality. Each Stockholder agrees that such Stockholder will keep confidential and will not disclose, divulge or use for any purpose, other than to monitor its investment in the Company, any confidential information obtained from the Company pursuant to the terms of this Agreement, unless such confidential information (i) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Stockholder), (ii) is or has been independently developed or conceived by the Stockholder without use of the Company's confidential information or (iii) is or has been made known or disclosed to the Stockholder by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that a Stockholder may disclose confidential information (a) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, (b) to any prospective purchaser of any Registrable Securities from such Stockholder as long as such prospective investor agrees to be bound by the provisions of this Section 3.4, (c) to any Affiliate, partner, member, stockholder or wholly owned subsidiary of such Stockholder in the ordinary course of business, as long as such Affiliate, partner, member stockholder or wholly owned subsidiary of such Stockholder agrees to be bound by the provisions of this Section 3.4, or (d) as may otherwise be required by law, provided that the Stockholder takes reasonable steps to minimize the extent of any such required disclosure. The Company, EnerTech, and the Stockholders hereby acknowledge that EnerTech invests in numerous companies, some of which may be competitive with the Company’s business. The Company, EnerTech and the Stockholders agree that EnerTech shall not be liable for any claim arising out of, or based upon, (i) the investment by EnerTech in any entity competitive to the Company, (ii) actions taken by any partner, officer or other representative of EnerTech to assist any such competitive company, whether or not such action was taken as a board member of such competitive company, or otherwise, and whether or not such action has a detrimental effect on the Company, unless such claim arises directly from the EnerTech’s misuse of confidential information in material breach of this Section 3.4.

4.Right of First Offer on Company Offerings

4.1.Right of First Offer. Subject to the terms and conditions specified in this Section 4.1, and applicable securities laws, in the event the Company proposes to offer or sell any New Securities, the Company shall first make an offering of such New Securities to EnerTech in accordance with the following provisions of this Section 4.1. EnerTech shall be entitled to apportion the right of first offer hereby granted it among itself and its partners, members and Affiliates in such proportions as it deems appropriate.

(a)The Company shall deliver a notice, in accordance with the provisions of Section 10.5 hereof, (the “Offer Notice”) to EnerTech stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

(b)By written notification received by the Company, within twenty (20) calendar days after mailing of the Offer Notice, EnerTech may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the number of shares of Common Stock issued and then held by EnerTech bears to the total number of shares of Common Stock of the Company issued and then held by all the Stockholders.

(c)In the event that the Company proposes to offer New Securities contingently, EnerTech will be issued warrants (“Contingent Warrants”) to purchase its pro rata portion of equity securities which may be purchased pursuant to such New Securities, or into which such New Securities may become convertible, as the case may be, in lieu of receiving such New Securities on the same terms as stated in the Offer Notice. The exercise of such Contingent Warrants will be subject to the same contingencies as the New Securities proposed to be offered. EnerTech must exercise such Contingent Warrants within twenty (20) calendar days after the Company has properly delivered a notice to EnerTech, in accordance with Section 10.5 hereof, that such Contingent Warrants may be exercised.

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(d)If the consideration proposed to be paid for New Securities is in property, services or other non-cash consideration, the value of the consideration shall be as agreed in good faith by EnerTech and the Company. If EnerTech and the Company fail to agree in good faith as to the value of such consideration, the price paid for such offered New Securities shall be deemed to be the value of such consideration as calculated in accordance with GAAP.

(e)The right of first offer in this Section 4.1 shall not be applicable to: (i) up to 14,706 shares of Common Stock properly issued or deemed issued to employees or directors of, or consultants to, the Company or any of its subsidiaries pursuant to the Management Option Plan (as defined in Section 8); or (ii) securities issued in connection with any stock split or stock dividend of the Company.

(f)The right of first offer set forth in this Section 4.1 may not be assigned or transferred except that such right is assignable by EnerTech to any of its Affiliates.

(g)If (i) the Company proposes to issue New Securities at any time before the provisions of this Section 4 have terminated pursuant to Section 4.2, (ii) EnerTech has been issued Contingent Warrants pursuant to Section 4.1(c), and (iii) EnerTech would be barred from exercising its rights under this Section 4, pursuant to Section 4.2 had the Contingent Warrants been exercised prior to the delivery of the Offer Notice because Acorn Energy’s ownership of the Company’s Common Stock would be less than seventy-five percent (75%) of the Company’s capital stock calculated on a fully diluted basis, then EnerTech shall not have the right to purchase or obtain New Securities proposed to be offered, but rather EnerTech will be issued warrants (“Secondary Contingent Warrants”) to purchase its pro rata portion of equity securities which may be purchased pursuant to such New Securities, or into which such New Securities may become convertible, as the case may be, in lieu of receiving such New Securities on the same terms as stated in the Offer Notice. Any Secondary Contingent Warrants shall become exercisable upon the lapse of Contingent Warrants referenced in subsection (iii) of this Section 4.1(g). EnerTech must exercise such Secondary Contingent Warrants within twenty (20) calendar days after the Company has properly delivered a notice to EnerTech, in accordance with Section 10.5 hereof, that such Secondary Contingent Warrants may be exercised.

4.2.Termination. The provisions of this Section 4 shall terminate upon the first to occur of (i) the consummation of an IPO, (ii) a failure by EnerTech to elect to purchase a portion of New Securities to which it is entitled under Section 4.1(b), or to exercise its Contingent Warrants or Secondary Contingent Warrants, if any, as provided under Sections 4.1(c) and 4.1(g), respectively and (iii) the point at which Acorn Energy’s ownership of the Company’s Common Stock is equal to seventy-five percent (75%) of the Company’s capital stock calculated on a fully diluted basis after giving effect to any proposed issuance of New Securities and the corresponding exercise by EnerTech of its rights under this Section 4, but excluding shares issued or reserved for issuance under the Management Option Plan (as hereinafter defined). For the avoidance of doubt, Enertech shall have the ability to exercise such right with respect to the proposed issuance of New Securities to the extent that the exercise of such right will not reduce Acorn Energy’s ownership of the Company’s Common Stock below seventy-five percent (75%) of the Company’s capital stock. For illustrative purpose, in the event of a proposed issuance of New Securities that would reduce Acorn Energy’s ownership of the Company’s Common Stock below seventy-five percent (75%) of the Company’s capital stock, EnerTech shall have the right to purchase or obtain only that portion of such New Securities as it would be entitled to purchase or obtain if the size of the proposed issuance of New Securities were such that it would result in Acorn Energy owning exactly seventy-five percent (75%) of the Company’s capital stock calculated on a fully diluted basis after giving effect to any proposed issuance of New Securities and the corresponding exercise by EnerTech of its rights under this Section 4.

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5.Rights of Refusal and Co-Sale

5.1.Company Right of First Refusal. Each Stockholder hereby unconditionally and irrevocably grants to the Company a Right of First Refusal to purchase all or any portion of Transfer Stock that such Stockholder may propose to transfer in a Proposed Transfer, at the same price and on the same terms and conditions as those offered to the Prospective Transferee. Each Stockholder proposing to make a Proposed Transfer must deliver a Proposed Transfer Notice to the Company and the Key Holders, not later than 10 days prior to the consummation of such Proposed Transfer. Such Proposed Transfer Notice shall contain the material terms and conditions of the Proposed Transfer and the identity of the Prospective Transferee. The Company must exercise its Right of First Refusal under this Section 5.1 by giving a Company Notice to such selling holder of Common Stock within fifteen (15) days after delivery of the Proposed Transfer Notice.

5.2.Secondary Refusal Right of Key Holders.

(a)Each Key Holder hereby unconditionally and irrevocably grants to the other Key Holder a Secondary Refusal Right to purchase the shares of Key Holder Stock not purchased by the Company pursuant to the Company’s Right of First Refusal under Section 5.1, as provided in this Section 5.2. If the Company does not intend to exercise its Right of Refusal under Section 5.1 with respect to all Key Holder Stock subject to a Proposed Transfer, the Company must deliver a Secondary Notice to the other Key Holder to that effect no later than fifteen (15) days after the selling Key Holder delivers the Proposed Transfer Notice to the Company. To exercise its Secondary Refusal Right, a Key Holder must deliver a Key Holder Secondary Notice to the selling Key Holder and the Company within ten (10) days after the deadline for delivery of the Secondary Notice.

(b)Each Stockholder that is not a Key Holder hereby unconditionally and irrevocably grants to the Key Holders a Secondary Refusal Right to purchase up to each Key Holder’s pro rata portion (based upon the total number of shares of each Key Holder’s Stock) of the Stockholder’s stock not purchased by the Company pursuant to the Company’s Right of First Refusal under Section 5.1, as provided in this Section 5.2. If the Company does not intend to exercise its Right of Refusal under Section 5.1 with respect to all of the selling Stockholder’s Common Stock subject to a Proposed Transfer, the Company must deliver a Secondary Notice to the Key Holders to that effect no later than fifteen (15) days after the selling Stockholder delivers the Proposed Transfer Notice to the Company. To exercise its Secondary Refusal Right, a Key Holder must deliver a Key Holder Secondary Notice to the selling Stockholder and the Company within ten (10) days after the deadline for delivery of the Secondary Notice.

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5.3.Consideration; Closing. If the consideration proposed to be paid for the Transfer Stock is in property, services or other non-cash consideration, the fair market value of the consideration shall be determined in good faith by the Company’s Board of Directors. If the Company or any Key Holder cannot for any reason pay for the Transfer Stock in the same form of non-cash consideration, the Company or such Key Holder may pay the cash value equivalent thereof, as determined by the Board of Directors. The closing of the purchase of Transfer Stock by the Company and/or the other Key Holder, as the case may be, shall take place, and all payments from the Company and/or the other Key Holder, as the case may be, shall have been delivered to the selling Stockholder by the later of (i) the date specified in the Proposed Transfer Notice as the intended date of the Proposed Transfer and (ii) forty-five (45) days after delivery of the Proposed Transfer Notice.

5.4.Right of Co-Sale.

(a)If any Transfer Stock subject to a Proposed Transfer by a Stockholder is not purchased pursuant to Sections 5.1 and 5.2 above and thereafter is to be sold to a Prospective Transferee, a Key Holder or Management Stockholder may elect to exercise its Right of Co-Sale and participate on a pro-rata basis in the Proposed Transfer on the same terms and conditions specified in the Proposed Transfer Notice. A Key Holder or Management Stockholder who desires to exercise its Right of Co-Sale must give the selling Stockholder written notice to that effect within fifteen (15) days after the deadline for delivery of the Key Holder Secondary Notice as described above, and upon giving such notice such Key Holder or Management Stockholder shall be deemed to have effectively exercised the Right of Co-Sale.

(b)Each Key Holder or Management Stockholder who timely exercises its Right of Co-Sale by delivering the written notice provided for above in Section 5.4(a) may include in the Proposed Transfer all or any part of his, her or its Common Stock equal to the product obtained by multiplying (i) the aggregate number of shares of Stockholder Common Stock subject to the Proposed Transfer (excluding shares purchased by the Company pursuant to the Right of First Refusal of the Company) by (ii) a fraction, the numerator of which is the number of shares of Common Stock owned by such Key Holder or Management Stockholder immediately before consummation of the Proposed Transfer and the denominator of which is the total number of shares of Common Stock owned, in the aggregate, by all Stockholders immediately prior to the consummation of the Proposed Transfer. To the extent a Key Holder or Management Stockholder exercises such right of participation in accordance with the terms and conditions set forth herein, the number of shares of Common Stock that the selling Stockholder may sell in the Proposed Transfer shall be correspondingly reduced.

(c)Each participating Key Holder or Management Stockholder shall effect its participation in the Proposed Transfer by delivering to the transferring Stockholder, no later than fifteen (15) days after such Key Holder’s or Management Stockholder’s exercise of the Right of Co-Sale, one or more stock certificates, properly endorsed for transfer to the Prospective Transferee, representing the number of shares of Common Stock that such Key Holder or Management Stockholder elects to include in the Proposed Transfer.

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(d)The terms and conditions of any sale pursuant to this Section 5.4 will be memorialized in, and governed by, a written purchase and sale agreement with customary terms and provisions for such a transaction.

(e)Each stock certificate a participating Key Holder or Management Stockholder delivers to the selling Stockholder pursuant to subparagraph (c) above will be transferred to the Prospective Transferee against payment therefor in consummation of the sale of the Transfer Stock pursuant to the terms and conditions specified in the Proposed Transfer Notice and the purchase and sale agreement, and the selling Stockholder shall concurrently therewith remit to the appropriate Key Holder or Management Stockholder the portion of the sale proceeds to which such Key Holder or Management Stockholder is entitled by reason of its participation in such sale. If any Prospective Transferee or Transferees refuse(s) to purchase securities subject to the Right of Co-Sale from a Key Holder or Management Stockholder exercising its Right of Co-Sale hereunder, no Stockholder may sell any Common Stock to such Prospective Transferee or Transferee unless and until, simultaneously with such sale, such selling Stockholder purchases all securities subject to the Right of Co-Sale from such other Stockholders.

(f)If any Proposed Transfer is not consummated within forty-five (45) days after receipt of the Proposed Transfer Notice by the Key Holders, the Management Stockholders, or the Company, as the case may be, the Stockholder proposing the Proposed Transfer may not sell any of its Common Stock unless it first complies in full with each provision of this Section 5. The exercise or election not to exercise any right by any Key Holder or Management Stockholder hereunder shall not adversely affect its right to participate in any other sales of Transfer Stock subject to this Section 5.4.

5.5.Drag-Along Right.

(a)In the event that any Key Holder owns more than fifty percent (50%) of the Company’s issued and outstanding capital stock and such Key Holder desires to accept a bona fide offer (a "Purchase Offer") from any person or persons, other than an Affiliate or another Stockholder, to purchase all (a "Divestiture") the shares of Common Stock then held by such Key Holder, then such Key Holder shall promptly deliver to each of the other Stockholders a written notice (the "Purchase Offer Notice") stating such Key Holder’s intention to sell such shares pursuant to such Purchase Offer and setting forth the terms and conditions of such Purchase Offer, including, without limitation, the identity of the proposed purchaser and the amount and type of consideration to be paid therefor. The Purchase Offer Notice shall include a copy of any written offer, letter of intent, term sheet or contract of sale pertaining to the Purchase Offer.

(b) In connection with a Divestiture, any Key Holder owning more than fifty percent (50%) of the Company’s issued and outstanding capital stock shall have the right ("Drag Along Right") to require each other Stockholder to participate in such sale of Common Stock by such Key Holder on the terms and conditions set forth in the Purchase Offer Notice (which shall be the same terms and conditions (on a per share basis) as are applicable to such Key Holder’s sale of shares of Common Stock to the proposed purchaser). Such Drag Along Right shall be exercisable by such Key Holder including in its Purchase Offer Notice a statement to the effect that such Key Holder elects to exercise its Drag Along Right in connection with the proposed sale. At any time prior to the closing of such sale, such Key Holder may withdraw its election to exercise its Drag Along Right upon written notice to the Stockholders.

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(c)The closing of the purchase and sale of any shares of Common Stock to be sold pursuant to the Drag Along Right shall occur concurrently with the closing of the sale of the shares of the Common Stock by the Key Holder owning more than fifty percent (50%) of the Company’s issued and outstanding capital stock, which shall be a date not less than sixty (60) days after the giving of the Purchase Offer Notice. At any such closing, each Stockholder shall deliver to the purchaser a certificate or certificates representing the number of shares of Common Stock to be sold by such Stockholder, duly endorsed in blank or accompanied by a duly executed stock power in blank, with signatures duly guaranteed and all requisite stock transfer stamps affixed thereto. All Stockholders shall be treated equally under this Section 5.5. It shall be a condition of the obligation to sell under this Section 5.5 that all facts and circumstances and all material aspects of any transaction under this Section 5.5 shall be disclosed. The provisions of this Section 5.5 shall terminate upon an IPO.

5.6.Effect of Failure to Comply.

(a)Any Proposed Transfer not made in compliance with the requirements of this Agreement shall be null and void ab initio, shall not be recorded on the books of the Company or its transfer agent and shall not be recognized by the Company. Each party hereto acknowledges and agrees that any breach of this Agreement would result in substantial harm to the other parties hereto for which monetary damages alone could not adequately compensate. Therefore, the parties hereto unconditionally and irrevocably agree that any non-breaching party hereto shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of purchases, sales and other transfers of Common Stock not made in strict compliance with this Agreement).

(b)If any Stockholder becomes obligated to sell any Common Stock to the Company under this Agreement and fails to deliver such Common Stock in accordance with the terms of this Agreement, the Company may, at its option, in addition to all other remedies it may have, send to such Stockholder the purchase price for such Common Stock as is herein specified and cancel on its books the certificate or certificates representing the Common Stock to be sold.

(c)If any Stockholder purports to sell any Common Stock in contravention of the terms of this Agreement (a “Prohibited Transfer”), the Company or a Key Holder, as the case may be, in addition to such remedies as may be available by law, in equity or hereunder, is entitled to require the following actions of such Stockholder, and such Stockholder will be bound by the terms of such option:

(i)If a Stockholder makes a Prohibited Transfer, a Key Holder or the Company, as the case may be, who timely exercises his, her or its Right of First Refusal under Sections 5.1 and 5.2 may require such Stockholder, to sell to the other Key Holder or the Company, as the case may be, the number of shares of Common Stock that such other Key Holder or the Company, as the case may be, would have been entitled to purchase under Sections 5.1 and 5.2 had the Prohibited Transfer been effected pursuant to and in compliance with the terms of Sections 5.1 and 5.2.

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(ii)If a Key Holder makes a Prohibited Transfer, the other Key Holder that timely exercises its Right of Co-Sale under Section 5.4 may require such Key Holder to purchase from it the number of shares of Common Stock that such Key Holder would have been entitled to sell to the Prospective Transferee under Section 5.4 had the Prohibited Transfer been effected pursuant to and in compliance with the terms of Section 5.4.

In each case, the sale will be made on the same terms and subject to the same conditions as would have applied had the Stockholder not made the Prohibited Transfer, except that the sale (including, without limitation, the delivery of the shares or the purchase price, as the case may be) must be made within ninety (90) days after the Company or the other Key Holder, as the case may be, learns of the Prohibited Transfer, as opposed to the timeframe proscribed in Sections 5.1, 5.2, 5.3, 5.4, or 5.5 as the case may be. Such Stockholder shall also reimburse the other Key Holder and the Company, as the case may be, for any and all fees and expenses, including legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Key Holder’s or the Company’s, as the case may be, rights under Sections 5.1, 5.2, 5.3, 5.4, or 5.5 as the case may be.

5.7.Assistance with Pledging of Interests. The rights of the Company and the Key Holders under this Section 5 shall not pertain or apply to any pledge by a Key Holder of its Common Stock which creates a mere security interest in such Common Stock. The Company shall consent to any pledging of any Key Holder’s Common Stock and other matters customarily requested of the Key Holders by the Key Holders’ lenders; provided that any pledge of Common Stock shall be contingent upon the pledgee providing a written instrument to the Company agreeing in writing that its lien is subject to the terms of this Agreement.

6.Exempt Transfers.

6.1.Transfers to Affiliates, Etc. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Sections 5.1, 5.2 and 5.4 shall not apply: (i) in the case of a Key Holder that is an entity, upon a transfer by such Key Holder to its stockholders, members, partners or other equity holders, (ii) to a repurchase of Common Stock from a Key Holder by the Company at a price no greater than that originally paid by such Key Holder for such Common Stock and pursuant to an agreement containing vesting and/or repurchase provisions approved by a majority of the Board of Directors, or (iii) to the sale or transfer of Common Stock between Key Holders and their respective Affiliates; provided, however, that such transfer shall be contingent upon the transferee providing a written instrument to the Company notifying the Company of such transfer and assignment and agreeing in writing to be bound by the terms of this Agreement; and providedfurther, notwithstanding any such permitted transfer, such transferred Common Stock shall remain Common Stock and Key Holder Stock for all purposes hereunder, and such transferee shall be treated as a Key Holder, as the case may be, (but only with respect to the securities so transferred to the transferee) for all purposes of this Agreement (including the obligations of a Key Holder with respect to Proposed Transfers of such Capital Stock pursuant to Section 5); and provided, further, in the case of any transfer pursuant to clause (i), that such transfer is made pursuant to a transaction in which there is no consideration actually paid for such transfer.

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6.2.Public Offering. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Section 5 shall not apply to the sale of any Common Stock to the public in an IPO, and the provisions of Section 5 shall terminate and be of no further force or effect upon (a) the consummation of the IPO, or (b) the Company first becoming subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act, whichever event shall first occur.

7.Key Holder Buy/Sell.

7.1.Triggering Notice. At any time following the first anniversary of the Closing of the Purchase Agreement (as defined therein), either Key Holder (such Key Holder, the “Triggering Key Holder”) may deliver a written notice in accordance with the provisions of Section 10.5 hereof, (a “Triggering Notice”) to the other Key Holder (the “Responding Key Holder”) stating: (i) its intent to commence a purchase or sale of Key Holder Stock under this Section 7 and (ii) the per-share price (the “Per-Share Buy/Sell Price”) which will be applicable to such transaction.

7.2.Response Notice. Within 90 days of the delivery of a Triggering Notice, the Responding Key Holder shall deliver a written notice in accordance with the provisions of Section 10.5 (the “Response Notice”) to the Triggering Key Holder stating whether the Responding Key Holder has elected: (i) to purchase the entirety of the Triggering Key Holder’s Common Stock at the Per-Share Buy/Sell Price or (ii) to sell the entirety of its Common Stock to the Triggering Key Holder at the Per-Share Buy/Sell Price.

7.3.Cure Period. If no Response Notice is delivered within 90 days of a Triggering Notice, the Triggering Key Holder shall deliver a written notice in accordance with the provisions of Section 10.5 (the “Cure Period Notice”) to the Responding Key Holder stating that the Responding Key Holder has failed to deliver a Response Notice and stating that the Responding Key Holder has 15 days from delivery of the Cure Period Notice (the “Cure Period”) to deliver a Response Notice to the Triggering Key Holder. If the Responding Key Holder does not deliver a Response Notice within the Cure Period, the Triggering Key Holder shall, at its sole option, within ten days of the conclusion of the Cure Period elect: (i) to purchase the entirety of the Responding Key Holder’s Common Stock at the Per-Share Buy/Sell Price or (ii) to sell the entirety of its Common Stock to the Responding Key Holder at the Per-Share Buy/Sell Price. The Key Holders shall thereupon effect a Closing of a sale or purchase in accordance with the provisions of Section 7.4 pursuant to the terms of the preceding sentence.

7.4.Closing. The closing of a sale or purchase under this Section 7 shall take place, and stock certificates representing all of the shares of Common Stock of the Selling Key Holder, properly endorsed for transfer to the purchasing Key Holder, as well as all payments from the purchasing Key Holder shall have been delivered to the selling Key Holder within forty-five (45) days after delivery of the Response Notice, the Cure Period Notice or the expiration of the Cure Period, as the case may be.

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8.Management Option Plan. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Sections 4 and 5 shall not apply to the issuance of options under a management option plan (the “Management Option Plan”), provided that: (i) the total Company equity available for issuance under the Management Option Plan will be 14,706 shares of Common Stock, equivalent to 12.5% ownership of the Company, on a fully diluted basis following Closing (as defined in the Purchase Agreement); (ii) the exercise price per share for any options issued under the Management Option Plan will be equal to or greater than the price per share paid by EnerTech under the Purchase Agreement; and (iii) the option pool under the Management Option Plan shall not be increased without EnerTech’s written consent.

9.Additional Covenants.

9.1.Insurance.Acorn Energy maintains Directors and Officers Errors and Omissions insurance pursuant to a policy of insurance substantially in the form provided to EnerTech. The Company and Acorn Energy will use reasonable best efforts to cause such insurance policy to be maintained until such time as the Board of Directors of the Company determines that such insurance should be discontinued. The policy shall not be cancelable by Acorn Energy without prior approval of the Board of Directors.

9.2.Employee Agreements.The Company will cause each person now or hereafter employed by it or any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a proprietary information, inventions, non-competition and non-solicitation agreement substantially in the form approved by the Board of Directors and satisfactory to the Stockholders.

9.3.Employee Vesting. All future employees and consultants of the Company who shall purchase, or receive options to purchase, shares of the Company’s capital stock following the date hereof shall be required to execute stock purchase or option agreements providing for vesting of shares over a four-year period with the first 25% of such shares vesting following 12 months of continued employment or services after the grant date of each such security, and the remaining shares vesting in equal monthly installments over the following 36 months. The issuance or transfer of any options to purchase shares of the Company’s capital stock shall be contingent upon the holder or transferee becoming a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter such holder or transferee shall be deemed a “Stockholder” for all purposes hereunder.

9.4.Board of Directors. Each Stockholder agrees to vote all of his, her or its shares of voting securities in the Company, whether now owned or hereafter acquired or which such Stockholder may be empowered to vote, from time to time and at all times, in whatever manner shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the following persons shall be elected to the Board: five to seven individuals designated in the following proportions: (i) one designee of EnerTech, which individual shall initially be Scott Ungerer, for so long as EnerTech remains a Key Holder , (ii) two designees of Acorn Energy, one of which individuals shall initially be John Moore, Chairman, (iii) one to three outside directors designated by the Stockholders voting together as a single class, and (iv) the chief executive officer of the Company, which individual shall initially be Bill McMahon.

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9.5.Meetings of the Board of Directors. The Board shall meet no less frequently than once every quarter, with monthly telephone conversations on an as-needed basis. Each authorized committee of the Board shall include the director elected by EnerTech. EnerTech shall be entitled to appoint an observer, who is approved by the Company’s Chief Executive, to all Board meetings. The Company will reimburse non-employee directors for all reasonable out-of-pocket expenses incurred in attending board and committee meetings.

9.6.Successor Indemnification. In the event that the Company or any of its successors or assigns (i) consolidates with or merges into any other entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately prior to such transaction, whether in the Company’s bylaws, Certificate of Incorporation, or elsewhere, as the case may be.

9.7.Transactions with Related Parties. The Company shall not enter into any business dealing, undertaking, contract, agreement, lease or other arrangement for the furnishing to or by the Company of goods, services or space or any other transaction with any Stockholder or any Affiliate of any Stockholder (an “Affiliate Contract”) and shall not take any action pertaining to the rights and obligations of the Company under such Affiliate Contract, without the approval of a majority of the disinterested members of the Company’s Board of Directors.

9.8.Actions Requiring Majority Stockholder Approval. Consent of the Stockholders holding a majority of the outstanding voting shares of Common Stock, which Stockholders must include EnerTech, provided that (x) EnerTech holds 5% or more of the Company’s issued and outstanding Common Stock and (y) EnerTech has exercised all of its rights under Section 4 to acquire New Securities prior to the termination of such rights under Section 4.2, shall be required for any action that (including by way of merger, consolidation, reclassification, reorganization or other similar event) creates, authorizes, or issues: (i) any class of stock or securities of the Company having any right, preference, privilege, power or priority superior to the Common Stock, or (ii) any debt or lease transaction resulting in an obligation to the Company, in the aggregate, in excess of $3,000,000.

9.9.Actions Requiring Super-Majority Stockholder Approval. Consent of the holders of more than 67% of the outstanding voting shares of the Common Stock shall be required for any action that (including by way of merger, consolidation, reclassification, reorganization or other similar event):

(a)increases or decreases the number of authorized shares of Common Stock or creates or authorizes any obligation or security convertible into shares of Common Stock,

(b)liquidates, dissolves or winds up the business and affairs of the Company or consents to any of the foregoing,

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(c)amends or waives any provision of the charter, by-laws or articles of the Company in a manner which adversely affects the holders of the Common Stock,

(d)acquires any other corporation or entity,

(e)adversely alters, affects or changes the rights, preferences, privileges, powers, or interests of, or the restrictions provided for the benefit of, the holders of the Common Stock,

(f)creates, authorizes shares of, or issues shares of any class or series of shares stock having any right, preference, privilege, power or priority on parity with the Common Stock,

(g)effects or authorizes any merger, recapitalization, reorganization, acquisition, consolidation, liquidation, winding up, or sale of all or substantially all of the assets of the Company,

(h)makes any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

(i)makes any loan or advance to any person, including, any employee or director,

(j)guarantees any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business,

(k)makes any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of two years, or

(l)enters into or causes the Company to be a party to any transaction with any director, officer or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such person or any Affiliate of the Company.

9.10.Termination of Covenants.The covenants set forth in this Section 9, shall terminate and be of no further force or effect upon (a) the consummation of the IPO, or (b) the Company first becoming subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act, whichever event shall first occur.

10.Miscellaneous.

10.1.Transfers, Successors and Assigns.The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

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10.2.Governing Law.This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to its principles of conflicts of laws.

10.3.Counterparts.This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

10.4.Titles and Subtitles.The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

10.5.Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Schedule A hereto, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 10.5.

If notice is given to the Company or Acorn Energy, a copy shall also be sent to:

Eilenberg Krause & Paul LLP

11 East 44th Street, 19th Floor

New York, New York 10017

Fax No. (212) 986-2399

Attention: Sheldon Krause, Esq.

Womble Carlyle Sandridge & Rice, PLLC

One Wachovia Center, Suite 3500

301 South College Street

Charlotte, NC 28202-6037

Fax No. (704) 338-7819

Attention: Joe B. Cogdell

If notice is given to EnerTech, a copy shall also be sent to:

Dechert LLP

Cira Centre

2929 Arch St.

Philadelphia, PA 19104-2808

Fax No. (215) 994-2222

Attention: Ian A. Hartman, Esq.

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10.6.Amendments and Waivers.This Agreement may be amended or modified and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by each of the Key Holders, provided that such consent shall not be required if the Key Holders do not then own shares representing at least 50% of the outstanding Common Stock. Any amendment or waiver so effected shall be binding upon the Company, the Stockholders and all of their respective successors and permitted assigns whether or not such party, assignee or other shareholder entered into or approved such amendment or waiver. Notwithstanding the foregoing, (a) this Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to any Stockholder without the written consent of such Stockholder unless such amendment, termination or waiver applies to all Stockholders, respectively, in the same fashion and (b) the consent of the Key Holders shall not be required for any amendment or waiver if such amendment or waiver does not apply to the Key Holders. The Company shall give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

10.7.Severability.The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

10.8.Additional Stockholders. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of Common Stock or options under the Management Option Plan after the date hereof, the Company’s issuance to any purchaser of such shares of Common Stock or recipient of stock options shall be contingent on such purchaser or option holder becoming a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and thereafter such purchaser shall be deemed a “Stockholder” for all purposes hereunder.

10.9.Entire Agreement.This Agreement (including the Exhibits hereto, if any) and the other Transaction Agreements (as defined in the Purchase Agreement) constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

10.10.Transfers of Rights. Each Stockholder hereto hereby agrees that it will not, and may, not assign any of its rights and obligations hereunder, unless such rights and obligations are assigned by such Stockholder to (a) any person or entity to which Registrable Securities are transferred by such Stockholder, or (b) to any Affiliate of such Stockholder, and, in each case, such transferee shall be deemed a “Stockholder” for purposes of this Agreement; provided that such assignment of rights shall be contingent upon the transferee providing a written instrument to the Company notifying the Company of such transfer and assignment and agreeing in writing to be bound by the terms of this Agreement or such transfer or assignment shall be void.

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10.11.Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

10.12.Effectiveness. This Agreement shall be effective as of the Closing (as defined in the Purchase Agreement).

10.13.Legend on Stock Certificates. Each certificate representing shares of Common Stock shall bear a legend substantially in the following form:

“THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS’ AGREEMENT DATED AS OF FEBRUARY 29, 2008 BY AND AMONG THE ISSUER OF THIS SECURITY AND CERTAIN HOLDERS OF THE STOCK OF SUCH CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.”

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

COALOGIX INC.:
By:
Name:
Title:
ACORN ENERGY, INC.:
By:
Name:
Title:
ENERTECH CAPITAL PARTNERS III L.P.
By:	ECP III Management L.P.,
	Its general partner
By:	ECP III Management LLC,
	Its general partner
By:
Name:	Scott Ungerer
Title:	CEO

/s/William McMahon

William McMahon

/s/Michael Mattes

Michael Mattes

/s/Frank Wenz

Frank Wenz

/s/Michael Cooper

Michael Cooper

EX-31.1

Exhibit 31.1

I, John A. Moore, the Chief Executive Officer of Acorn Energy, Inc., certify that:

1. I have reviewed this report on Form 10-Q of Acorn Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and to the audit committee of the registrant's board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 20, 2008
By:	\s\ John A. Moore
	John A. Moore
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Michael Barth, the Chief Financial Officer of Acorn Energy, Inc., certify that:

1. I have reviewed this report on Form 10-Q of Acorn Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and to the audit committee of registrant's board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to which could adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 20, 2008
By:	\s\ Michael Barth
	Michael Barth
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Acorn Energy, Inc. (the “Company”) for the quarterly period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John A. Moore, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John A. Moore

John A. Moore

Chief Executive Officer

May 20, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Acorn Energy, Inc. (the “Company”) for the quarterly period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Barth, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Michael Barth

Michael Barth

Chief Financial Officer

May 20, 2008