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 June 30, 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  ¨ Accelerated filer  ¨ Non-accelerated filer  ¨ 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 August 14, 2008
Common Stock, $0.01 par value per share	11,387,659 shares

ACORN ENERGY, INC.

Quarterly Report on Form 10-Q

for the Quarterly Period Ended June 30, 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 June 30, 2008	1
	Consolidated Statements of Operations the six and three month periods ended June 30, 2007 and 2008	2
	Consolidated Statement of Changes in Shareholders’ Equity for the six month period ended June 30, 2008	3
	Consolidated Statements of Cash Flows for the six month periods ended June 30, 2007 and 2008	4
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26

PART II. Other Information

Item 1.	Legal Proceedings	27
Item 6.	Exhibits	28
Signatures		29

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)

ASSETS	As of December 31, 2007			As of June 30, 2008
				(unaudited)
Current assets:
Cash and cash equivalents	$	19,644		$	16,708
Restricted cash		--			2,303
Accounts receivable, net		1,775			1,547
Unbilled work-in-process		1,784			1,443
Inventory		119			527
Other current assets		1,391			2,473
Total current assets		24,713			25,001
Property and equipment, net		1,335			1,446
Available for sale - Investment in Comverge		55,538			14,068
Investment in GridSense		--			996
Investment in Paketeria		1,439			909
Other investments		668			400
Funds in respect of employee termination benefits		1,607			1,940
Restricted cash		1,517			618
Other intangible assets, net		5,987			7,408
Goodwill		3,945			4,154
Other assets		218			2,086
Total assets	$	96,967		$	59,026
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term bank credit	$	590		$	--
Current maturities of long-term debt		171			70
Convertible debt, net		4,237			--
Trade accounts payable		910			907
Accrued payroll, payroll taxes and social benefits		1,118			934
Other current liabilities		3,844			2,109
Total current liabilities		10,870			4,020
Long-term liabilities:
Long-term debt		12			12
Liability for employee termination benefits		2,397			2,888
Deferred taxes		16,038			1,550
Other liabilities		325			424
Total long-term liabilities		18,772			4,874
Minority interests		--			2,143
Shareholders’ equity:
Common stock - $0.01 par value per share:
Authorized - 20,000,000 shares; Issued -11,134,795 shares and 12,165,030 at December 31, 2007 and June 30, 2008		111			121
Additional paid-in capital		49,306			52,672
Warrants		1,330			1,023
Accumulated deficit		(9,692	)		(9,181	)
Treasury stock, at cost - 777,371 shares for December 31, 2007 and June 30, 2008, respectively		(3,592	)		(3,592	)
Accumulated other comprehensive income		29,862			6,946
Total shareholders’ equity		67,325			47,989
Total liabilities and shareholders’ equity	$	96,967		$	59,026

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)

	Six months ended June 30,						Three months ended June 30,
	2007			2008			2007			2008
Sales
Projects	$	1,287		$	4,041		$	475		$	2,133
Catalytic regeneration services		--			3,601			--			1,352
Other		433			260			206			122
		1,720			7,902			681			3,607
Cost of sales
Projects		1,042			2,777			461			1,470
Catalytic regeneration services		--			2,498			--			1,007
Other		337			197			164			98
		1,379			5,472			625			2,575
Gross profit		341			2,430			56			1,032
Operating expenses:
Research and development expenses		233			108			103			57
Selling, marketing, general and administrative expenses		1,859			5,239			1,049			2,686
Total operating expenses		2,092			5,347			1,152			2,743
Operating loss		(1,751	)		(2,917	)		(1,096	)		(1,711	)
Gain on early redemption of convertible debentures		--			1,259			--			--
Finance income (expense), net		(371	)		(2,900	)		(345	)		88
Gain on sale of Comverge shares		--			5,782						5,782
Gain on Comverge public offering		16,169			--			16,169			--
Income before taxes on income		14,047			1,224			14,728			4,159
Tax benefit (expense) on income		(5	)		2			(3	)		(640	)
Income from operations of the Company and its consolidated subsidiaries		14,042			1,226			14,725			3,519
Minority interests		--			80			--			89
Share in losses of GridSense		--			(134	)		--			(134	)
Share in losses of Paketeria		(388	)		(661	)		(201	)		(374	)
Net income	$	13,654		$	511		$	14,524		$	3,100
Basic and diluted earnings per share:
Net income per share - basic	$	1.43		$	0.05		$	1.52		$	0.28
Net income per share - diluted	$	1.23		$	0.04		$	1.21		$	0.26
Weighted average number of shares outstanding - basic		9,549			11,138			9,583			11,243
Weighted average number of shares outstanding - diluted		11,366			11,995			12,290			12,138

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 income		--		--		--			--			511			--			--			511
FAS 115 adjustment on Comverge shares, net of deferred taxes		--		--		--			--			--			--			(23,072	)		(23,072	)
Differences from translation of financial statements of subsidiaries and equity investees		--		--		--			--			--			--			156			156
Comprehensive loss																					(22,405	)
Intrinsic value of beneficial conversion feature of convertible debentures at extinguishment		--		--		(1,259	)		--			--			--			--			(1,259	)
Exercise of options and warrants		250		2		1,060			(307	)		--			--			--			755
Conversion of Debentures		780		8		2,955			--			--			--			--			2,963
Stock option compensation		--		--		433			--			--			--			--			433
Stock option compensation of subsidiary		--		--		177			--			--			--			--			177
Balances as of June 30, 2008		12,165	$	121	$	52,672		$	1,023		$	(9,181	)	$	(3,592	)	$	6,946		$	47,989

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)

	Six months ended June 30,
	2007			2008
Cash flows provided by (used in) operating activities:
Net income	$	13,654		$	511
Adjustments to reconcile net income to net cash used in operating activities (see Schedule A):		(14,651	)		(2,268	)
Net cash used in operating activities		(997	)		(1,757	)
Cash flows provided by (used in) investing activities:
Proceeds from sale of Comverge shares		--			9,682
Investment in GridSense		--			(1,153	)
Restricted cash		--			(1,404	)
Short-term loans provided to Paketeria		(733	)		(1,584	)
Loans to investee and potential investee companies and capitalized investment costs		--			(1,987	)
Transaction costs in 2007 acquisition of SCR Tech		--			(956	)
Amounts funded for employee termination benefits		(26	)		(335	)
Utilization of employee termination benefits		62			2
Acquisition of license		--			(2,000	)
Acquisitions of property and equipment		(167	)		(275	)
Net cash used in investing activities		(864	)		(10	)
Cash flows provided by (used in) financing activities:
Short-term debt borrowings (repayments), net		(296	)		(590	)
Proceeds from long-term debt		107			--
Proceeds from convertible debentures with warrants net of transaction costs		5,840			--
Redemption of convertible debentures		--			(3,443	)
Repayments of long-term debt		(62	)		(117	)
Repayment of related party note payable		(300	)		--
Issuance of shares to minority shareholders in consolidated subsidiary		--			2,226
Proceeds from employee stock option and warrant exercises		178			755
Net cash provided (used in) by financing activities		5,467			(1,169	)
Net increase (decrease) in cash and cash equivalents		3,606			(2,936	)
Cash and cash equivalents at beginning of period		1,521			19,644
Cash and cash equivalents at end of period	$	5,127		$	16,708

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ACORN ENERGY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

	Six months ended June 30,
Schedule A:	2007			2008
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		67			551
Impairment of software license		23			--
Share in losses of Paketeria		356			650
Share in losses of GridSense		--			134
Increase (decrease) in liability for employee termination benefits		(250	)		491
Deferred income taxes		--			10
Amortization of stock-based deferred compensation		406			610
Amortization of beneficial conversion feature, debt origination costs and value of warrants in private placement of Debentures		205			3,064
Gain on public offering of investment in Comverge		(16,169	)		--
Gain on sale of Comverge shares		--			(5,782	)
Gain on early redemption of Debentures		--			(1,259	)
Impairment of investment and provision of loan and accrued interest to investee company		--			516
Minority interests		--			(80	)
Other		(1	)		14
Change in operating assets and liabilities:
Decrease in accounts receivable, unbilled work-in process and other current and other assets		417			47
Increase in inventory		--			(408	)
Increase (decrease) in accounts payable and other liabilities		295			(826	)
Net cash used in operating activities		(14,651	)		(2,268	)

Non-cash items:
Value of beneficial conversion feature upon issuance of convertible debentures	$	2,570
Unrealized gain (loss) from Comverge shares	$	14,043		($37,570	)
Amount due from broker on account of options exercised	$	325
Reduction of deferred tax liability with respect to unrealized loss from Comverge shares			$	14,498
Increase in goodwill with respect to finalizing purchase price allocation			$	209
Reduction in intangibles acquired with respect to finalizing purchase price allocation			$	250
Reduction in value of put option with respect to finalizing purchase price allocation			$	41

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	$	2,570
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. and its 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 six-month period ended June 30, 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.Certain reclassifications have been made to the Company’s prior years’ consolidated financial statements to conform to the current year’s consolidated financial statement presentation.

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 a consensus on 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 did not have a material impact on the Company’s results of operations and financial position.

6

In December 2007, the FASB reached a consensus on 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). 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)

During the second quarter of 2008, the Company sold 757,367 of its 1,763,665 Comverge shares held at the beginning of 2008. The Company received proceeds of $9,682 from the sales and recorded a pre-tax gain of $5,782.

The Company’s remaining 1,006,298 Comverge shares are accounted for as “available-for-sale” under SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities”. Accordingly the Company reflected its investment in Comverge based on Comverge’s share price of $13.98 at June 30, 2008 which resulted in a reduction of the carrying value to reflect a fair market value of $14,068. In addition, the Company adjusted the previously recorded deferred tax liability associated with the Comverge shares to $2,404. The net reduction of $23,072 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 of total 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 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 represents approximately 24.5% of GridSense's issued and outstanding shares. The Company did not exercise any of the 15,714,285 warrants it acquired in the placement and they expired on July 2, 2008. Also in January 2008, GridSense issued 3,000,000 of its shares in an acquisition. The GridSense issuance diluted the Company’s holdings in GridSense to approximately 23.4%.

The Company’s accounts for its investment in GridSense using the equity method in accordance with APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock”. The Company records its share of income or loss in GridSense with a lag of three months as it is not able to receive timely financial information. In the second quarter of 2008, the Company recorded a loss of $112 representing the Company’s weighted average of approximately 23.8% share of GridSense’s losses for the period from January 2, 2008 to March 31, 2008. Based on an independent appraisal, the Company has allocated the $1,153 investment in GridSense as follows:

· $761 to the value of technologies acquired. The acquired technologies is to be amortized using the straight-line method over ten years.

· $73 to the value of the customer relationships and $61 to the value of the tradename at the date of the investment. The value of the customer relationships and the tradename are to be amortized using the straight-line method over weighted average 12.5 year period.

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· $25 to the value of the warrants acquired.

· $233 to non-amortizing goodwill.

All the above components of the Company’s investment are not reflected separately as such in the consolidated balance sheet of the Company, but are reflected as components of the Company’s investment in GridSense. In addition to the Company’s share of losses in GridSense for the period from January 2, 2008 to March 31, 2008, the Company recorded amortization with respect to the identified amortizable intangibles noted above. The Company’s Share of losses in Gridsense is comprised of the following:

	Six months ended June 30, 2008		Three months ended June 30, 2008
Equity loss in GridSense for the period from January 2, 2008 - March 31, 2008	$	112	$	112
Amortization expense associated with acquired technologies, customer relationships and trademarks		22		22
Share of losses in GridSense	$	134	$	134

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:

	Six months ended June 30, 2008			Six months ended June 30, 2007			Three months ended June 30, 2008			Three months ended June 30, 2007
Equity loss in Paketeria	$	(592	)	$	(293	)	$	(334	)	$	(161	)
Amortization expense associated with acquired non-compete and franchise agreements		(58	)		(63	)		(29	)		(27	)
Stock compensation expense		(11	)		(32	)		(11	)		(13	)
Share of losses in Paketeria	$	(661	)	$	(388	)	$	(374	)	$	(201	)

8

During the six months ended June 30, 2008, the Company lent Paketeria €1,030 ($1,624 based upon 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 any equity and/or debt financing. In addition, the Company received warrants to purchase 6,866 shares of Paketeria. If the warrants are exercised prior to December 31, 2008, the exercise price of the warrants will be €75 ($118) unless Paketeria completes a financing through the sale of its common stock of at least €1,000 by December 31, 2008 in which event the exercise price will be the lower of €75 or the price per share in the financing. If no financing has occurred by December 31, 2008, the exercise price will be the price per share of Paketeria’s last financing round.

The amount lent to Paketeria was allocated to the loan and the warrants received based on the relative fair values at time of issuance. The Company allocated $1,561 to the loan portion and $63 to the value of the warrants. The Company is accreting interest on the loan portion until the maturity date of the loan using the effective interest method. The loan balance is included in Other Current Assets.

Note 6: Goodwill and Other Intangible Assets

There were no impairments of goodwill recorded during the six-month period ended June 30, 2008. Upon finalizing the purchase price allocation of the Company’s additional investment in DSIT in November 2007, the Company recorded an increase in goodwill of $209 along with a decrease in acquired intangibles of $250. The Company’s goodwill is related to both its SCR segment ($3,714) and its RT Solutions segment ($440). As a result of the adjustment of the purchase price allocation, the amount allocated to the put option associated with the additional investment in DSIT was reduced by $41.

On May 9, 2008, the Company’s CoaLogix, Inc. (“CoaLogix”) subsidiary entered into a strategic alliance and license agreement with Solucorp Industries, Ltd. pursuant to which CoaLogix obtained exclusive, worldwide commercialization and marketing rights to Solucorp’s IFS-2C technology for use in applications which remove heavy metals, such as mercury, from power plants. The agreement has a term of ten years, with an option in favor of CoaLogix to renew for an additional five-year period. In consideration for its rights under the agreement, CoaLogix paid an upfront license fee of $2,000 and agreed to pay royalties on net sales of, and to share a portion of any royalties received in respect of, licensed product with Solucorp based on specified formula.

The changes in the carrying amounts and accumulated amortization of intangible assets from December 31, 2007 to June 30, 2008 were as follows:

	SCR					RT Solutions
	Cost		Accumulated amortization			Cost			Accumulated amortization			Net
Balance at December 31, 2007	$	5,511	$	(81	)	$	557			--		$	5,987
Acquisition of license		2,000		--			--			--			2,000
Adjustment of acquired intangibles upon finalizing purchase price allocation		--		--			(250	)		--			(250	)
Amortization		--		(303	)		--			(26	)		(329	)
Balance at June 30, 2008	$	7,511	$	(384	)	$	307		$	(26	)	$	7,408

All intangible assets are being amortized over their estimated useful lives, which were estimated to be ten years for SCR and seven years for RT Solutions intangibles. Amortization expense for each of the six months ended June 30, 2007 and 2008 amounted to $13 and $329, respectively. Amortization expense with respect to intangible assets is estimated to be $795 per year for each of the years ending June 30, 2009 through 2013.

Note 7: Other Investments

During the second quarter of 2008, the Company recorded an impairment charge of $268 with respect to the Company’s investment in Local Power Inc, (Local Power). The charge is included in selling, marketing and general administrative expense in the second quarter.

During the first quarter of 2008, the Company lent Local Power $245 on a promissory note that bears interest at a rate of 8% per year and is 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.

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Note 8: Other Assets

At June 30, 2008, Other Assets includes a $1,500 secured promissory note from Coreworx, Inc. The Company has entered into a letter of intent to acquire all the outstanding shares of Coreworx. The promissory note bears interest at a rate of 12% per year and is due on December 31, 2010. Coreworx 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 six month period ended June 30, 2008, the Company recorded interest income of $40 with respect to the promissory note which is also included in Other Assets. Other Assets also includes $93 of transaction costs capitalized in contemplation of the acquisition of Coreworx. (See Note 16).

At June 30, 2008, Other Assets also includes $200 on a convertible promissory note evidencing a loan made by CoaLogix to a company in contemplation of the acquisition by CoaLogix of the assets of that company. CoaLogix did not enter into a definitive agreement with the company by the target date provided for in the convertible promissory note and does not intend to proceed with the acquisition. The note bears interest at the rate of 11% per year and the note is due February 28, 2011. During the six month period ended June 30, 2008, the Company recorded interest income of $7 with respect to the promissory note which is also included in Other Assets.

Note 9: 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 10: 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 and EnerTech Capital Partners III L.P. (“EnerTech”) pursuant to which EnerTech purchased from CoaLogix a 15% interest in CoaLogix for $1,948. The Company owns 85% of CoaLogix following the transaction and EnerTech’s interest in CoaLogix was reflected in the Company’s Consolidated Balance Sheets as Minority Interests. The Company recorded an immaterial gain as a result of the investment by EnerTech. During the second quarter of 2008, EnerTech invested an additional $278 in CoaLogix as its 15% share of an aggregate $1,850 additional investment made by the Company and Enertech in CoaLogix. The minority interest’s share of CoaLogix’s net loss for the six and three month periods ending June 30, 2008 was $80 and $89, respectively.

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 parties with 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 certain 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 11: Stock Options and Warrants

(a) Acorn Stock Options

A summary of stock option activity for the six months ended June 30, 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		(50,000	)	$	2.17			$	136
Forfeited or expired		--
Outstanding at June 30, 2008		1,919,000		$	3.42		3.4 years	$	4,100
Exercisable at June 30, 2008		1,359,498		$	3.01		2.6 years	$	3,553

The weighted average grant date fair value of the 285,000 stock options granted during the first six 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%

(b) CoaLogix Stock Option Plan

In April 2008, the Company adopted a CoaLogix Inc. 2008 Stock Option Plan (the “Plan”) for its CoaLogix subsidiary to be administrated by the board members of CoaLogix.

In April 2008, CoaLogix granted options to purchase 13,971 of its ordinary shares, to senior management and employees of CoaLogix under the Plan. The options were granted with an exercise price of $126.16 per share and are exercisable for a period of ten years. The options vest over a four year period from the date of grant. Upon exercise of all the options in the Plan, the Company’s holdings in CoaLogix will be diluted from 85% to approximately 76%. During the six and three month periods ending June 30, 2008, $177 was recorded as stock compensation expense with respect to the abovementioned options ($57 in Cost of Sales - Catalytic Regeneration Services and $120 in Selling, Marketing, General and Administrative expenses).

The purpose of the Plan for our CoaLogix subsidiary is to provide incentives to key employees of CoaLogix to further the growth, development and financial success of CoaLogix.

(c) Stock-based compensation expense

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Total stock-based compensation expense included in the Company’s statements of operations for the six months ended June 30, 2007 and 2008, respectively, was:

	Six months ended June 30, 2007		Six months ended June 30, 2008		Three months ended June 30, 2007		Three months ended June 30, 2008
Cost of sales	$	22	$	57	$	1	$	57
Selling, marketing, general and administrative expenses		352		542		103		393
Share of losses in Paketeria		32		11		13		11
Total stock based compensation expense	$	406	$	610	$	117	$	461

(d) Warrants

A summary of stock warrants activity for the six months ended June 30, 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		(200,485	)	$	3.21
Forfeited or expired		--
Outstanding and exercisable at June 30, 2008		786,021		$	4.06		3.59

Note 12: Warranty Provision

The following table summarizes the changes in accrued warranty liability from the period from December 31, 2007 to June 30, 2008:

	Gross Carrying Amount
Balance at December 31, 2007	$	107
Warranties issued and adjustment of provision		80
Warranty claims		(2	)
Balance at June 30, 2008*	$	185

* $10 of the warranty provision is included in other current liabilities and $175 in other liabilities at June 30, 2008

The Company’s warranty provision is based upon the Company’s estimate of costs to be incurred during the warranty period.

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Note 13: 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 June 30, 2008 consisted of the following:

	Level 1		Level 2		Total
Available for sale securities	$	14,068		--	$	14,068

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 14: 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.

· SCR (Selective Catalytic Reduction) Catalyst and Management Services conducted through the Company’s CoaLogix subsidiary provides catalyst regeneration technologies and management services for 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 and six month periods ended June 30, 2007.

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

	RT Solutions			SCR			Other			Total
Six months ended June 30, 2008:
Revenues from external customers	$	3,595		$	3,601		$	706		$	7,902
Intersegment revenues		16			--			--			16
Segment gross profit		1,180			1,102			148			2,430
Segment income (loss)		154			(395	)		(42	)		(283	)
Six months ended June 30, 2007:
Revenues from external customers	$	1,132			--		$	588		$	1,720
Intersegment revenues		--			--			--			--
Segment gross profit		291			--			50			341
Segment loss		(211	)		--			(371	)		(582	)
Three months ended June 30, 2008:
Revenues from external customers	$	1,913		$	1,352		$	342		$	3,607
Intersegment revenues		16			--			--			16
Segment gross profit		616			344			72			1,032
Segment income (loss)		71			(578	)		(7	)		(514	)
Three months ended June 30, 2007:
Revenues from external customers	$	432			--		$	249		$	681
Intersegment revenues		--			--			--			--
Segment gross profit (loss)		95			--			(39	)		56
Segment loss		(268	)		--			(288	)		(556	)

Reconciliation of Segment Income (Loss) to Consolidated Net Income

	Six months ended June 30,						Three months ended June 30,
	2007			2008			2007			2008
Total loss for reportable segments	$	(211	)	$	(241	)	$	(268	)	$	(507	)
Other operational segment loss		(371	)		(42	)		(288	)		(7	)
Total operating loss		(582	)		(283	)		(556	)		(514	)
Share of losses in Paketeria		(388	)		(661	)		(201	)		(374	)
Share of losses in GridSense		--			(134	)		--			(134	)
Minority interests		--			80			--			89
Gain on sale of Comverge shares		--			5,782			--			5,782
Gain recorded on Comverge public offering		16,169			--			16,169			--
Gain on early redemption of Debentures		--			1,259			--			--
Interest expense recorded with respect to the private placement of Debentures		--			(3,064	)		--			--
Income tax benefit (expense)		(5	)		2			(3	)		(640	)
Net loss of corporate headquarters and other unallocated costs*		(1,540	)		(2,470	)		(888	)		(1,109	)
Total consolidated net income	$	13,654		$	511		$	14,524		$	3,100

* The six and three months ended June 30, 2008 includes $516 and $268, respectively of impairments and loan provisions with respect to the Company’s investment in Local Power.

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Note 15: Income Taxes

During the second quarter of 2008, the Company received an exemption of income taxes from the State of Delaware. Thus, effective for the period beginning with the Company’s transition to Delaware in March 2006, the Company’s effective income tax rate on domestic earnings is 34%.

Note 16: Subsequent Events

Acquisition of Coreworx Inc.

On August 13, 2008, the Company entered into and closed an agreement for the acquisition all of the outstanding capital stock of Coreworx, Inc. (“Coreworx”). Coreworx is headquartered in Ontario, Canada and is engaged in the design and delivery of project collaboration solutions for large capital projects.  In consideration for the Coreworx shares, Acorn issued 287,500 shares of its Common Stock. Under the share purchase agreement, a portion of these shares will be held in escrow until one year after the closing. 

Prior to the purchase of the Coreworx shares, the Company contributed to the capital of Coreworx $2,500 in cash and $3,400 aggregate principal amount of its 8% one-year promissory notes. The cash and notes were delivered by Coreworx to the holders of Coreworx’s debentures in full payment and satisfaction of all principal and accrued interest outstanding on such debentures.

Prior to and in contemplation of the completion of the acquisition, Acorn lent Coreworx $1,500.   

As a result of the transaction, Coreworx is a wholly-owned subsidiary of the Company and will be presented as the Company’s Energy Infrastructure Software segment. In connection with the transaction, the Company agreed to implement an option plan for Coreworx employees for up to 20% of the outstanding Coreworx shares. The Coreworx management team will continue in their current positions. 

Value of the Company’s Investment in Comverge

During the period from July 1, 2008 to August 12, 2008, the Company sold an additional 453,798 of its Comverge shares for approximately $5,428. As of August 12, 2008, the total market value of the Company’s remaining 552,500 Comverge shares was approximately $3.6 million based on an August 12, 2008 closing market price of $6.55 per share.

Loan to GridSense

In July 2008, the Company lent GridSense C$750 ($750) under a secured promissory note which bears interest at 8% and is due on October 30, 2008. The note is secured by all the assets of GridSense.

Capital Call in EnerTech

In July 2008, the Company received a capital call of $750 from EnerTech Capital Partners III L.P. The Company funded the capital call in August 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

Acquisition of Coreworx

On August 13, 2008, we entered into and closed an agreement for the acquisition all of the outstanding capital stock of Coreworx, Inc. (“Coreworx”). Coreworx is headquartered in Ontario, Canada and is engaged in the design and delivery of project collaboration solutions for large capital projects.  In consideration for the Coreworx shares, we issued 287,500 shares of our Common Stock. Under the share purchase agreement, a portion of these shares will be held in escrow until one year after the closing. 

Prior to the purchase of the Coreworx shares, we contributed to the capital of Coreworx $2.5 million in cash and $3.4 million aggregate principal amount of its 8% one-year promissory notes. The cash and notes were delivered by Coreworx to the holders of Coreworx’s debentures in full payment and satisfaction of all principal and accrued interest outstanding on such debentures.

Prior to and in contemplation of the completion of the acquisition, we lent Coreworx $1.5 million.   

As a result of the transaction, Coreworx is a wholly-owned subsidiary and will be presented as our Energy Infrastructure Software segment. In connection with the transaction, we agreed to implement an option plan for Coreworx employees for up to 20% of the outstanding Coreworx shares. The Coreworx management team will continue in their current positions. 

DC Circuit Court Vacates Clean Air Interstate Rule

On July 11, 2008, the District of Columbia Court of Appeals issued an opinion in the State of North Carolina v. Environmental Protection Agency in which the court vacated the Environmental Protection Agency’s (EPA) Clean Air Interstate Rule (CAIR) and the associated Federal Implementation Plan.

The EPA adopted CAIR in March 2005 to provide a federal framework to limit the emission of sulfur dioxide (SO₂) and nitrogen oxides (NOx). The rule required 28 eastern states and the District of Columbia to permanently cap SO₂ and NOx, thereby significantly reducing emissions in the affected states.

Under CAIR, states had to achieve required emission reductions using one of two compliance options:    (1) meet the state’s emission budget by requiring power plants to participate in an EPA-administered interstate cap-and-trade system that caps emissions in two stages, or (2) meet an individual state emissions budget that is administered through measures of the state’s choosing.  The EPA-administered interstate cap-and-trade system did not establish quotas on individual states with respect to SO₂ or NOx, but instead created a regional framework with regional caps.  CAIR was to be phased in under a two part plan, with a Phase I cap for NOx and SO₂ beginning in 2009 and 2010, respectively, and Phase II beginning with respect to both pollutants in 2015.

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Although the court’s ruling eliminated the CAIR program, including the related SO₂ and NOx cap-and-trade programs, the court noted that, in the absence of CAIR, the NOx SIP Call program will continue. In addition state allowances for NOx under the Clean Air Act remain in effect. However, by striking down CAIR and the cap-and-trade regime, the CAIR-promulgated annual NOx allowances have been eliminated, leaving the validity of the states’ regulations regarding these allowances in question. The EPA has announced that it is reviewing the decision and analyzing its effects it is unclear when new regulation will be proposed or adopted or if legislation to revamp the Clean Air Act may overtake or supersede new regulatory action.

CoaLogix Receives Two New Orders for Regeneration Totaling $5 Million

CoaLogix secured two new contracts for catalyst regeneration totaling over five million dollars substantially increasing its backlog. The new contracts are for delivery in 2008 and 2009 with one of the new contracts coming from a southern utility company and another from a mid-Atlantic utility company.

Strategic Alliance and License Agreement with Solucorp Industries, Ltd.

In May 2008, our CoaLogix subsidiary signed an agreement to obtain for $2 million 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 an option to extend for an additional five years.

Comverge

On June 30, 2008 we held 1,006,298 common shares of Comverge. During the period from July 1, 2008 to August 12, 2008, we sold an additional 453,798 of our Comverge shares for approximately $5.4 million. As of August 12, 2008, the total market value of our remaining 552,500 Comverge shares was approximately $3.6 million based on an August 12, 2008 closing market price of $6.55 per share.

Paketeria

In July 2008, our Paketeria affiliate in Germany deepened its partnership with the Volksbank network with the execution by Volksbank Meissen of an agreement to open 12 “shop-in-bank” locations in Meissen -- two in August and the remaining ten in the fall. This follows the May opening of “shop-in-bank” pilot stores in five Volksbank branches in Celle, a suburb of Hanover with a population of 70,000. As part of the agreement, Volksbank Meissen also made a small equity investment in Paketeria. Volksbank Meissen’s first major promotion will be Stromboerse (100% owned by Paketeria) services for cost savings on energy and gas.

Thus far in 2008, we have provided Paketeria with approximately $1.5 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 (further described on page F-20 of our Annual Report on Form 10-K) 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 warrants acquired expired in July 2008. The 15,714,285 shares acquired by us in the placement represented approximately 24.5% of GridSense's issued and outstanding shares at  the time. Our holdings in GridSense were subsequently diluted to approximately 23.8% as a result of a transaction by GridSense. In July 2008, we provided GridSense with a C$750,000 loan ($750,000). The loan bears interest at a rate of 8% per year is due on October 30, 2008. The loan is secured by a security interest in all the assets of GridSense.

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Investment Company Act

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, it is likely that we were 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.

In June 2007, we 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 formulated and implemented plans for returning the Company to compliance with the numerical tests for exemption from investment company status. Those plans included 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 recent 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. At the end of June 2008, our management and board of directors performed a valuation of our assets after giving effect to such transactions and determined that we are in compliance with the numerical tests for exemption from investment company status at June 30, 2008. We believe that there is little or no future risk to us with respect to Investment Company Act compliance.

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, strategy and business development.

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

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· 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.

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

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

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

· Coreworx Inc. Acquired in August 2008, provides unique solutions for engineering, procurement and construction companies who manage capital projects.

· 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.

· Local Power, Inc. Provides consultation services for Community Choice Aggregation.

During the 2008 periods included in this report, we had operations in two reportable segments: providing catalyst regeneration technologies and management services for SCR systems through our CoaLogix subsidiary and RT Solutions which is conducted through our DSIT subsidiary. The following analysis should be read together with the segment information provided in Note 14 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

Our RT Solutions segment reported significantly increased revenues in 2008 as compared to 2007 (for both the three and six months ended June 30). The increase in revenues was the result of the acquisition of the following projects:

· A NIS 30 million (approximately $8.1 million at June 30, 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. This order was received in mid- 2007 and the project was successfully completed in the second quarter of 2008.

· A number of significant embedded hardware and software RT projects for which we received over $2 million of orders in the first six months of 2008.

Our increased revenues are a direct result of our progress in those 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. 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 $5.1 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

In the first half of 2008, SCR-Tech secured new contracts from major U.S. companies representing more than triple 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 as well as a contract from a southern utility company and another from a mid-Atlantic utility company. The contracts represent both new and repeat customers.  At the end of the second quarter, SCR-Tech had a backlog of approximately $12.5 million which we expect to realize over the next 2 years.

 As noted in “Recent Developments”, in July 2008, the District of Columbia Court of Appeals issued an opinion in the State of North Carolina v. Environmental Protection Agency in which the court vacated the EPA’s Clean Air Interstate Rule (CAIR) and the associated Federal Implementation Plan. The court’s ruling may mean less regeneration activity in the short term for CoaLogix.  However, we believe that the long-term trend is for increasing and more stringent environmental regulation our customers and that the long-term prospects for the regeneration business remain good. In addition we believe that the new uncertain regulatory landscape creates additional opportunities for CoaLogix’s SCR management services.

In May 2008, CoaLogix, Inc. entered into a license agreement with Solucorp Industries, Ltd. to obtain worldwide marketing, selling, and installation rights to Solucorp Industries IFS-2C technology for the fixation of heavy metals, such as mercury, for the electric power generation industry. CoaLogix will market the product under the brand name MetalliFix Hg. CoaLogix paid a one-time licensing fee of $2,000,000. The agreement also requires that CoaLogix pay Solucorp cost plus an agreed mark up on all MetalliFix reagents and Solucorp will also receive a percentage of net sale proceeds based on certain sales parameters.  In addition, Solucorp will be paid a percentage of any royalties received by CoaLogix for the use of the MetalliFix system.  The term of the licensing agreement is for 10 years with an additional 5-year renewal period. CoaLogix intends to invest heavily on the marketing, sales, customer training, product installation and support of the MetalliFix technology.  This program is expected to rapidly build industry awareness of the newest proven technology to effectively reduce mercury emissions in coal fired furnace facilities.

Paketeria

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 August 1, 2008, 935 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 $1.5 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 from other sources. These advances are to be repaid by December 31, 2008. In connection with the loans, we also received warrants to acquire additional shares of Paketeria.

In June 2008 Paketeria entered into an agreement with the Volksbank network to open 12 “shop-in-bank” locations in Meissen -- two in August 2008 and the remaining ten in the fall. This follows the May 2008 opening of “shop-in-bank” pilot stores in five Volksbank branches in Celle, a suburb of Hanover with a population of 70,000. As part of the agreement, Volksbank Meissen also made a small equity investment in Paketeria.

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Paketeria continues to look for additional outside equity or debt financing to finance its expansion.

GridSense

We acquired our interest in GridSense by participating as the lead investor in their January 2008 private placement. In the private placement we acquired 15,714,285 shares and 15,714,285 warrants for C$1.1 million (approximately $1.1 million) plus transaction costs. The 15,714,285 shares we acquired represents approximately 25% of GridSense's issued and outstanding shares. We did not exercise any of the 15,714,285 warrants it acquired in the placement and they expired on July 2, 2008. Our holdings in GridSense were diluted to approximately 24% following the first quarter acquisition by GridSense of Transformer Contracting, Inc. in which they issued an additional 3,000,000 shares.

In July 2008, we lent GridSense C$750,000 ($750,000) under a secured promissory note which bears interest at 8% and is due on October 30, 2008. The note is secured by all the assets of GridSense.

We account for our GridSense investment the equity method and, as such, we record approximately 24% of its income/loss in our consolidated results. We record our share of income or loss in GridSense with a lag of three months as we are not able to receive timely financial information. In the second quarter of 2008, we recorded a loss of $112,000 representing our 25% share of GridSense’s losses for the period from January 2, 2008 to March 31, 2008. In addition, we also recorded an additional $22,000 as our share of losses in GridSense which represents the amortization of certain intangible assets acquired by us in our initial investment. We will record our share of GridSense’s second quarter results in the third quarter of 2008.

Local Power

Local Power (LPI) has won several new contracts in California and currently requires additional funding to expand operations and take advantage of the growing opportunities for city-based energy systems, both in the West, Midwest, and the Northeast CCA Markets. This ramp-up of operational resources is prompted by a dramatic increase in work that will now commence during LPI’s preparation of the San Francisco CCA implementation, the world’s largest urban green power public works project. Acorn management has decided at this time to limit its funding to Local Power and has taken an impairment charge of $268,000 on its investment in LPI in the second quarter of 2008.

Corporate

As noted above in “Recent Developments” on August 13, 2008, we entered into and closed an agreement for the acquisition all of the outstanding capital stock of Coreworx. Coreworx is engaged in the design and delivery of project collaboration solutions for large capital projects.

During the second quarter of 2008, we sold 757,367 of the 1,763,665 Comverge shares held at the beginning of the year. The Company received proceeds of $9,682 (an average sales price of $12.78 per share) from the sales and recorded a pre-tax gain of $5,782. Subsequent to June 30, 2008, we have continued to sell our Comverge shares and through August 12, 2008, we sold an additional 453,798 of our Comverge shares for approximately $5.4 million (an average sales price of $11.96 per share). As of August 12, 2008, the total market value of our remaining 552,500 Comverge shares was approximately $3.6 million based on an August 12, 2008 closing market price of $6.55 per share.

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 and non-cash interest expense of approximately $3.1 million on the early redemption of our debentures. At the end of July, prior to our acquisition of Coreworx, we had no corporate debt and approximately $17.1 million in unrestricted cash. 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.

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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 and six months ended June 30, 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 and six months ended June 30, 2008 include the results of our newly acquired SCR-Tech subsidiary. As such, results for the three and six months ended June 30, 2008 may not be comparable to the results for the three and six months ended June 30, 2007 without negating the effect of SCR-Tech’s results.

	Six months ended June 30,															Three months ended June 30,
	2007						2008						Change			2007						2008						Change
	($,000)			% of sales			($,000)			% of sales			From 2007 to 2008			($,000)			% of sales			($,000)			% of sales			From 2007 to 2008
Sales	$	1,720			100	%	$	7,902			100	%		359	%	$	681			100	%	$	3,607			100	%		430	%
Cost of sales		1,379			80			5,472			69			297			625			92			2,575			71			312
Gross profit		341			20			2,430			31			613			56			8			1,032			29			1,743
R&D expenses		233			14			108			1			(54	)		103			15			57			2			(45	)
SMG&A expenses		1,859			108			5,239			66			182			1,049			154			2,686			74			156
Operating loss		(1,751	)		(102	)		(2,917	)		(37	)		67			(1,096	)		(161	)		(1,711	)		(47	)		56
Gain on early redemption of Debentures		--			--			1,259			16						--			--			--			--			--
Finance income (expense), net		(371	)		(22	)		(2,900	)		(37	)		682			(345	)		(51	)		88			2			(126	)
Gain on public offering of Comverge		16,169			940			--			--			(100	)		16,169			2,374			--			--			(100	)
Gain on sale of Comverge shares		--			--			5,782			73						--			--			5,782			160
Income before taxes on income		14,047			817			1,224			15			(91	)		14,728			2,163			4,159			115			(72	)
Taxes on income		(5	)		0			2			0			(140	)		(3	)		0			(640	)		18
Income (loss) from operations of the Company and its consolidated subsidiaries		14,042			816			1,226			16			(91	)		14,725			2,162			3,519			98			(76	)
Minority interests		--			--			80			1						--			--			89			2
Share of losses in GridSense		--			--			(134	)		(2	)					--			--			(134	)		(4	)
Share in losses in Paketeria		(388	)		(23	)		(661	)		(8	)		70			(201	)		(30	)		(374	)		(10	)		86
Net income	$	13,654			794		$	511			6			(96	)%	$	14,424			2,118		$	3,100			86			(79	)

Sales. Sales in the first six months of 2008 increased by $6.2 million or 359% to $7.9 million from $1.7 million in the first six months of 2007. The increase in sales is attributable to the sales of CoaLogix which we acquired at the end of 2007 of $3.6 million in the first six months of 2008 which were not included in our consolidated results in 2007 and an increase in DSIT sales of $2.6 million or 250% from $1.7 million in 2007 to $4.3 million in 2008. Sales in the second quarter of 2008 increased by $2.9 million, or 430% to $3.6 million from $0.7 million in the second quarter of 2007. The increase in second quarter 2008 sales is also attributable to CoaLogix sales of $1.3 million combined with an increase in DSIT sales of $1.6 million. The increase in DSIT sales for both the three and six months ended June 30, 2008 was almost entirely 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. The $3.6 million of sales in the second quarter of 2008 represents a decrease of approximately $0.7 million or 17% from sales in the first quarter of 2008. The quarter-to-quarter decrease in sales is due to a $0.8 million decrease in CoaLogix sales partially offset by a quarter-to-quarter increase of $0.2 million in DSIT sales. The change in sales at CoaLogix was due to seasonal factors since power plants do not schedule service of their catalyst systems during the spring and summer ozone months.

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Gross profit. Gross profits in the first six months of 2008 increased by $2.1 million or 613% to $2.4 million from $0.3 million in the first six months of 2007. The increase in gross profits is attributable to the inclusion of CoaLogix gross profits of $1.1 million in the first six months of 2008 combined with an increase in DSIT gross profits of $1.0 million or 390% from $0.3 million in 2007 to $1.3 million in 2008. Gross profits in the second quarter of 2008 increased by approximately $1.0 million as compared to the second quarter of 2007. The increase in second quarter 2008 gross profit was also attributable to the inclusion in 2008 of CoaLogix gross profits of $0.3 million combined with an increase in DSIT gross profit of $0.7 million. The increase in DSIT gross profit was also attributable to the aforementioned increase in RT Solutions segment sales. Our gross margins also increased to 31% in the first six months of 2008 compared to 20% in the first six months of 2007. The increased gross margins were the result of CoaLogix gross margin of 31% during the period and DSIT’s increased gross margin of 31% as compared to 2007’s 20%. DSIT’s increased gross margins were due to higher margin projects being performed during the period.

Selling, marketing, general and administrative expenses (“SMG&A”).SMG&A in the first six months of 2008 increased by $3.4 million as compared to the first six months of 2007. A portion of the increase was attributable to the inclusion of CoaLogix’s SMG&A costs of $1.5 million. DSIT’s SMG&A increased by approximately $0.4 million compared to the first six months of 2007. During that period, senior management in 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. In addition, DSIT’s costs have increased due to the weakness of the US dollar during 2008 as compared to 2007. Corporate SMG&A expense also increased by approximately $1.5 million during 2008 as compared to 2007. The increase in corporate SMG&A is due to approximately $500,000 of impairments recorded with respect our investment in Local Power and increased professional fees and salaries reflecting a higher level of corporate activity due to our M&A activity.

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 income (expense), net. The increase in finance expense in the first six months of 2008 compared with the first six months of 2007 is due to the non-cash 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. This was partially offset by interest income earned on the proceeds of the sale of Comverge shares.

Gain on public offering of Comverge. In April 2007, Comverge completed its initial public offering. As a result of the Comverge offering, the Company recorded an increase in its investment in Comverge and recorded a non-cash gain of $16.2 million in “Gain on public offering of Comverge”.

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Gain on sale of Comverge shares. During the second quarter of 2008, we sold 757,367 of the 1,763,665 Comverge shares we held at the beginning of 2008. We received proceeds of $9.7 million from the sales and recorded a pre-tax gain of $5.8 million.

Taxes on income. In the second quarter of 2008, we recorded income tax expense of $0.6 million primarily due to the gain recorded on the sale of Comverge shares.

Share of losses in GridSense. We record our share of income or loss in GridSense with a lag of three months as we are not able to receive timely financial information. We will record our share of GridSense’s second quarter results in the third quarter of 2008. In the first six months of 2008, we recorded a loss of $112,000 representing our approximately 25% share of GridSense’s losses for the first quarter of 2008. In addition, we also recognized additional losses totaling $22,000 with respect to amortization related to acquired technologies, customer relationships and trademarks.

Share of losses in Paketeria. In the first six months of 2008, we recorded a loss of $592,000 representing our approximately 31% share of Paketeria’s losses for the period. In addition, we also recognized additional losses totaling $69,000 with respect to amortization related to the value of a non-compete agreement and franchises and stock compensation expense.

Liquidity and Capital Resources

As of June 30, 2008, we had working capital of $21.0 million, including $16.7 million of cash and cash equivalents not including restricted cash of $2.9 million (of which we expect approximately $2.3 million to be released by the first quarter of 2009). Net cash used in the six months ended June 30, 2008 was $2.9 million, of which $1.8 million was used in operating activities. The primary use of cash in operating activities during the first six months of 2008 was our corporate cash operating expenditures of approximately $1.4 million. Cash used in investing activities were primarily due to our $3.6 million of loans made to Paketeria, Coreworx and others, $2.0 used for the acquisition of license technology by our CoaLogix subsidiary, $1.2 million used to fund 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 and $1.0 million of costs related to our November 2007 acquisition of SCR Tech. These amounts were offset by the proceeds of $9.7 from the sale of our Comverge shares during the second quarter. Net cash of $1.2 million was used in financing activities, primarily from the redemption of our debentures ($3.4 million) and repayment of short and long-term borrowings ($0.7 million). This use of cash was partially offset by the $2.2 million investment made by Enertech in CoaLogix and the proceeds from the exercise of warrants and employee stock options.

As of August 1, 2008 the Company’s corporate operations had a total of approximately $17.1 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 $1.5 million increase from the balance as of June 30, 2008. This increase in cash is due to the sale of Comverge shares after June 30, 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.

At June 30, 2008, DSIT had approximately $280,000 in Israeli credit lines available to DSIT by an Israeli bank, of which $190,000 was then being used. DSIT had additional funds in the same bank which the bank had the right to offset against the line of credit being used. As such, the net line of credit being used by DSIT on June 30, 2008 was zero.

At June 30, 2008, DSIT was in technical violation of covenants under its bank line of credit. The 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.

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Contractual Obligations and Commitments

Our contractual obligations and commitments at June 30, 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 June 30,
	(amounts in thousands)
Contractual Obligations		Total		2009		2010-2011		2012-2013		2014 and thereafter
Long-term debt		$	80	$	70	$	8	$	2	$	--
Operating leases (1)			2,505		850		1,079		576		--
Potential severance obligations to Israeli employees (2)			2,888		--		--		--		2,888
Investment in EnerTech Capital Partners III L.P. (3)			4,600		4,600		--		--		--
Purchase commitments			760		760		--		--		--
Total contractual cash obligations			10,833		6,280		1,087	$	578	$	2,888

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 June 30, 2008, we accrued a total of $2.9 million for potential severance obligations of which approximately $1.9 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.

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. In July we received an additional capital call of $750,000 which was made in August.

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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 June 30, 2008 stood at approximately $190,000. Additionally, our non-US dollar monetary assets and liabilities (net liability of approximately $0.9 million) in Israel are exposed to fluctuations in exchange rates. In addition, $3.0 million and $0.7 million of our backlog of projects are contracts and orders that are linked to an Israeli Ministry of Defense Index, 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 Coltrol 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 1.Legal Proceedings

None.

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Item 6.Exhibits.

10.1	CoaLogix Inc. 2008 Stock Option Plan.*
10.2	Stock Option Agreement with William J. McMahon under the CoaLogix Inc. 2008 Stock Option Plan.*
10.3	CoaLogix Inc. and Subsidiaries Capital Appreciation Rights Plan.*
10.4	Participation Agreement with William J. McMahon under the CoaLogix Inc. and Subsidiaries Capital Appreciation Rights Plan.*
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.

* This exhibit includes a management contract, compensatory plan or arrangement in which one or more directors or executive officers of the Registrant participate.

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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.
Date: August 14, 2008	By:	/s/ Michael Barth
		Michael Barth Chief Financial Officer

29

EX-10.1

coalogix INC.

2008 STOCK option PLAN

(As Amended and Restated Effective July 29, 2008)

COALOGIX INC.

2008 STOCK oPTION PLAN

(As Amended and Restated Effective July 29, 2008)

1.Definitions

In addition to other terms defined herein, the following terms shall have the meanings given below:

(a)Administrator means the Board, and, upon its delegation of all or part of its authority to administer the Plan to the Committee, the Committee.

(b)Affiliate means any Subsidiary of the Corporation or any other business entity which is controlled by the Corporation; provided, however, that the term "Affiliate" shall not include any Parent of the Corporation and shall be construed in a manner in accordance with the registration provisions of applicable federal securities laws and as permitted by Code Section 409A (if and to the extent applicable).

(c)Applicable Law or Applicable Laws means any applicable laws, rules or regulations (or similar guidance), including but not limited to the Securities Act, the Exchange Act and the Code.

(d)Board or Board of Directors means the Board of Directors of the Corporation.

(e)Cause shall mean one or more of following acts by a Participant: (i) such Participant's breach of (A) any material provision of such Participant's employment agreement, or (B) any stockholders, confidentiality or noncompetition agreement with the Corporation or any Subsidiary; (ii) any intentional act or intentional omission by such Participant that causes, or is likely to cause, material harm to the Corporation or any Subsidiary or its business reputation; (iii) such Participant's dishonesty, fraud, gross negligence or willful misconduct related to Participant's performance of his or her duties to the Corporation or any Subsidiary; (iv) such Participant's conviction of, or such Participant's entry of a plea of guilty or no contest to, a felony (other than for motor vehicle offenses the effect of which do not materially impair a Participant's performance of his or her duties), or such Participant's arrest or indictment for a felony or crime of moral turpitude (other than for motor vehicle offenses the effect of which do not materially impair a Participant's performance of his or her duties) related to Participant's performance of his or her duties; (v) such Participant's repeated use of drugs or alcohol that in the reasonable determination of the Board interferes with the performance by the Participant of his or her duties and that is not cured within forty-five (45) days by the Participant taking action reasonably requested by the Board in writing to address the issue; and (vi) such Participant's willful and continued failure (A) to follow the direction (consistent with such Participant's duties) of the President and Chief Executive Officer of the Corporation, the Board or any other Participant to whom such Participant reports, (B) to perform substantially his or her duties to the Corporation or any Subsidiary or (C) to follow the written policies, procedures and rules of the Corporation or any Subsidiary for which such Participant works, in each case if such failure is not cured within ten (10) days after a written demand is delivered to such Participant by the Board or the President of either the Corporation or the Subsidiary for which such Participant works that specifically identifies the manner in which the Board believes that such Participant has not met his or her obligations hereunder; provided, however, that for purposes of this clause (vi), no act or failure to act on the part of a Participant shall be considered "willful" unless it is done or omitted to be done by such Participant in bad faith or without reasonable belief that such Participant's action or omission was in the best interests of the Corporation. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done or omitted to be done by such Participant in good faith and in the best interest of the Corporation. The termination of employment of a Participant shall not be deemed to be for "Cause" unless the Participant is notified prior to such termination of employment that such termination is for Cause. The determination of "Cause" shall be made by the Administrator and its determination shall be final and conclusive. Without in any way limiting the effect of the foregoing, for purposes of the Plan and an Option, a Participant's employment or service shall be deemed to have terminated for Cause if, after the Participant's employment or service has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Administrator, a termination for Cause.

(f)A Change of Control shall (except as may be otherwise provided in an individual Option Agreement or as may be otherwise required, if at all, pursuant to Code Section 409A) mean the occurrence of any of the following events with respect to the Corporation:

(i)The acquisition of Voting Securities of the Corporation by any person (other than a stockholder of the Corporation on the Effective Date) immediately after which such person has beneficial ownership of more than 50% of the combined voting power (determined on an "as converted" common stock equivalent basis) of the Corporation's then outstanding Voting Securities;

(ii)A merger, consolidation or reorganization involving the Corporation, unless:

(A)the stockholders of the Corporation, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least a majority of the combined voting power (determined on an "as converted" common stock equivalent basis) of the outstanding Voting Securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation");and

(B)the individuals who were members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors of the Surviving Corporation; or

(iii)The sale or other disposition of all or substantially all of the assets of the Corporation (defined as a sale of assets of the Corporation representing more than 40% of the Fair Market Value of the total assets held by the Corporation) to any person (other than a transfer to a Subsidiary).

(iv)Notwithstanding the foregoing, a Non-Control Acquisition shall not constitute a Change of Control.

Except as provided in Section 1(f)(iii) above, in no event shall a Change of Control of a Subsidiary constitute a Change of Control of the Corporation.

2

(For the purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act.)

The Administrator shall have full and final authority, in its discretion, to determine whether a Change of Control of the Corporation has occurred, the date of the occurrence of such Change of Control and any incidental matters relating thereto.

(g)Common Stock means the Common Stock of CoaLogix Inc., or any successor securities thereto. Shares of Common Stock may be issuable under the Plan.

(h)Code means the Internal Revenue Code of 1986, as amended. Any reference herein to a specific Code section shall be deemed to include all related regulations or other guidance with respect to such Code section.

(i)Committee means the Compensation Committee of the Board or other committee of the Board which may be appointed to administer the Plan in whole or in part.

(j)Corporation means CoaLogix Inc., a Delaware corporation, together with any successor thereto.

(k)Director means a member of the Board or of the board of directors of an Affiliate.

(l)Disability shall, except as may be otherwise determined by the Administrator (taking into account any Code Section 409A considerations), as applied to any Participant, have the meaning given in any Option Agreement, employment agreement, consulting agreement or other similar material agreement, if any, to which the Participant is a party, or, if there is no such agreement (or if such agreement does not define disability), "Disability" shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months. The Administrator shall have sole authority to determine if a Disability has occurred.

(m)Effective Date means the effective date of the Plan, as provided in Section 4.

(n)Employee means any person who is an employee of the Corporation or any Affiliate (including entities which become Affiliates after the Effective Date of the Plan). For this purpose, an individual shall be considered to be an Employee only if there exists between the individual and the Corporation or an Affiliate the legal and bona fide relationship of employer and employee (taking into account any Code Section 409A considerations); provided, however, that, with respect to Incentive Options, "Employee" means any person who is considered an employee of the Corporation or Subsidiary for purposes of Treas. Reg. Section 1.421-1(h) (or any successor provision related thereto).

(o)Exchange Act means the Securities Exchange Act of 1934, as amended.

3

(p)Fair Market Value of any asset other than cash or securities required to be valued under this Plan means the fair market value thereof at the time of such determination, as determined in good faith by the Administrator based on all relevant available facts, which may include among other things the opinions of independent valuation experts as to value. The Fair Market Value of the Common Stock or any other securities as of a date of determination means the following:

(i)Stock Listed and Shares Traded. If the Common Stock or other securities are listed and traded on a national securities exchange (as such term is defined by the Exchange Act) (including but not limited to the NASDAQ Stock Market) on the date of determination, the Fair Market Value per share shall be the average of the closing prices of the securities on such national securities exchange for the ten (10) trading day period ending three (3) trading days prior to the date of determination. If the Common Stock or other securities are traded in the over-the-counter market, the Fair Market Value per share shall be the average of the closing bid and asked prices on the date of determination.

(ii)Stock Listed But No Shares Traded. If the Common Stock or other securities are listed on a national securities exchange (including but not limited to the NASDAQ Stock Market), but no shares of the Common Stock or other securities are traded on the date of determination but there were shares traded on dates within a reasonable period before the date of determination, the Fair Market Value shall be the closing price of the Common Stock or other securities on the most recent date before the date of determination. If the Common Stock or other securities are regularly traded in the over-the-counter market but no shares of the Common Stock or other securities are traded on the date of determination (or if records of such trades are unavailable or burdensome to obtain) but there were shares traded on dates within a reasonable period before the date of determination, the Fair Market Value shall be the average of the closing bid and asked prices of the Common Stock or other securities on the most recent date before the date of determination.

(iii)Stock Not Listed. If the common stock or other securities are not listed on a national securities exchange (including but not limited to the NASDAQ Stock Market) and are not regularly traded in the over-the-counter market, then the Administrator shall determine the Fair Market Value of the Common Stock or other securities based on all relevant available facts, which may include among other things the average of the closing bid and ask prices reflected in the over-the-counter market on a date within a reasonable period either before or after the date of determination, or opinions of independent valuation experts as to value and may take into account any recent sales and purchases of such Common Stock or other securities to the extent they are representative.

(iv)Notwithstanding the foregoing, (A) with respect to the grant of Incentive Options, the Fair Market Value shall be determined by the Administrator in accordance with the applicable provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or in any other manner consistent with the Code Section 422; and (B) Fair Market Value shall be determined in accordance with Code Section 409A if and to the extent required.

(q)Incentive Option means an Option that is designated by the Administrator as an Incentive Option pursuant to Section 7 and intended to meet the requirements of incentive stock options under Code Section 422.

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(r)Independent Contractor means an independent contractor, consultant or advisor providing services to the Corporation or an Affiliate.

(s)Non-Control Acquisition means an acquisition of Voting Securities by an employee benefit plan (or a trust forming a part thereof) maintained by the Corporation or any Subsidiary.

(t)Nonqualified Option means an Option granted under Section 7 that is not intended to qualify as an incentive stock option under Code Section 422.

(u)Option means an Incentive Option or Nonqualified Option granted under Section 7 that entitles the holder to purchase from the Corporation a stated number of shares of Common Stock at the Option Price, and subject to such terms and conditions, as may be set forth in the Plan or Option Agreement or established by the Administrator.

(v)Option Agreement means an Option agreement (including any amendment or supplement thereto) between the Corporation and a Participant specifying the terms, conditions and restrictions of an Option granted to the Participant. An Option Agreement may also state such other terms, conditions and restrictions, including but not limited to terms, conditions and restrictions applicable to shares of Common Stock or any other benefit underlying an Option, as may be established by the Administrator.

(w)Option Period means the term of an Option, as provided in Section 7(d).

(x)Option Price means the price at which an Option may be exercised, as provided in Section 7(b).

(y)Parent means a "parent corporation," whether now or hereafter existing, as defined in Code Section 424(e).

(z)Participant means an Employee employed by, or a Director or an Independent Contractor providing services to, the Corporation or an Affiliate who satisfies the requirements of Section 6 and is selected by the Administrator to receive an Option under the Plan.

(aa)Plan means the CoaLogix Inc. 2008 Stock Option Plan, as amended and restated effective July 29, 2008, and as it may be hereafter amended and/or restated.

(bb)Retirement shall, as applied to any Participant, have the meaning given in any Option Agreement, employment agreement, consulting agreement or other similar material agreement, if any, to which the Participant is a party, or, if there is no such agreement (or if any such agreement does not define retirement), "Retirement" shall mean retirement in accordance with the retirement policies and procedures established by the Corporation, as determined by the Administrator in its sole discretion (taking into account any Code Section 409A considerations).

(cc)SCR Tech means SCR Tech, LLC, a North Carolina limited liability company and a Subsidiary of the Corporation.

(dd)Securities Act means the Securities Act of 1933, as amended.

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(ee)Stockholders' Agreement means that certainCoalogix Inc. Stockholders' Agreement by and between the Corporation and certain stockholders or option holders, as it may be hereafter amended and/or restated.

(ff)Subsidiary means a "subsidiary corporation," whether now or hereafter existing, as defined in Code Section 424(f).

(gg)Termination Date means the date of termination of a Participant's employment or service for any reason, as determined by the Administrator or its designee in its or his discretion.

(hh)Voting Securities means securities of a corporation that have the power to vote generally for the election of directors.

2.Purpose

The purpose of the Plan is to encourage and enable selected Employees, Directors and Independent Contractors of Corporation and its Affiliates to acquire or to increase their holdings of Common Stock in order to promote a closer identification of their interests with those of the Corporation and its stockholders, thereby further stimulating their efforts to enhance the efficiency, soundness, profitability, growth and stockholder value of the Corporation. This purpose will be carried out through the grant to selected Participants of Options, which may be in the form of Incentive Options and/or Nonqualified Options, and/or any other awards which may be permitted under the Plan.

3.Administration of the Plan

(a)The Plan shall be administered by the Board of Directors of the Corporation or, upon its delegation, by the Committee. For the purposes of the Plan, the term "Administrator" shall refer to the Board and, upon its delegation to the Committee of all or part of its authority to administer the Plan, to the Committee.

(b)Subject to the provisions of the Plan, the Administrator shall have full and final authority in its discretion to take any action with respect to the Plan including, without limitation, the authority (i) to determine all matters relating to Options, including selection of individuals to be granted Options, the types of Options, the number of shares of Common Stock subject to an Option, and all terms, conditions, restrictions and limitations of an Option; (ii) to prescribe the form or forms of the Option Agreements evidencing any Options granted under the Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iv) to construe and interpret the Plan, Options and Option Agreements made under the Plan, to interpret rules and regulations for administering the Plan and to make all other determinations deemed necessary or advisable for administering the Plan. In addition, (i) the Administrator shall also have authority, in its sole discretion, to accelerate the date that any Option which was not otherwise exercisable or vested shall become exercisable or vested in whole or in part without any obligation to accelerate such date with respect to any other Option granted to any recipient; and (ii) the Administrator also may in its sole discretion modify or extend the terms and conditions for exercise or vesting of an Option (in each case, taking into account any Code Section 409A considerations). The Administrator may determine that a Participant's rights, payments and/or benefits with respect to an Option (including but not limited to any shares issued or issuable and/or cash paid or payable with respect to an Option) shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Option. Such events may include, but shall not be limited to, termination of employment for cause, violation of policies of the Corporation or an Affiliate, breach of non-solicitation, non-competition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is determined by the Administrator to be detrimental to the business or reputation of the Corporation or any Affiliate. In addition, the Administrator shall have the authority and discretion to establish terms and conditions of Options (including but not limited to the establishment of subplans) as the Administrator determines to be necessary or appropriate to conform to the applicable requirements or practices of jurisdictions outside of the United States.In addition to action by meeting in accordance with Applicable Law, any action of the Administrator with respect to the Plan may be taken by a written instrument signed by all of the members of the Board or Committee, as appropriate, in accordance with Applicable Law, and any such action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called. All determinations of the Administrator with respect to the Plan and any Option or Agreement will be final and binding on the Corporation and all persons having or claiming an interest in any Option granted under the Plan. No member of the Board or Committee, as applicable, shall be liable while acting as Administrator for any action or determination made in good faith with respect to the Plan, an Option or an Option Agreement. The members of the Board or Committee, as applicable, shall be entitled to indemnification and reimbursement in the manner provided in the Corporation's certificate of incorporation and/or bylaws and/or pursuant to Applicable Law.

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(c)Notwithstanding the other provisions of Section 3, the Administrator may delegate to one or more officers of the Corporation the authority to grant Options to eligible Participants, and to make any or all of the determinations reserved for the Administrator in the Plan and summarized in Section 3(b) herein with respect to such Options (subject to any restrictions imposed by Applicable Laws and such terms and conditions as may be established by the Administrator). To the extent that the Administrator has delegated authority to grant Options pursuant to this Section 3(c) to one or more officers of the Corporation, references to the Administrator shall include references to such officer or officers, subject, however, to the requirements of the Plan and other Applicable Laws.

4.Effective Date

The Effective Date of the Plan is April 9, 2008. The Plan was amended and restated effective July 29, 2008. Options may be granted under the Plan on and after the Effective Date, but not after April 8, 2018. Options that are outstanding at the end of the Plan term (or such earlier termination date as may be established by the Board pursuant to Section 10(a)) shall continue in accordance with their terms, unless otherwise determined by the Administrator.

5.Shares of Stock Subject to the Plan; Option Limitations

(a)Shares of Stock Subject to the Plan: Subject to adjustment as provided in Section 5(c) herein, the number of shares of Common Stock initially authorized for issuance under the Plan (including for the grant of Incentive Options) was 14,706 shares. As a result of a July 11, 2008 increase by 2,000 shares in the number of shares authorized for issuance and a subsequent 25-to-1 stock split, and subject to adjustments as provided in Section 5(c), the maximum number of shares of Common Stock that may be issued pursuant to the Plan, as amended and restated effective July 29, 2008, shall not exceed 417,650 shares. Of the total number of shares issuable under the Plan, the maximum number of shares of Common Stock available for the grant of Incentive Options under the Plan, as amended and restated effective July 29, 2008, shall be 417,650 shares (subject to adjustment as provided in Section 5(c) herein). Shares delivered under the Plan shall be authorized but unissued shares, treasury shares or shares acquired on the open market or in private transactions. The Corporation hereby reserves sufficient authorized shares of Common Stock to meet the grant of Options hereunder.

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(b)Shares Not Subject to Limitations: The following will not be applied to the share limitations of Section 5(a) above: (i) dividends, including dividends paid in shares, or dividend equivalents paid in cash in connection with outstanding Options; (ii) Options which are settled in cash rather than the issuance of shares; (iii) any shares subject to an Option if the Option is forfeited, cancelled, terminated, expires or lapses for any reason without the issuance of shares underlying the Option or any shares subject to an Option which shares are forfeited to, or repurchased or reacquired by, the Corporation; and (iv) any shares surrendered by a Participant or withheld by the Corporation to pay the Option Price of an Option or shares used to satisfy any tax withholding requirement in connection with the exercise of an Option if, in accordance with the terms of the Plan, a Participant pays such Option Price or satisfies such tax withholding by either tendering previously owned shares or having the Corporation withhold shares.

(c)Adjustments: If there is any change in the outstanding shares of Common Stock because of a merger, consolidation or reorganization involving the Corporation, or if the Board of Directors of the Corporation declares a stock dividend, stock split distributable in shares of Common Stock or reverse stock split, combination or reclassification of the Common Stock, or if there is a similar change in the capital stock structure of the Corporation affecting the Common Stock (excluding conversion of convertible securities by the Corporation and/or the exercise of warrants by their holders), then the number of shares of Common Stock reserved for issuance under the Plan shall be correspondingly adjusted, and the Administrator shall make such adjustments to Options or to any provisions of this Plan as the Administrator deems equitable to prevent dilution or enlargement of Options or as may otherwise be advisable.

6.Eligibility

An Option may be granted only to an individual who satisfies all of the following eligibility requirements on the date the Option is granted:

(a)The individual is either (i) an Employee, (ii) a Director or (iii) an Independent Contractor.

(b)With respect to the grant of Incentive Options, the individual is otherwise eligible to participate under Section 6, is an Employee of the Corporation or Subsidiary and does not own, immediately before the time that the Incentive Option is granted, stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a Parent or Subsidiary. Notwithstanding the foregoing, an Employee who owns more than 10% of the total combined voting power of the Corporation or a Parent or Subsidiary may be granted an Incentive Option if the Option Price is at least 110% of the Fair Market Value of the Common Stock, and the Option Period does not exceed five years. For this purpose, an individual will be deemed to own stock which is attributable to him under Code Section 424(d).

(c)With respect to the grant of substitute Options or assumption of Options in connection with a merger, consolidation, acquisition, reorganization or similar business combination involving the Corporation or an Affiliate, the recipient is otherwise eligible to receive the Option and the terms of the Option are consistent with the Plan and Applicable Laws (including, to the extent deemed applicable, the federal securities laws registration provisions, Code Section 424(a) and Code Section 409A).

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(d)The individual, being otherwise eligible under this Section 6, is selected by the Administrator as an individual to whom an Option shall be granted (as defined above, a "Participant").

7.Options

(a)Grant of Options: Subject to the limitations of the Plan, the Administrator may in its sole and absolute discretion grant Options to such eligible individuals in such numbers, subject to such terms and conditions, and at such times as the Administrator shall determine. Both Incentive Options and Nonqualified Options may be granted under the Plan, as determined by the Administrator; provided, however, that Incentive Options may only be granted to Employees of the Corporation or Subsidiary. To the extent that an Option is designated as an Incentive Option but does not qualify as such under Code Section 422, the Option (or portion thereof) shall be treated as a Nonqualified Option.

(b)Option Price: The Option Price per share at which an Option may be exercised shall be established by the Administrator and stated in the Option Agreement evidencing the grant of the Option; provided, that (i) the Option Price shall be no less than 100% of the Fair Market Value per share of the Common Stock as determined on the date the Option is granted (or 110% of the Fair Market Value with respect to Incentive Options granted to an Employee who owns stock possessing more than 10% of the total voting power of all classes of stock of the Corporation or a Parent or Subsidiary, as provided in Section 6(b) herein); and (ii) in no event shall the Option Price per share of any Option be less than the par value, if any, per share of the Common Stock. Notwithstanding the foregoing, the Administrator may in its discretion authorize the grant of substitute or assumed options of an acquired entity with an Option Price not equal to at least 100% of the Fair Market Value of the stock on the date of grant if the terms of such substitution or assumption otherwise comply, to the extent deemed applicable, with Code Section 409A and Code Section 424(a)).

(c)Date of Grant: An Option shall be considered to be granted on the date that the Administrator acts to grant the Option, or on such other date as may be established by the Administrator in accordance with Applicable Laws.

(d)Option Period and Limitations on the Right to Exercise Options:

(i)The Option Period shall be determined by the Administrator at the time the Option is granted and shall be stated in the Option Agreement. With respect to Incentive Options, the Option Period shall not extend more than 10 years from the date on which the Option is granted (or five years with respect to Incentive Options granted to an Employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a Parent or Subsidiary, as provided in Section 6(b) herein). Any Option or portion thereof not exercised before expiration of the Option Period shall terminate. The period or periods during which, and the terms and conditions pursuant to which, an Option may vest and become exercisable shall be determined by the Administrator in its discretion.

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(ii)An Option may be exercised by giving written notice to the Corporation in form acceptable to the Administrator at such place and subject to such conditions as may be established by the Administrator or its designee. Such notice shall specify the number of shares to be purchased pursuant to an Option and the aggregate purchase price to be paid therefor and shall be accompanied by payment of such purchase price. Unless an Option Agreement provides otherwise, such payment shall be in the form of cash or cash equivalent; provided that, except where prohibited by the Administrator or Applicable Law (and subject to such terms and conditions as may be established by the Administrator), payment may also be made:

(A)By delivery (by either actual delivery or attestation) of shares of Common Stock owned by the Participant;

(B)By shares of Common Stock withheld upon exercise;

(C)With respect only to purchases upon exercise of an Option after a Public Market for the Common Stock exists, by delivery of written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option Price;

(D)By such other payment methods as may be approved by the Administrator and which are acceptable under Applicable Laws; or

(E)By any combination of the foregoing methods.

Shares delivered or withheld in payment on the exercise of an Option shall be valued at their Fair Market Value on the date of exercise. For the purposes herein, a "Public Market" for the Common Stock shall be deemed to exist (i) upon consummation of a firm commitment underwritten public offering of the Common Stock (or successor securities thereto) pursuant to an effective registration statement under the Securities Act, or (ii) if the Administrator otherwise determines that there is an established public market for the Common Stock.

(iii)Unless the Administrator determines otherwise, no Option granted to a Participant who was an Employee at the time of grant shall be exercised unless the Participant is, at the time of exercise, an Employee and has been an Employee continuously since the date the Option was granted, subject to the following:

(A)The employment relationship of a Participant shall be treated as continuing intact for any period that the Participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed three months, or, if longer, as long as the Participant's right to reemployment is guaranteed either by statute or by contract. The employment relationship of a Participant shall also be treated as continuing intact while the Participant is not in active service because of Disability.

(B)Unless an individual Option Agreement provides otherwise, if the employment of a Participant is terminated because of death or Disability, the Option may be exercised only to the extent vested and exercisable on the Participant's Termination Date, and the Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of six monthsnext succeeding the Termination Date (or such other period stated in the Option Agreement); or (Y) the close of the Option Period. In the event of the Participant's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

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(C)Unless an individual Option Agreement provides otherwise, if the employment of the Participant is terminated for any reason other than Disability, death or Cause, his Option may be exercised only to the extent vested and exercisable on his Termination Date, and the Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of 45 days next succeeding the Termination Date (or such other period stated in the Option Agreement); or (Y) the close of the Option Period. In the event of the Participant's death, such Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(D)Unless an individual Option Agreement provides otherwise, if the employment of the Participant is terminated for Cause, his Option shall lapse and no longer be exercisable as of his Termination Date, as determined by the Administrator.

(E)Notwithstanding the foregoing, the Administrator shall have authority, in its sole discretion (taking into account any Code Section 409A considerations), to accelerate the date for exercising all or any part of an Option which was not otherwise vested and exercisable, extend the period during which an Option may be exercised, modify the other terms and conditions of exercise, or any combination of the foregoing.

(iv)Unless an individual Option Agreement provides otherwise, an Option granted to a Participant who was Director but who was not an Employee at the time of grant shall be exercisable as follows: (A) If the services of the Participant as a Director terminate due to death or Disability, the vesting of the Option shall be accelerated so that the Option shall become vested as of the Director's Termination Date to the extent the Option would have been vested on the first anniversary of the Director's Termination Date (without regard to the Participant's termination of service), and, in such event, the Option must be exercised, if at all, prior to the first to occur of the first anniversary of the Director's Termination Date or the close of the Option Period; (B) If the services of the Director are terminated due to the resignation, failure to be re-elected or any other reason other than death, Disability or Cause, then the Option may be exercised only to the extent vested and exercisable on the Director's Termination Date and must be exercised, if at all, prior to the first to occur of the end of the 45-day period next succeeding the Termination Date (or such other period stated in the Option Agreement) or the close of the Option Period; and (C) if the services of such a Participant are terminated for Cause, his Option shall lapse and no longer be exercisable as of his Termination Date, as determined by the Administrator. Notwith-standing the foregoing, the Administrator may in its discretion (taking into account any Code Section 409A considerations) accelerate the date for exercising all or any part of an Option which was not otherwise exercisable on the Termination Date, extend the period during which an Option may be exercised, modify the other terms and conditions to exercise, or any combination of the foregoing.

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(v)Unless an individual Option Agreement provides otherwise, an Option granted to a Participant who was an Independent Contractor of the Corporation or an Affiliate at the time of grant (and who does not thereafter become an Employee, in which case he shall be subject to the provisions of Section 7(d)(iii) herein) may be exercised only to the extent vested and exercisable on the Participant's Termination Date (unless the termination was for Cause), and must be exercised, if at all, prior to the first to occur of the following, as applicable: (X) the close of the period of 30 days next succeeding the Termination Date (or such other period stated in the Option Agreement); or (Y) the close of the Option Period. If the services of such a Participant are terminated for Cause, his Option shall lapse and no longer be exercisable as of his Termination Date, as determined by the Administrator. Notwithstanding the foregoing, the Administrator may in its discretion (taking into account any Code Section 409A considerations) accelerate the date for exercising all or any part of an Option which was not otherwise exercisable on the Termination Date, extend the period during which an Option may be exercised, modify the other terms and conditions to exercise, or any combination of the foregoing.

(e)Rights as a Stockholder: A Participant and his legal representatives, legatees or distributees shall not be deemed to be the holder of any shares subject to an Option and shall not have any rights of a stockholder unless and until certificates for such shares have been issued and delivered to him or them under the Plan (or, in the case of uncertificated shares, other written notice of ownership has been provided in accordance with Applicable Laws). A certificate or certificates for shares of Common Stock acquired upon exercise of an Option shall be issued in the name of the Participant or his beneficiary and distributed to the Participant or his beneficiary (or, in the case of uncertificated shares, other written notice of ownership in accordance with Applicable Laws shall be provided) promptly following receipt of notice of exercise and payment of the purchase price (except as may otherwise be determined by the Corporation in the event of payment of the Option Price pursuant to Section 7(d)(ii)(C) herein). Shares issued upon exercise of an Option shall be subject to any restrictions applicable under the Plan (including but not limited to the provisions of Section 11), an Option Agreement, the Stockholders' Agreement or any other applicable agreements or instruments. Upon the issuance of a certificate for shares of Common Stock to a Participant (or, in the case of uncertificated shares, upon delivery of written notice of ownership in accordance with Applicable Laws), the Participant shall have such rights and incidents of ownership of the shares of Common Stock acquired pursuant to an Option, including the right to vote and the right to receive dividends when and if paid by the Corporation, and to exercise such additional rights with respect to the shares, as are permitted by the Plan, the Option Agreement, the Stockholders' Agreement, the Corporation's certificate of incorporation and bylaws and Applicable Law.

(f)Nontransferability of Options: Incentive Options shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession or, in the Administrator's discretion, as may otherwise be permitted in accordance with Treas. Reg. Section 1.421-1(b)(2) or any successor provision thereto. Nonqualified Options shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession, except as may be permitted by the Administrator in a manner consistent with the registration provisions of the Securities Act. Except as may be permitted by the preceding sentences, an Option shall be exercisable during the Participant's lifetime only by him or by his guardian or legal representative. The designation of a beneficiary in accordance with the Plan does not constitute a transfer.

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(g)Notice of Disposition: If shares of Common Stock acquired upon exercise of an Incentive Option are disposed of within two years following the date of grant or one year following the transfer of such shares to a Participant upon exercise, the Participant shall, promptly following such disposition, notify the Corporation in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Administrator may reasonably require.

(h)Limitation on Incentive Options: In no event shall there first become exercisable by an Employee in any one calendar year Incentive Options granted by the Corporation or any Parent or Subsidiary with respect to shares having an aggregate Fair Market Value (determined at the time an Incentive Option is granted) greater than $100,000; provided that, if such limit is exceeded, then the first $100,000 of shares to become exercisable in such calendar year will be Incentive Options and the Options (or portion thereof) for shares with a value in excess of $100,000 that first became exercisable in that calendar year will be Nonqualified Options.

8.Change of Control

Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, if an Award Agreement specifically so provides, all Options outstanding as of the date of such Change of Control shall become fully vested and exercisable, whether or not then otherwise vested and exercisable. In such event, the Administrator may (i) determine that Options must be exercised, if at all, within a fixed time period (as determined by the Administrator) following or prior to such Change of Control event, (ii) determine that such Options shall terminate after such time period, and/or (iii) make other similar determinations regarding the rights of Participants with respect to such Options.

9.Withholding

The Corporation shall withhold all required local, state, federal, foreign and other taxes and any other amount required to be withheld by any governmental authority or law from any amount payable in cash with respect to an Option. Prior to the delivery or transfer of any certificate for shares or any other benefit conferred under the Plan, the Corporation shall require any Participant or other person to pay to the Corporation in cash with respect to an award the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of such recipient. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit a recipient to satisfy such obligation in whole or in part, and any other local, state, federal or foreign income tax obligations relating to such an Option, by electing (the "election") to have the Corporation withhold shares of Common Stock from the shares to which the recipient is entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

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10.Amendment and Termination of the Plan and Options

(a)Amendment and Termination of Plan: The Plan may be amended, altered, suspended and/or terminated at any time by the Board; provided that approval of an amendment to the Plan by the stockholders of the Corporation shall be required to the extent, if any, that stockholder approval of such amendment is required by Applicable Law.

(b)Amendment and Termination of Options: The Administrator may amend, alter, suspend and/or terminate any Option granted under the Plan, prospectively or retroactively, but such amendment, alteration, suspension or termination of an Option shall not (except as otherwise provided in Section 10(c) or Section 10(d) herein), without the consent of the recipient of an outstanding Option, materially adversely affect the rights of the recipient with respect to the Option.

(c)Unilateral Authority of Administrator to Modify Plan and Options: Notwithstanding Section 10(a) and Section 10(b) herein, the following provisions shall apply:

(i)The Administrator shall have unilateral authority to amend the Plan and any Option (without Participant consent and without stockholder approval, unless such stockholder approval is required by Applicable Law) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A, Code Section 422 and federal securities laws).

(ii)The Administrator shall have unilateral authority to make adjustments to the terms and conditions of Options in recognition of unusual or nonrecurring events affecting the Corporation or any Affiliate, or the financial statements of the Corporation or any Affiliate, or of changes in accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles.

(d)Cash Settlement: Notwithstanding any provision of the Plan, an Option or an Option Agreement to the contrary, the Administrator shall have unilateral authority to cause any Option (or portion thereof) granted under the Plan to be canceled in consideration of an alternative award or cash payment of an equivalent cash value, as determined by the Administrator in its sole discretion, made to the holder of such canceled Option.

11.Restrictions on Options and Shares

(a)General: As a condition to the issuance and delivery of Common Stock hereunder, or the grant of any benefit pursuant to the Plan, the Corporation shall require a Participant or other person at any time and from time to time to become a party to an Option Agreement, the Stockholders' Agreement, other agreement(s) restricting the voting, transfer, purchase or repurchase of shares of Common Stock of the Corporation, and any other employment agreements, consulting agreements, non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Corporation. In addition, without in any way limiting the effect of the foregoing, each Participant or other holder of shares issued under the Plan shall be permitted to transfer such shares only if such transfer is in accordance with the Plan, the Option Agreement, the Stockholders' Agreement and any other applicable agreements and Applicable Law. The acquisition of shares of Common Stock under the Plan by a Participant or any other holder of shares shall be subject to, and conditioned upon, the compliance by the Participant or other holder of such shares with the restrictions described in the Plan, the Option Agreement, the Stockholders' Agreement and any other applicable agreements and Applicable Law.

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(b)Compliance with Applicable Laws, Rules and Regulations: The Corporation may impose such restrictions on Options, shares of Common Stock and any other benefits underlying Options hereunder as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such securities. Notwithstanding any other Plan or Option Agreement provision to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock under the Plan, make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with Applicable Laws (including but not limited to the requirements of the Securities Act). The Corporation will be under no obligation to register shares of Common Stock or other securities with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state or foreign securities laws, stock exchange or similar organization, and the Corporation will have no liability for any inability or failure to do so. The Corporation may cause a restrictive legend or legends to be placed on any certificate issued pursuant to an Option hereunder in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

12.Option Agreement

The grant of any Option under the Plan shall be evidenced by the execution of an Option Agreement between the Corporation and the Participant. Such Option Agreement may state terms, conditions and restrictions applicable to the Option and any may state such other terms, conditions and restrictions, including but not limited to terms, conditions and restrictions applicable to shares subject to an Option, as may be established by the Administrator.

13.No Right or Obligation of Continued Employment or Service

Neither the Plan, the grant of an Option nor any other action related to the Plan shall confer upon a Participant any right to continue in the employment or service of the Corporation or an Affiliate as an Employee, Director or Independent Contractor or to interfere in any way with the right of the Corporation or an Affiliate to terminate the Participant's employment or service at any time. Except as otherwise provided in the Plan, an Option Agreement or as may be determined by the Administrator, all rights of a Participant with respect to an Option shall terminate upon the termination of the Participant's employment or service.

14.Compliance with Code Section 409A

Notwithstanding any other provision in the Plan or an Option to the contrary, if and to the extent that Code Section 409A is deemed to apply to the Plan or any Option, it is the general intention of the Corporation that the Plan and all such Options shall, to the extent practicable, comply with, or be exempt from, Code Section 409A, and the Plan and any such Option shall, to the extent practicable, be construed in accordance therewith. Deferrals of shares or any other benefit issuable pursuant to an Option otherwise exempt from Code Section 409A in a manner that would cause Code Section 409A to apply shall not be permitted unless such deferrals are in compliance with (or eligible for another exemption from) Code Section 409A. In the event that the Corporation (or a successor thereto) has any stock which is publicly traded on an established securities market or otherwise, distributions to any Participant who is a "specified employee" (as defined under Code Section 409A) upon a separation from service may only be made on a date that is more than six months after the date of separation from service (or, if earlier than the end of the six-month period, the date of death of the specified employee) or as otherwise permitted under Code Section 409A. Without in any way limiting the effect of the foregoing, (i) in the event that exemption from or compliance with Code Section 409A requires that any special terms, provisions or conditions be included in the Plan or any Option, then such terms, provisions and conditions shall, to the extent practicable, be deemed to be made a part of the Plan or Option, as applicable, and (ii) terms used in the Plan or an Option Agreement shall be construed in accordance with Code Section 409A if and to the extent required. Further, in the event that the Plan or any Option shall be deemed not to comply with Code Section 409A, then neither the Corporation, the Administrator nor its or their designees or agents shall be liable to any Participant or other person for actions, decisions or determinations made in good faith.

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15.Unfunded Plan; No Effect on Other Compensation and Benefit Plans

(a)The Plan shall be unfunded, and the Corporation shall not be required to create a trust or segregate any assets that may at any time be represented by Options under the Plan. The Plan shall not establish any fiduciary relationship between the Corporation and any Participant or other person. Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Corporation or any Affiliate, including, without limitation, any specific funds, assets or other property which the Corporation or any Affiliate, in their discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Common Stock or other amounts, if any, payable under the Plan, unsecured by any assets of the Corporation or any Affiliate. Nothing contained in the Plan shall constitute a guarantee that the assets of such entities shall be sufficient to pay any benefits to any person.

(b)The amount of any compensation deemed to be received by a Participant pursuant to an Option shall not constitute compensation with respect to which any other employee benefits of such Participant are determined, including, without limitation, benefits under any bonus, pension, profit sharing, life insurance or salary continuation plan, except as otherwise specifically provided by the terms of such plan or as may be determined by the Administrator.

(c)The adoption of the Plan shall not affect any other stock incentive or other compensation plans in effect for the Corporation or any Affiliate, nor shall the Plan preclude the Corporation from establishing any other forms of stock incentive or other compensation for employees or service providers of the Corporation or any Affiliate.

16.Governing Law

The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws, and in accordance with applicable federal laws of the United States.

17.Stockholder Approval

The initial adoption of Plan was subject to approval by the stockholders of the Corporation, which approval was received within 12 months of the Effective Date of the Plan. Options granted prior to such stockholder approval were conditioned upon and were effective only upon approval of the Plan by such stockholders on or before such date. Amendments to the Plan shall be subject to additional stockholder approvals if and to the extent required by Applicable Law or if otherwise deemed advisable by the Board.

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18.Effect of Certain Changes in Duties and/or Status

Notwithstanding the other terms of the Plan or an Option Agreement, the Administrator has sole discretion to determine (taking into account any Code Section 409A considerations), at the time of grant of an Option or at any time thereafter, the effect, if any, on Options (including but not limited to the vesting and/or exercisability of Options) granted to a Participant in the event of (i) a change in the Participant's duties or responsibilities, (ii) a change in the Participant's status as an Employee, Director or Independent Contractor, including but not limited to a change from full-time to part-time, or vice versa, or (iii) other similar changes in the nature or scope of the Participant's employment or service. In addition, unless otherwise determined by the Administrator, for purposes of the Plan, a Participant shall be considered to have terminated employment or service and to have ceased to be an Employee or Independent Contractor, as the case may be, if his employer (or the party for whom the Participant is providing services, in the case of an Independent Contractor) was an Affiliate at the time of grant and such employer or other party ceases to be an Affiliate, even if he continues to be employed by or provide services to such employer or party.

19.Beneficiary Designation

The Administrator may in its discretion permit a Participant to designate in writing a person or persons as beneficiary, which beneficiary shall be entitled to receive benefits (if any) to which the Participant is otherwise entitled under the Plan in the event of death. In the absence of such designation by a Participant, and in the event of the Participant's death, the estate of the Participant shall be treated as beneficiary for purposes of the Plan, unless the Administrator determines otherwise. The Administrator shall have discretion to approve and interpret the form or forms of such beneficiary designation. A beneficiary, legal guardian, legal representative or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Option Agreement applicable to the Participant, except to the extent that the Plan and/or Option Agreement provide otherwise, and to any additional restrictions deemed necessary or appropriate by the Administrator.

20.Gender and Number

Except where otherwise indicated by the context, words in any gender shall include any other gender, words in the singular shall include the plural and words in the plural shall include the singular.

21.Successors and Assigns

The Plan shall be binding upon the Corporation, its successors and assigns, and Participants, their executors, administrators and permitted transferees and beneficiaries.

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22.Severability

If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

23.Rules of Construction

Headings are given to the sections of the Plan solely as a convenience to facilitate reference. The reference to any statute, regulation or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.

24.Right of Offset

Notwithstanding any other provision of the Plan or an Option Agreement, the Corporation may reduce the amount of any payment or benefit otherwise payable to or on behalf of a Participant by the amount of any obligation of the Participant to or on behalf of the Corporation or an Affiliate that is or becomes due and payable.

25.Fractional Shares

Except as otherwise provided in an Option Agreement or determined by the Administrator, (a) the total number of shares issuable pursuant to the exercise or vesting of an Option shall be rounded down to the nearest whole share, and (b) no fractional shares shall be issued. The Administrator may, in its discretion, determine that a fractional share shall be settled in cash.

26.Uncertificated Stock

Notwithstanding anything in the Plan to the contrary, to the extent the Plan provides for the issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may, in the Corporation's discretion, be effected on a non-certificated basis, to the extent not prohibited by the Corporation's certificate of incorporation or bylaws or by Applicable Law (including but not limited to applicable state corporate law and the applicable rules of any stock exchange on which the Common Stock is traded).

27.Income and Other Taxes

Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise on their behalf in connection with awards granted under the Plan (including any taxes arising under Code Section 409A), and the Corporation shall not have any obligation to indemnify or otherwise hold any Participant harmless from any or all of such taxes.

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IN WITNESS WHEREOF, this CoaLogix Inc. 2008 Stock Option Plan, as amended and restated effective July 29, 2008, is, by the authority of the Board of Directors of the Corporation, executed in behalf of the Corporation, as of the _____ day of _____________, 2008.

	COALOGIX INC.
	By:         Name:       Title:
ATTEST:
Secretary
[Corporate Seal]

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EX-10.2

Exhibit 10.2

Option No. _____

COALOGIX INC.

2008 STOCK OPTION PLAN

Stock Option Agreement

(Employees)

Name of Participant:	William J. McMahon
Grant Date:	April 9, 2008
Number of Shares Subject to Option:	147,050 shares [reflects effect of 25-for-1 stock split in July 2008]
Option Price:	$5.05 [reflects effect of 25-for-1 stock split in July 2008]
Type of Option:	Incentive Option
Date Vesting Begins:	November 7, 2008
Expiration Date:	April 8, 2018

THIS AGREEMENT (together with Schedule A attached hereto, this "Agreement"), made effective as of the 9th day of April, 2008 (the "Grant Date"), by and between CoaLogix Inc., a Delaware corporation (the "Corporation"), and William J. McMahon, an Employee of the Corporation or an Affiliate (the "Participant").

REC ITALS :

In furtherance of the purposes of the CoaLogix Inc. 2008 Stock Option Plan, as it may be hereafter amended and/or restated (the "Plan"), and in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation and the Participant hereby agree as follows:

1.Incorporation of Plan. The rights and duties of the Corporation and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2.Grant of Option; Term of Option. The Corporation hereby grants to the Participant, pursuant to the Plan, as a matter of separate inducement and agreement in connection with his employment with the Corporation, and not in lieu of any salary or other compensation for his services, the right and option (the "Option") to purchase all or any part of an aggregate of One Hundred Forty-Seven Thousand Fifty (147,050) shares [reflects effect of 25-for-1 stock split in July 2008] (the "Shares") of Common Stock, at a purchase price (the "Option Price") of Five Dollars Five Cents ($5.05) per Share [reflects effect of 25-for-1 stock split in July 2008]. The Option shall be designated as an Incentive Option. To the extent that the Option is designated as an Incentive Option and such Option does not qualify as an Incentive Option, the Option (or portion thereof) shall be treated as a Nonqualified Option. Except as otherwise provided in the Plan, the Option will expire if not exercised in full before April 8, 2018 (the "Expiration Date") (such term commencing with the Grant Date and ending on the Expiration Date being referred to as the "Option Period").

3.Exercise of Option. The Option shall become exercisable on the date or dates and subject to such conditions set forth in the Plan, this Agreement and Schedule A, which is attached hereto and expressly made a part of this Agreement. To the extent that the Option is exercisable but is not exercised, the Option shall accumulate and be exercisable by the Participant in whole or in part at any time prior to the Expiration Date, subject to the terms of the Plan and this Agreement. Upon the exercise of an Option in whole or in part, payment of the Option Price in accordance with the provisions of the Plan and this Agreement, and satisfaction of such other conditions as may be established by the Administrator, the Corporation shall promptly deliver to the Participant a certificate or certificates for the Shares purchased (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Laws). Payment of the Option Price shall be in the form of cash or cash equivalent; provided that, except where prohibited by the Administrator or Applicable Law (and subject to such terms and conditions as may be established by the Administrator), payment may also be made (a) by delivery (by either actual delivery or attestation) of shares of Common Stock owned by the Participant; (b) by shares of Common Stock withheld upon exercise but only if and to the extent that payment by such method does not result in accounting consequences deemed unacceptable to the Administrator; (c) with respect only to purchases upon exercise of the Option after a Public Market for Common Stock exists (as determined under the Plan), by delivery of written notice of exercise to the Corporation and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option Price; (d) by such other payment methods as may be approved by the Administrator and which are acceptable under Applicable Laws; or (e) by any combination of the foregoing methods. Shares delivered or withheld in payment of the Option Price shall be valued at their Fair Market Value on the date of exercise in accordance with Plan terms.

4.Effect of Change of Control.

(a)Notwithstanding the other provisions herein, in the event of a Change of Control, the Option, if outstanding as of the date of such Change of Control, shall become fully vested and exercisable, whether or not then otherwise vested and exercisable. In such event, the Administrator may (i) determine that the Option must be exercised, if at all, within a fixed time period (as determined by the Administrator) following or prior to such Change of Control, and/or (ii) determine that the Option shall terminate after such time period, and/or (iii) make other similar determinations regarding the Participant's rights with respect to the Option.

(b)For the purposes herein, a "Change of Control" shall mean the occurrence of any of the following events with respect to the Corporation:

(i)The acquisition of Voting Securities of the Corporation by any person (other than a stockholder of the Corporation on the Effective Date) immediately after which such person has beneficial ownership of more than 50% of the combined voting power (determined on an "as converted" common stock equivalent basis) of the Corporation's then outstanding Voting Securities;

(ii)A merger, consolidation or reorganization involving the Corporation, unless:

(A)the stockholders of the Corporation, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least a majority of the combined voting power (determined on an "as converted" common stock equivalent basis) of the outstanding Voting Securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation");and

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(B)the individuals who were members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors of the Surviving Corporation; or

(iii)The sale or other disposition of all or substantially all of the assets of the Corporation (defined as a sale of assets of the Corporation representing more than 40% of the Fair Market Value of the total assets held by the Corporation) to any person (other than a transfer to a Subsidiary).

(iv)Notwithstanding the foregoing, a Non-Control Acquisition shall not constitute a Change of Control.

(v)Notwithstanding the foregoing, an event described in this Section 4(b) shall only constitute a Change of Control if the Change of Control Consideration received by Acorn Energy, Inc. in cash, cash equivalents or freely-tradable securities or securities that become freely-tradable, or such Change of Control Consideration that is available for distribution to Acorn Energy, Inc., is a dollar amount equal to or greater than the amount required to generate a Thirty Percent (30%) Internal Rate of Return on the initial capital contribution of $11,038,700 made by Acorn Energy, Inc. on November 7, 2007, increased by the amount of any cash or other property contributed to the capital of the Corporation by Acorn Energy, Inc., reduced by any dividends or other distributions paid from the Corporation to Acorn Energy, Inc., on or before the Change of Control, and reduced by the Change of Control Consideration at the Change of Control date. For example, to illustrate the provisions of this Section 4(b)(v), assume that Acorn Energy, Inc. makes an additional capital contribution of $1,000,000 on July 1, 2008, receives a dividend distribution of $500,000 on January 1, 2009, and a third-party buyer acquires 100% of the Voting Securities of the Corporation on September 1, 2010, with the Change of Control Consideration received at closing in cash or freely-tradable securities by Acorn Energy, Inc. equal to $24,200,000. Such transaction would constitute a Change of Control for purposes of this Plan because the Change of Control Consideration received by Acorn Energy, Inc. on September 1, 2010 ($24,200,000) exceeds the amount of Change of Control Consideration required to provide a minimum 30% Internal Rate of Return to Acorn Energy, Inc. ($24,121,309). “Internal Rate of Return” means the discount rate that results in a net present value of zero for a series of cash flows.

Except as provided in Section 4(b)(iii) above, in no event shall a Change of Control of a Subsidiary constitute a Change of Control of the Corporation.

(For the purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or

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Section 14(d)(2) of the Exchange Act, other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act.)

The Administrator shall have full and final authority, in its discretion, to determine whether a Change of Control of the Corporation has occurred, the date of the occurrence of such Change of Control and any incidental matters relating thereto.

5.Termination of Employment. The Option shall not be exercised unless the Participant is, at the time of exercise, an Employee and has been an Employee continuously since the date the Option was granted, subject to the following:

(a)The employment relationship of the Participant shall be treated as continuing intact for any period that the Participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed three months, or, if longer, as long as the Participant's right to reemployment is guaranteed either by statute or by contract. The employment relationship of the Participant shall also be treated as continuing intact while the Participant is not in active service because of Disability. The Administrator shall have authority to determine whether the Participant has incurred a Disability, and, if applicable, the Participant's Termination Date for any reason.

(b)If the employment of the Participant terminates because of death or Disability, the Option may be exercised only to the extent vested and exercisable on the Participant's Termination Date, and the Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (i) the close of the period of six months next succeeding the Termination Date; or (ii) the close of the Option Period. In the event of the Participant's death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(c)If the employment of the Participant terminates for any reason other than Disability, death or Cause, the Option may be exercised only to the extent vested and exercisable on the Termination Date, and the Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (i) the close of the period of 45 days next succeeding the Termination Date; or (ii) the close of the Option Period. In the event of the Participant's death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(d)If the employment of the Participant terminates for Cause, his Option shall lapse and no longer be exercisable as of the Termination Date, as determined by the Administrator. For the purposes of this Agreement, "Cause" shall mean one or more of following acts by a Participant: (i) such Participant's breach of (A) any material provision of such Participant's employment agreement, or (B) any stockholders, confidentiality or noncompetition agreement with the Corporation or any Subsidiary; (ii) any intentional act or intentional omission by such Participant that causes, or is likely to cause, material harm to the Corporation or any Subsidiary or its business reputation; (iii) such Participant's dishonesty, fraud, gross negligence or willful misconduct related to Participant's performance of his or her duties to the Corporation or any Subsidiary; (iv) such Participant's conviction of, or such Participant's entry of a plea of guilty or no contest to, a felony (other than for motor vehicle offenses the effect of which do not materially impair a Participant's performance of his or her duties), or such Participant's arrest or indictment for a felony or crime of moral turpitude (other than for motor vehicle offenses the effect of which do not materially impair a Participant's performance of his or her duties) related to Participant's performance of his or her duties; (v) such Participant's repeated use of drugs or alcohol that in the reasonable determination of the Board interferes with the performance by the Participant of his or her duties and that is not cured within forty-five (45) days by the Participant taking action reasonably requested by the Board in writing to address the issue; and (vi) such Participant's willful and continued failure (A) to follow the direction (consistent with such Participant's duties) of the President and Chief Executive Officer of the Corporation, the Board or any other Participant to whom such Participant reports, (B) to perform substantially his or her duties to the Corporation or any Subsidiary or (C) to follow the written policies, procedures and rules of the Corporation or any Subsidiary for which such Participant works, in each case if such failure is not cured within ten (10) days after a written demand is delivered to such Participant by the Board or the President of either the Corporation or the Subsidiary for which such Participant works that specifically identifies the manner in which the Board believes that such Participant has not met his or her obligations hereunder; provided, however, that for purposes of this clause (vi), no act or failure to act on the part of a Participant shall be considered "willful" unless it is done or omitted to be done by such Participant in bad faith or without reasonable belief that such Participant's action or omission was in the best interests of the Corporation. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done or omitted to be done by such Participant in good faith and in the best interest of the Corporation. The termination of employment of a Participant shall not be deemed to be for "Cause" unless the Participant is notified prior to such termination of employment that such termination is for Cause. The determination of "Cause" shall be made by the Administrator and its determination shall be final and conclusive. Without in any way limiting the effect of the foregoing, for purposes of the Plan and an Option, a Participant's employment or service shall be deemed to have terminated for Cause if, after the Participant's employment or service has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Administrator, a termination for Cause.

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(e)No Right or Obligation of Continued Employment or Service. Neither the Plan, the grant of the Option nor any other action related to the Plan shall confer upon the Participant any right to continue in the employment or service of the Corporation or an Affiliate or to interfere in any way with the right of the Corporation or an Affiliate to terminate the Participant's employment or service at any time. Except as otherwise expressly provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Option shall terminate upon the termination of the Participant's employment or service.

6.Nontransferability of Option. To the extent that the Option is designated as an Incentive Option, the Option shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws or intestate succession or, in the Administrator's discretion, as may otherwise be permitted in accordance with Treas. Reg. Section 1.421-1(b)(2) or any successor provision thereto. To the extent that the Option is designated as a Nonqualified Option, the Option shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession, except as may be permitted by the Administrator in a manner consistent with the registration provisions of the Securities Act. Except as may be permitted by the preceding sentences, the Option shall be exercisable during the Participant's lifetime only by him or by his guardian or legal representative. The designation of a beneficiary in accordance with the Plan does not constitute a transfer. The Shares shall be subject to such rights of first refusal, repurchase rights and/or other transfer restrictions as are stated in this Agreement, the Plan, any Stockholders' Agreement and/or any other agreement between the Participant and the Corporation.

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7.Superseding Agreement; Binding Effect. This Agreement supersedes any statements, representations or agreements of the Corporation with respect to the grant of the Option, any other equity-based awards or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. This Agreement does not supersede or amend any Stockholders' Agreement, noncompetition agreement, nonsolicitation agreement, confidentiality agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Corporation, including, but not limited to, any restrictive covenants contained in such agreements, except that, unless the Administrator determines otherwise, the terms of the Plan and this Agreement shall control with respect to the terms of the Option or any related rights.

8.Representations and Warranties of Participant. The Participant represents and warrants to the Corporation that:

(a)Agrees to Terms of the Plan and Agreement. The Participant has received a copy of the Plan, has read and understands the terms of the Plan, this Agreement and the Stockholders' Agreement, and agrees to be bound by their terms and conditions.

(b)Purchase for Own Account for Investment. Any Shares acquired shall be acquired for the Participant's own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act. The Participant has no present intention of selling or otherwise disposing of all or any portion of the Shares.

(c)Access to Information. The Participant has had access to all information regarding the Corporation and its present and prospective business, assets, liabilities and financial condition that the Participant reasonably considers important in making a decision to acquire the Shares, and the Participant has had ample opportunity to ask questions of, and to receive answers from, the Corporation's representatives concerning such matters and this investment.

(d)Understanding of Risks. The Participant is fully aware of: (i) the specula-tive nature of, and the financial hazards involved in, an investment in the Shares; (ii) the lack of liquidity of the Shares and the restrictions on the transferability of the Shares; (iii) the qualifications and backgrounds of the management of the Corporation; and (iv) the tax consequences of an investment in the Shares. The Participant is capable of evaluating the merits and risks of this investment, has the ability to protect his own interests in this transaction and is financially capable of bearing a total loss on his investment.

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(e)No General Solicitation. At no time was the Participant presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale or purchase of the Shares.

(f)Compliance with Securities Laws. The Shares have not been registered with the Securities and Exchange Commission ("SEC") under the Securities Act and, notwithstanding any other provision of this Agreement or the Plan to the contrary, the right to acquire any Shares is expressly conditioned upon compliance with all applicable federal and state securities laws. The Participant agrees to cooperate with the Corporation to ensure compliance with such laws.

(g)No Transfer Unless Registered or Exempt. None of the Corporation's securities is presently publicly traded, and the Corporation has made no representation, covenant or agreement as to whether there will be a public market for any of its securities. The Participant understands that he may not transfer any Shares unless such Shares are registered under the Securities Act and qualified under applicable state securities laws or unless, in the opinion of counsel to the Corporation, exemptions from such registration and qualification requirements are available. The Participant understands that only the Corporation may file a registration statement with the SEC and that the Corporation is under no obligation to do so with respect to the Shares. The Participant has also been advised that exemptions from registration and qualification may not be available or may not permit the Participant to transfer all or any of the Shares in the amounts or at the times proposed by him. The Participant also agrees in connection with any registration of the Corporation's securities that, upon the request of the Corporation or the underwriters managing any public offering of the Corporation's securities, the Participant will not sell or otherwise dispose of any Shares (or any shares acquired pursuant to Section 22 herein) without the prior written consent of the Corporation or such underwriters, as the case may be, for such period of time (not to exceed 180 days) after the effective date of such registration requested by such managing underwriters and subject to all restrictions as the Corporation or the underwriters may specify.

(h)Tax Consequences. The Corporation has made no warranties or representations to the Participant with respect to the tax consequences (including, but not limited to, income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Corporation or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon the grant of the Option or the acquisition or disposition of the Shares and that the Participant has been advised that he should consult with his own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Corporation has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

9.Restrictions on Option and Shares.

(a)Other Agreements. As a condition to the issuance and delivery of the Shares, or the grant of any benefit pursuant to the terms of the Plan, the Corporation shall require the Participant or other person at any time and from time to time to become a party to this Agreement, the Stockholders' Agreement, other agreement(s) restricting the voting, transfer, purchase or repurchase of the Shares, and any other employment agreements, consulting agreements, non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Corporation. The Participant shall be subject to all voting, transfer, repurchase and/or other restrictions as are provided in the Stockholders' Agreement (including but in not way limited to the restrictions contained in Article 5 of the Stockholders' Agreement) and this Agreement, and, by entering into this Agreement, the Participant expressly acknowledges and agrees to be bound by such restrictions. The Participant's receipt of the Option, Shares of Common Stock issuable pursuant to the Option and/or any other benefit under the Plan or this Agreement shall be subject to the Participant's compliance with such restrictions. In addition, without in any way limiting the effect of the foregoing, the Participant shall be subject to the Repurchase Right provided in Section 9(b) herein.

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(b)Corporation's Repurchase Rights. If the employment or service of the Participant with the Corporation or an Affiliate terminates for any reason (whether by the Corporation or the Participant, and whether voluntary or involuntary), the Corporation or its designee shall have the right (but not the obligation) to repurchase (the "Repurchase Right") any or all Shares, subject to such terms and conditions (including, but not limited to, determination of the repurchase price (the "Repurchase Price")) as may be stated in the Plan and this Agreement. In such event, the Repurchase Price, if any, paid by the Corporation or its designee shall be determined as follows: (i) if the employment or service of the Participant is terminated (A) by the Corporation other than for Cause or (B) by the Participant due to death, Disability, Retirement or termination by the Participant with the Administrator's consent, the Repurchase Price shall equal the Fair Market Value per share of Common Stock, multiplied by the number of the Shares being repurchased; (ii) if the Participant voluntarily terminates employment or service for non-Cause reasons other than death, Disability, Retirement or Cause and such termination is without the Administrator's consent and such termination occurs on or after the third anniversary of the Grant Date of the Option, the Repurchase Price shall equal one-half of the Fair Market Value per share of Common Stock, multiplied by the number of Shares being repurchased; and (iii) if (A) the employment or service of the Participant is terminated for Cause or (B) the Participant voluntarily terminates employment or service for non-Cause reasons other than death, Disability or Retirement and such termination is without the Administrator's consent and such termination occurs before the third anniversary of the Grant Date of the Option, then the Repurchase Price shall equal the lesser of one-half of the Fair Market Value per share or the original purchase price (that is, the Option Price) per share, multiplied by the number of Shares being repurchased. The Fair Market Value shall be determined by the Administrator as of the Participant's Termination Date or as of a date as soon as practicable preceding or following the Participant's Termination Date. The Administrator's determination of the Fair Market Value shall be final and conclusive. The Administrator has sole discretion to determine the basis of the Participant's termination. (Without in any way limiting the foregoing, if the Participant voluntarily terminates employment or service with the Administrator's consent but the Participant violates any non-competition agreement or other restrictive covenants applicable to him, such termination shall be deemed to be a termination without Administrator consent (unless the Administrator determines otherwise).) The Corporation's Repurchase Right described herein may, in the Corporation's discretion, be exercised by a designee or designees of the Corporation and, for the purposes of Section 9(b), references to the "Corporation" shall (unless the context otherwise requires) include its designee or designees. The Corporation may exercise its Repurchase Right under this Section 9(b) at any time during the 90-day period following the Participant's Termination Date by delivering written notice to the Participant or other holder of such Shares, or, if later, the end of the 90-day period following the last day on which the Option could be exercised pursuant to Section 4 or Section 5 herein. Such notice shall be accompanied by delivery of a certified or official bank check (or other consideration acceptable to the Corporation and the Participant or other holder) in the amount of the Repurchase Price; provided, however, that, the Administrator in its discretion may determine that the Repurchase Price shall be subject to any right of offset of the Corporation or other terms and conditions. In addition, the Corporation may delay payment of the Repurchase Price for such period as may be necessary to avoid adverse accounting consequences for the Corporation, to avoid violation of the terms of any financing agreement applicable to the Corporation or to avoid violation of any provisions of Applicable Law restricting distributions or the redemption of equity by the Corporation. Upon delivery of such notice and the payment of the Repurchase Price, the Corporation shall become the legal and beneficial owner of the Shares being purchased and all rights and interests therein or relating thereto. In the event that any Shares held by the Participant shall be transferred to another person or entity, the Corporation's Repurchase Right shall extend and apply to all Shares held by such transferee or transferees.

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(c)Subsequent Transferees. The Repurchase Right restrictions described in Section 9(b) shall apply to any shares held by a transferee or transferees (collectively, the "Transferee"), which shares were issued to the Participant pursuant to the Plan and subsequently transferred to the Transferee. The Corporation shall be under no obligation to transfer or issue shares to such Transferee, and such Transferee shall have no rights with respect to any such shares, until the Transferee has agreed to be subject to the terms and conditions of the Plan (including, but not limited to, the provisions of Section 9 therein), this Agreement, the Stockholders' Agreement and any other applicable agreement. Any transfer or purported transfer made by a purchaser of shares under the Plan, except at the times and in the manner herein specified, will be null and void and the Corporation shall not recognize or give effect to such transfer on its books and records or recognize the person or persons to whom such proposed transfer has been made as the legal or beneficial holder of those shares.

(d)Expiration of Repurchase Right. The Repurchase Right described in Section 9(b) shall expire in the event that a "public market" (as defined in the Plan) for Common Stock (or successor securities) shall be deemed to exist.

(e)Compliance with Applicable Laws, Rules and Regulations. The Corporation may impose such restrictions on the Option, any Shares, any shares issued under Section 22 or other benefits underlying the Option as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such securities. Notwithstanding any other provision in the Plan or this Agreement to the contrary, the Corporation shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits, or take any other action, unless such delivery, distribution or action is in compliance with Applicable Laws (including, but not limited to, the requirements of the Securities Act). The Corporation will be under no obligation to register shares of Common Stock or other securities with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state or foreign securities laws, stock exchange or similar organization, and the Corporation will have no liability for any inability or failure to do so. The Corporation may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Shares in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

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10.Changes in Duties and/or Status. The Participant acknowledges that, notwithstanding any terms of the Plan or this Agreement to the contrary, the Administrator has sole discretion to determine (taking into account any Code Section 409A considerations), at the time of grant of the Option or at any time thereafter, the effect, if any, on the Option (including, but not limited to, the vesting and/or exercisability of the Option) in the event of (i) a change in the Participant's duties or responsibilities, (ii) a change in the Participant's status as an Employee, including, but not limited to, a change from full-time to part-time, or vice versa, or (iii) other similar changes in the nature or scope of the Participant's employment. In addition, unless otherwise determined by the Administrator, for purposes of this Agreement, the Participant shall be considered to have terminated employment and to have ceased to be an Employee if his employer was an Affiliate at the time of grant and such employer ceases to be an Affiliate, even if the Participant continues to be employed by such employer.

11.Governing Law. Except as otherwise provided in the Plan or herein, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws, and in accordance with applicable federal laws of the United States.

12.Amendment and Termination; Waiver. Subject to the terms of the Plan, the Administrator may amend, alter, suspend and/or terminate the Option, prospectively or retroactively, but such amendment, alteration, suspension or termination of the Option shall not, without the consent of the Participant (except as otherwise provided in the Plan or this Section 12), materially adversely affect the rights of the Participant with respect to the Option. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including, but in no way limited to, Code Section 409A, Code Section 422 and federal securities laws). The Administrator shall have unilateral authority to make adjustments to the terms and conditions of the Option in recognition of unusual or nonrecurring events affecting the Corporation or any Affiliate, or the financial statements of the Corporation or any Affiliate, or of changes in accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles. The waiver by the Corporation of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

13.No Rights as a Stockholder. The Participant and his legal representatives, legatees, distributees or transferees shall not be deemed to be the holder of any Shares and shall not have any rights of a stockholder unless and until certificates for such Shares have been issued to him or them (or, in the case of uncertificated shares, other written notice of ownership in accordance with Applicable Laws has been provided).

14.Withholding. The Participant acknowledges that the Corporation shall require the Participant or other person to pay to the Corporation in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Corporation to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Option and delivery of the Shares, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may, in its discretion, establish procedures to permit the Participant to satisfy such obligations in whole or in part, and any other local, state, federal or foreign income tax obligations relating to the Option, by electing (the "election") to have the Corporation withhold shares of Common Stock from the Shares to which the Participant is entitled. The number of the Shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

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15.Administration. The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of this Agreement by the Administrator and any decision made by it with respect to this Agreement shall be final and binding.

16.Notices. Except as may be otherwise provided by the Plan, any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailed but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant's address indicated by the Corporation's records, or if to the Corporation, at the Corporation's principal office.

17.Severability; Gender and Number. If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Except where otherwise indicated by the context, words in any gender shall include any other gender, words in the singular shall include the plural and words in the plural shall include the singular.

18.Notice of Disposition. To the extent that the Option is designated as an Incentive Option, if any Shares are disposed of within two years following the date of grant or one year following the transfer of such Shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Corporation in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Administrator may reasonably require.

19.Right of Offset. Notwithstanding any other provision of the Plan or this Agreement, the Corporation may reduce the amount of any payment otherwise distributable to or on behalf of the Participant by the amount of any obligation of the Participant to the Corporation or an Affiliate that is or becomes due and payable, and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

20.Counterparts; Further Instruments. 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. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

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21.Forfeiture of Shares and/or Gain from Shares.

(a)Notwithstanding any other provision of this Agreement which may provide to the contrary (including, but not limited to, the Repurchase Right described in Section 9(b) and the rights of the Corporation in the event of the termination of the employment or service of the Participant for Cause, which rights are not reduced by the terms of this Section 21), if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service for any reason (regardless of whether such termination was by the Corporation or the Participant, and whether voluntary or involuntary), the Participant engages in a Prohibited Activity(as defined herein), then (i) the Option shall immediately be terminated and forfeited in its entirety, (ii) any Shares shall immediately be forfeited and returned to the Corporation (without the payment by the Corporation of any consideration for such Shares), and the Participant shall cease to have any rights related thereto and shall cease to be recognized as the legal owner of such Shares, and (iii) any Gain (as defined herein) realized by the Participant with respect to any Shares shall immediately be paid by the Participant to the Corporation.

(b)For purposes of this Agreement, a "Prohibited Activity" shall mean (i) the Participant's solicitation or assisting any other person in so soliciting, directly or indirectly, of any customers, suppliers, vendors or other service providers to or of the Corporation or any Affiliate within the United States that the Participant learned confidential information about or had contact with through his employment or other service with the Corporation or an Affiliate for the purpose of inducing that customer, supplier, vendor or other service provider to terminate or alter his or its relationship with the Corporation or an Affiliate; (ii) the Participant's inducement, directly or indirectly, of any employees or consultants within the United States to terminate their employment with or service to the Corporation or an Affiliate; (iii) the Participant's violation of any non-competition, non-solicitation or confidentiality restrictions or other restrictive covenants applicable to the Participant; (iv) the Participant's violation of any of the Corporation's policies; (v) the Participant's violation of any material (as determined by the Administrator) federal, state or other law, rule or regulation; (vi) the Participant's disclosure or other misuse of any confidential information or material concerning the Corporation or an Affiliate (except as otherwise required by law or as agreed to by the parties herein); (vii) the Participant's dishonesty in a manner that negatively impacts the Corporation in any way; (viii) the Participant's refusal to perform his duties for the Corporation or an Affiliate; (ix) the Participant's engaging in fraudulent conduct; or (x) the Participant's engaging in any conduct that is or could be materially damaging to the Corporation or its Affiliates without a reasonable good faith belief that such conduct was in the best interest of the Corporation or any of its Affiliates. The Administrator shall have sole and absolute discretion to determine if a Prohibited Activity has occurred.

(c)For purposes of this Agreement, "Gain" shall mean, unless the Administrator determines otherwise, an amount equal to (i) the greater of (A) the Fair Market Value per Share of the Shares (or portion thereof) at the time of exercise or (B) the disposition price per Share of any Shares sold or disposed at the time of disposition (including but in no way limited to any Repurchase Price which may be paid by the Corporation to the Participant pursuant to Section 9(b) herein), multiplied by (ii) the number of the Shares sold or disposed of, minus (iii) the purchase price paid for the Shares (or portion thereof).

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(d)Notwithstanding the provisions of this Section 21, the waiver by the Corporation in any one or more instances of any rights afforded to the Corporation pursuant to the terms of this Section 21 shall not be deemed to constitute a further or continuing waiver of any rights the Corporation may have pursuant to the terms of this Agreement or the Plan (including, but not limited to, the rights afforded the Corporation in this Section 21).

(e)The Corporation and the Participant hereby expressly agree that, notwithstanding the other provisions of this Section 21, if the Participant has entered into an employment agreement, consulting agreement or other agreement containing non-competition, non-solicitation, confidentiality or similar covenants, then the provisions contained in such agreement(s) with respect to the scope (e.g., duration, territory, or prohibited activity) of such restrictive covenants shall control (and thus prevail over Section 21(b)(i), Section 21(b)(ii) and Section 21(b)(iii) herein), unless the Administrator should determine otherwise. In any event, the Corporation shall retain the forfeiture and recoupment rights provided in Section 21(a) in the event of a violation of such restrictive covenants unless, and then only to the extent prohibited by, or restricted under, Applicable Laws.

(f)By accepting this Agreement, and without limiting the effect of Section 19 herein, the Participant consents to a deduction (to the extent permitted by Applicable Law) from any amounts the Corporation or an Affiliate may owe the Participant from time to time (including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Participant by the Corporation or an Affiliate), to the extent of the amounts the Participant owes the Corporation pursuant to this Agreement, including, but not limited to, this Section 21. Whether or not the Corporation elects to make any set-off in whole or in part, if the Corporation does not recover by means of set-off the full amount owed by the Participant pursuant to this Agreement, the Participant agrees to immediately pay the unpaid balance to the Corporation. Further, by executing and returning this Agreement to the Corporation, the Participant acknowledges and agrees that (i) he has read the Plan and this Agreement in its entirety; (ii) he has had the opportunity to consult with legal counsel prior to execution of this Agreement; (iii) this Agreement is valid and binding upon, and enforceable against, the Participant in accordance with its terms, including, but not limited to, the restrictions contained in Section 21 herein; and (iv) the consideration for this Agreement is valuable and sufficient consideration.

22.Right to Future Stock or Other Securities.

(a)Right of First Offer. Subject to the terms and conditions of this Section 22 and applicable securities law, if the Corporation proposes to offer or sell any New Securities (as defined below) and either Acorn Energy, Inc. ("Acorn") or EnerTech Capital Partners III L.P. ("EnerTech") has the right to participate in the offer or sale of such New Securities (other than EnerTech's right to participate in the offer or sale of securities pursuant to the right of first offer granted under Article 4 of the Stockholders' Agreement), then the Corporation shall first offer such New Securities to the Participant. The Participant shall be entitled to purchase New Securities as described below. The right of first offer granted to the Participant pursuant to this Section 22 is referred to herein as the "ROFO," and any such New Securities purchased by Participant pursuant to this Section 22 shall be referred to as "ROFO Shares." The parties hereto expressly agree that the ROFO is granted to the Participant in order to clarify the Participant's rights in his capacity as a shareholder (or potential shareholder) and not for compensatory purposes.

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(i)The Company shall give notice (the "Offer Notice") to the Participant, stating (A) its bona fide intention to offer such New Securities, (B) the number of such New Securities to be offered, and (C) the price (the "ROFO Purchase Price") and terms, if any, upon which it proposes to offer such New Securities.

(ii)By notification to the Company within twenty (20) days after the Offer Notice is given, the Participant may elect to purchase or otherwise acquire, 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 Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Options and Common Stock then held, by such Participant bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all preferred stock, if any, and other Derivative Securities, as defined below). At the expiration of such twenty (20) day period, the Company shall promptly notify the Participant and each other participant of the Plan who holds this right (each, an "Eligible Participant") who elect to purchase or acquire all the shares available to them (each, a "Fully Exercising Investor") of any other Eligible Participant's failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which the Eligible Participants were entitled to subscribe but that were not subscribed for by the Eligible Participants which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of preferred stock, if any, and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the preferred stock, if any, and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Section 22(a)(ii) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 22(a)(ii).

(iii)The Company may, during the ninety (90) day period following the expiration of the periods provided in Section 22(a)(ii), offer and sell the remaining unsubscribed portion of such New Securities to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the ROFO provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Eligible Participants in accordance with this Section 22.

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(iv)The ROFO described in this Section 22 shall not be applicable to shares of Common Stock issued in an IPO.

(v)Notwithstanding any provision hereof to the contrary, in lieu of complying with the provisions of this Section 22, the Company may elect to give notice to the Eligible Participants within thirty (30) days after the issuance of New Securities. Such notice shall describe the type, price and terms of the New Securities. Each Eligible Participant shall have thirty (30) days from the date notice is given to elect to purchase up to the number of New Securities that would, if purchased by such Eligible Participants, maintain such Eligible Participant's percentage-ownership position, calculated as set forth in Section 22(a)(ii) before giving effect to the issuance of such New Securities. The closing of such sale shall occur within sixty (60) days of the date notice is given to the Eligible Participants.

(b)Other Restrictions on ROFO Shares; Corporation's ROFO Repurchase Rights. Any and all ROFO Shares acquired by the Participant pursuant to this Section 22 shall, unless the Administrator determines otherwise (or as otherwise provided in this Section 22(b)), be subject to the other provisions of this Agreement applicable to the Shares issued or issuable pursuant to the Option. In addition, without in any way limiting the effect of the foregoing, the following provisions shall apply: In the event that the employment or service of the Participant with the Corporation or an Affiliate terminates for any reason (whether by the Corporation or the Participant, and whether voluntary or voluntary), the provisions of Section 9(b) regarding the Corporation's Repurchase Right shall also apply to the ROFO Shares (such Repurchase Right as it relates to the ROFO Shares being also referred to herein as the Corporation's "ROFO Repurchase Right"); provided, however, that, in such event, the term "Option Price" shall be replaced by the term "ROFO Purchase Price" (as defined in Section 22(a)(i) herein), and, regardless of the basis of the Participant's termination, in no event shall the ROFO Repurchase Price be less than the ROFO Purchase Price. Further, in the event that the Participant engages in a "Prohibited Activity" as defined in Section 21(b) such that the rights of the Corporation provided in Section 21(a) apply, references in Section 21 to the "Shares" shall include the ROFO Shares. In such event, notwithstanding the other provisions of Section 21(a)(ii), the Corporation shall be required to pay the Participant the ROFO Purchase Price for such ROFO Shares as a condition to the Participant's forfeiture of the ROFO Shares and rights related thereto.

(c)Subsequent Transferees. The ROFO Repurchase Right restrictions described in Section 22(b) shall apply to any ROFO Shares held by a transferee or transferees (collectively, the "ROFO Shares Transferee"), which shares were issued to the Participant pursuant to this Section 22 and subsequently transferred to the ROFO Shares Transferee. The Corporation shall be under no obligation to transfer or issue shares to such ROFO Shares Transferee, and such ROFO Shares Transferee shall have no rights with respect to any such shares, until the ROFO Shares Transferee has agreed to be subject to the terms and conditions of the Plan (including, but not limited to, the provisions of Section 22 therein), this Agreement, the Stockholders' Agreement and any other applicable agreement. Any transfer or purported transfer made by a purchaser of shares issued under this Section 22, except at the times and in the manner herein specified, will be null and void and the Corporation shall not recognize or give effect to such transfer on its books and records or recognize the person or persons to whom such proposed transfer has been made as the legal or beneficial holder of those shares.

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(d)Survival and Termination of ROFO and ROFO Repurchase Right. The Participant's ROFO described in Section 22(a) and the Corporation's ROFO Repurchase Right described in Section 22(b) shall continue not withstanding the earlier termination of the Option and/or this Agreement. In such event, the ROFO Repurchase Price (as defined in Section 22(b)) shall continue to be determined as provided in Section 22(b), notwithstanding the termination of the Option or the Agreement. The ROFO and the ROFO Repurchase right shall terminate and be of no further force or effect (i) immediately before the consummation of an IPO or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.

(e)Definitions.

(i)"Derivative Securities" means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

(ii)"New Securities" means, collectively, equity securities of the Corporation, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities, other than any such securities issued for compensatory purposes to employees or consultants of the Corporation.

[Signature Page To Follow]

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IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Corporation and by the Participant effective as of the day and year first above written.

	COMPANY: COALOGIX, INC.
ATTEST: By: Name: Title:	By: Name: Title:
	PARTICIPANT:
	_______________________________(SEAL)
	Name:William J. McMahon

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COALOGIX INC.

2008 STOCK OPTION PLAN

Stock Option Agreement

(Employees)

SCHEDULE A

Date Option Granted:	April 9, 2008
Date Option Expires:	April 8, 2018
Number of Shares Subject to Option:	147,050 shares [reflects effect of 25-for-1 stock split in July 2008]
Option Price (per Share):	$5.05 [reflects effect of 25-for-1 stock split in July 2008]
Type of Option:	X    Incentive Option
	Nonqualified Option

Vesting Schedule:

(a)The Option shall become vested and exercisable with respect to 25% of the Shares subject to the Option on November 7, 2008, subject to the continued employment of the Participant and the terms of the Plan and this Agreement.

(b)The Option shall become vested and exercisable in 6.25% installments per quarter commencing on February 7, 2009, so that the Option shall become vested and exercisable with respect to an aggregate of 50% of the Shares subject to the Option on November 7, 2009, 75% of the Shares subject to the Option on November 7, 2010, and 100% of the Shares subject to the Option on November 7, 2011, in each case subject to the continued employment of the Participant and the terms of the Plan and this Agreement.

A-1

EX-10.3

Exhibit 10.3

COALOGIX, INC. AND SUBSIDIARIES

CAPITAL APPRECIATION RIGHTS PLAN

Effective Date: April 9, 2008

COALOGIX, INC. AND SUBSIDIARIES

CAPITAL APPRECIATION RIGHTS PLAN

This CoaLogix, Inc. and Subsidiaries Capital Appreciation Rights Plan (the “Plan”),sponsored and made effective as of the Effective Date by CoaLogix, Inc., a Delaware corporation (the “Corporation”), is intended to be an unfunded incentive compensation plan maintained by the Corporation primarily for the purpose of providing incentive-based compensation only to a select group of management or highly compensated employees (as defined in ERISA Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6)). This Plan is not intended to provide retirement income or result in a deferral of income for employees and is therefore not intended to be an employee benefit plan within the meaning of ERISA Section 3(3) and is not intended to be subject to ERISA.

Statement of Purpose

1.The Corporation believes that the services of certain key managers of the Corporation and its Subsidiaries are of great value and that such managers should be compensated for careful and loyal service to the Corporation.

2.The Corporation wishes to provide a mechanism for retaining, motivating and creating an incentive for its key managers to add substantial value to the Corporation and/or its Subsidiaries through profitable growth and to reward such managers upon a Change of Control. In order to completely align the interests of the Corporation’s key managers with the interests of its stockholders, no value under the Plan will be paid to Participants until such time as the Corporation’s stockholders receive value for their shares of Corporation stock.

3.The Corporation has designed this Plan to reinforce the need for its managers to maintain their entrepreneurial focus and to foster teamwork and constructive debate to inspire greater growth and significant improvements in financial performance, thereby substantially increasing the value of the Corporation and its Subsidiaries.

4.For purposes of this Plan, the Corporation does not intend to make regular determinations of Fair Market Value (including independent valuations) of the Corporation or other Participating Companies during the term of the Plan.

5.The value of your CARs Award depends on many factors, including the future growth of the Corporation’s business and the state of the capital markets at the time of a Change of Control. Accordingly, the Corporation is making no representation or warranty with respect to the future value of your CARs Award.

6.Participants acknowledge and agree that this Statement of Purpose is an important part of the Plan and that they have read, carefully considered and agree that the matters set forth in the Statement of Purpose are important to the continued successful growth of the Corporation and its Subsidiaries taken as a whole.

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Capital Appreciation Rights Plan

The Corporation does hereby establish this Capital Appreciation Rights Plan under the terms and provisions set forth herein.

ARTICLE 1

DEFINITIONS

The following words and phrases as used in this Plan shall have the meanings set forth in this Article 1 unless a different meaning is clearly required by the context:

1.1“Adjusted Initial Value” means the Initial Value, increased by the amount of any cash or other property contributed to the capital of the Corporation by its stockholders after the Effective Date, and decreased by the amount of any dividend or other distribution paid by the Corporation to its stockholders.

1.2“Aggregate Award Pool” means an amount equal to Five Percent (5%) multiplied by the excess, if any, of (i) the Change of Control Consideration for the Corporation, over (ii) the Adjusted Initial Value of the Corporation.

1.3“Beneficial Ownership” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

1.4“Beneficiary” means, with respect to a Participant, the individual(s) to whom the Participant’s CARs Benefit, if any, shall be paid in the event of the Participant’s death, and shall be determined in accordance with the following provisions:

(a)Designation of Beneficiary. A Participant’s Beneficiary or Beneficiaries shall be the individual or individuals who are last designated in writing by the Participant as such Participant’s Beneficiary or Beneficiaries. A Participant shall designate the initial Beneficiary or Beneficiaries in writing on an Election Form. Any subsequent modification of the Participant’s Beneficiary or Beneficiaries shall be in a written, executed and notarized letter addressed to the Corporation or in a subsequently executed and notarized Election Form, which shall be effective only when it is received and accepted by the Plan Committee. If more than one Beneficiary is designated by a Participant and one or more of the Beneficiaries are not living at the time of the Participant’s death, then the percentage allocated to the deceased Beneficiaries shall be reallocated to the living Beneficiaries on a proportional basis based upon their previously designated percentages.

(b)No Designated Beneficiary. If, at any time, no Beneficiary has been validly designated by a Participant, or the Beneficiary designated by the Participant is no longer living at the time of the Participant’s death, then the Participant’s Beneficiary shall be deemed to be the Participant’s spouse, and in the absence thereof, the Participant’s estate.

(c)Designation of Entities. A Participant may not designate an entity as a Beneficiary, other than a trust, limited partnership or limited liability company established solely for the benefit of a Participant or his or her spouse, children or grandchildren. To the extent that a designation purports to designate an entity as a Beneficiary, the entire designation shall be null and void.

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(d)Contingent Beneficiaries. A Participant may designate a contingent Beneficiary or Beneficiaries to receive the Participant’s CARs Benefit in the event that the Participant’s currently designated Beneficiary or Beneficiaries should predecease the Participant.

1.5“Board” shall mean the Board of Directors of the Corporation.

1.6“CARs Award” means an award to a Participant under the Plan that is set forth in a Participation Agreement and that establishes a percentage to be used to calculate the CARs Benefit for such Participant upon a Change of Control of the Corporation.

1.7“CARs Benefit” means, subject to Section 3.6, with respect to a CARs Award to a particular Participant, the product of (i) the CARs Award for such Participant, multiplied by (ii) the Aggregate Award Pool, if any.

For example, assume that:

· Participant A has a CARs Award of 10% and is currently employed by the Corporation or a Subsidiary on the date of a Change of Control; and

· The Aggregate Award Pool for the Corporation is $1 million (determined by multiplying 5% times the excess of (i) the Change of Control Consideration for the Corporation, over (ii) the Adjusted Initial Value of the Corporation).

Participant A’s CARs Benefit would be equal to 10% multiplied by $1 million, for a CARs Benefit of $100,000.

1.8“Cause” means one or more of following acts by a Participant: (1) such Participant’s breach of (a) any material provision of such Participant’s employment agreement, or (b) any stockholders, confidentiality or noncompetition agreement with the Corporation or any Subsidiary; (2) any intentional act or intentional omission by such Participant that causes, or is likely to cause, material harm to the Corporation or any Subsidiary or its business reputation; (3) such Participant’s dishonesty, fraud, gross negligence or willful misconduct related to Participant’s performance of his or her duties to the Corporation or any Subsidiary; (4) such Participant’s conviction of, or such Participant’s entry of a plea of guilty or no contest to, a felony (other than for motor vehicle offenses the effect of which do not materially impair a Participant’s performance of his or her duties), or such Participant’s arrest or indictment for a felony or crime of moral turpitude (other than for motor vehicle offenses the effect of which do not materially impair a Participant’s performance of his or her duties) related to Participant’s performance of his or her duties; (5) such Participant’s repeated use of drugs or alcohol that in the reasonable determination of the Board interferes with the performance by the Participant of his or her duties and that is not cured within forty-five (45) days by the Participant taking action reasonably requested by the Board in writing to address the issue; and (6) such Participant’s willful and continued failure (i) to follow the direction (consistent with such Participant’s duties) of the President and Chief Executive Officer of the Corporation, the Board or any other Participant to whom such Participant reports, (ii) to perform substantially his or her duties to the Corporation or any Subsidiary or (iii) to follow the written policies, procedures and rules of the Corporation or any Subsidiary for which such Participant works, in each case if such failure is not cured within ten (10) days after a written demand is delivered to such Participant by the Board or the President of either the Corporation or the Subsidiary for which such Participant works that specifically identifies the manner in which the Board believes that such Participant has not met his or her obligations hereunder; provided, however, that for purposes of this clause (6), no act or failure to act on the part of a Participant shall be considered “willful” unless it is done or omitted to be done by such Participant in bad faith or without reasonable belief that such Participant’s action or omission was in the best interests of the Corporation. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done or omitted to be done by such Participant in good faith and in the best interest of the Corporation. The termination of employment of a Participant shall not be deemed to be for “Cause” unless the Participant is notified prior to such termination of employment that such termination is for Cause.

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1.9“Change of Control” means the occurrence of any of the following events with respect to the Corporation:

(a)The acquisition of Voting Securities of the Corporation by any Person (other than a shareholder of the Corporation on the Effective Date) immediately after which such Person has Beneficial Ownership of more than 50% of the combined voting power (determined on an “as converted” common stock equivalent basis) of the Corporation’s then outstanding Voting Securities;

(b)A merger, consolidation or reorganization involving the Corporation, unless:

(i)the stockholders of the Corporation, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least a majority of the combined voting power (determined on an “as converted” common stock equivalent basis) of the outstanding Voting Securities of the corporation resulting from such merger or consolidation or reorganization (the “Surviving Corporation”);and

(ii)the individuals who were members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the members of the board of directors of the Surviving Corporation; or

(c)The sale or other disposition of all or substantially all of the assets of the Corporation (defined as a sale of assets of the Corporation representing more than 40% of the Fair Market Value of the total assets held by the Corporation) to any Person (other than a transfer to a Subsidiary).

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(d)Notwithstanding the foregoing, a Non-Control Acquisition shall not constitute a Change of Control.

(e)Notwithstanding the foregoing, an event described in this Section 1.9 shall only constitute a Change of Control if the Change of Control Consideration received by Acorn Energy, Inc. in cash, cash equivalents or freely-tradable securities or securities that become freely-tradable, or such Change of Control Consideration that is available for distribution to Acorn Energy, Inc., is a dollar amount equal to or greater than the amount required to generate a Thirty Percent (30%) Internal Rate of Return on the initial capital contribution of $11,038,700 made by Acorn Energy, Inc. on November 7, 2007, increased by the amount of any cash or other property contributed to the capital of the Corporation by Acorn Energy, Inc., reduced by any dividends or other distributions paid from the Corporation to Acorn Energy, Inc., on or before the Change of Control, and reduced by the Change of Control Consideration at the Change of Control date. For example, to illustrate the provisions of this Section 1.9(e), assume that Acorn Energy, Inc. makes an additional capital contribution of $1,000,000 on July 1, 2008, receives a dividend distribution of $500,000 on January 1, 2009, and a third-party buyer acquires 100% of the Voting Securities of the Corporation on September 1, 2010, with the Change of Control Consideration received at closing in cash or freely-tradable securities by Acorn Energy, Inc. equal to $24,200,000. Such transaction would constitute a Change of Control for purposes of this Plan because the Change of Control Consideration received by Acorn Energy, Inc. on September 1, 2010 ($24,200,000) exceeds the amount of Change of Control Consideration required to provide a minimum 30% Internal Rate of Return to Acorn Energy, Inc. ($24,121,309).

Except as provided in Section 1.9(c) above, in no event shall a Change of Control of a Subsidiary constitute a Change of Control of the Corporation.

1.10“Change of Control Consideration” means, with respect to the Corporation, an amount equal to the difference between (i) the Fair Market Value of all cash, securities and other property (a) paid or issued by the acquiring entity in exchange for the stock or assets of the Corporation in consideration for such Change of Control or (b) raised as proceeds in a public offering of the Corporation’s voting common stock (or any successor securities thereto, pursuant to an effective registration statement on Form S-1 (or other applicable form) under the Securities Act of 1933, and (ii) all fees and expenses incurred by the Corporation or the stockholders thereof associated with the transaction, including without limitation investment banking, legal, accounting and appraisal fees and expenses, including fees and expenses incurred to respond to any claim pursuant to Sections 7.2 and 7.3, and the Fair Market Value of any debt of the Corporation for which the shareholders of the Corporation prior to the Change of Control remain liable following the Change of Control. The Fair Market Value of the Change of Control Consideration shall be determined as of the date of the Change of Control.

1.11“Claimant” has the meaning set forth in Section 7.2(b).

1.12“Code” means the Internal Revenue Code of 1986, as amended from time to time.

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1.13“Common Stock” means, as applicable, the common stock of the Corporation.

1.14“Corporation” means CoaLogix, Inc., a Delaware corporation, and its successors and assigns, and any other corporation, partnership, limited liability company or sole proprietorship into which the Corporation may be merged or consolidated.

1.15“Disability” means, with respect to a Participant, that the Participant has been determined to be disabled within the meaning of the Corporation’s long term disability plan, if any, and if no such plan is in existence, then Disability shall mean that the Participant has been determined to be disabled by the Social Security Administration for purposes of federal Social Security benefits.

1.16“Effective Date” means April 9, 2008.

1.17“Election Form” means the written document (the form of which is attached to this Plan as Exhibit B) by which a Participant makes his or her designation of Beneficiaries.

1.18“Eligible Individual” means an individual who is a manager or highly compensated employee (within the meaning of ERISA Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6)) of the Corporation and/or a Subsidiary.

1.19“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

1.20“Exchange Act” means the Securities Exchange Act of 1934, as amended.

1.21“Fair Market Value” of any asset other than cash or securities required to be valued under this Plan means the fair market value thereof at the time of such determination, as determined in good faith by the Plan Committee based on all relevant available facts, which may include among other things the opinions of independent valuation experts as to value. The Fair Market Value of common stock or any other securities as of a date of determination means the following:

(a)Stock Listed and Shares Traded. If the common stock or other securities are listed and traded on a national securities exchange (as such term is defined by the 1934 Act) or on the NASDAQ National Market System on the date of determination, the Fair Market Value per share shall be the average of the closing prices of the securities on such national securities exchange or on the National Market System, for the ten (10) trading day period ending three (3) trading days prior to the date of determination. If the common stock or other securities are traded in the over-the-counter market, the Fair Market Value per share shall be the average of the closing bid and asked prices on the date of determination.

(b)Stock Listed But No Shares Traded. If the common stock or other securities are listed on a national securities exchange or on the National Market System but no shares of the common stock or other securities are traded on the date of determination but there were shares traded on dates within a reasonable period before the date of determination, the Fair Market Value shall be the closing price of the common stock or other securities on the most recent date before the date of determination. If the common stock or other securities are regularly traded in the over-the-counter market but no shares of the common stock or other securities are traded on the date of determination (or if records of such trades are unavailable or burdensome to obtain) but there were shares traded on dates within a reasonable period before the date of determination, the Fair Market Value shall be the average of the closing bid and asked prices of the common stock or other securities on the most recent date before the date of determination.

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(c)Stock Not Listed. If the common stock or other securities are not listed on a national securities exchange or on the National Market System and are not regularly traded in the over-the-counter market, then the Plan Committee shall determine the Fair Market Value of the common stock or other securities based on all relevant available facts, which may include among other things the average of the closing bid and ask prices reflected in the over-the-counter market on a date within a reasonable period either before or after the date of determination, or opinions of independent valuation experts as to value and may take into account any recent sales and purchases of such common stock or other securities to the extent they are representative.

The Plan Committee’s determination of Fair Market Value shall be final and binding for all purposes of this Plan.

1.22“Initial Value” means an amount equal to $12,986,683.

1.23“Internal Rate of Return” means the discount rate that results in a net present value of zero for a series of cash flows.

1.24“Majority of CARs Awards” means the holders of a majority of the total CARs Awards granted pursuant to the Plan. For example, if the Corporation has granted CARs Awards for 100% of the Aggregate Award Pool, then the Participants that hold CARs Awards for more than 50% constitute the Majority of CARs Awards.

1.25“Non-Control Acquisition” shall mean an acquisition of Voting Securities by an employee benefit plan (or a trust forming a part thereof) maintained by the Corporation or any Subsidiary.

1.26“Participant” means an Eligible Individual who has met the requirements for participation in this Plan by being selected by the Plan Committee to be a Participant hereunder and who has executed a Participation Agreement.

1.27“Participation Agreement” means a written agreement between the Corporation and a Participant (the form of which is attached to this Plan as Exhibit A) that is given to an Eligible Individual to evidence such Eligible Individual’s status as a Participant in this Plan. A Participation Agreement shall be effective only when validly executed by the Corporation and the Participant.

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1.28“Person” for purposes of Section 1.9, has the meaning used for purposes of Section 13(d) or 14(d) of the Exchange Act. For all other purposes under this Plan, Person means any individual, organization, corporation, partnership, limited liability company or other entity.

1.29“Plan” means this CoaLogix, Inc. and Subsidiaries Capital Appreciation Rights Plan, as the same shall be from time to time amended.

1.30“Plan Committee” prior to a Change of Control of the Corporation means a committee appointed by the Board and comprised of one or more members of the Board who are not Participants under the Plan. Following a Change of Control of the Corporation, the Plan Committee shall be comprised of the members of the Plan Committee that were serving on the day preceding the date of the Change of Control. Any vacancy on the Plan Committee following a Change of Control shall be filled by the affirmative vote of the persons that held a majority of the outstanding shares of Voting Securities on the day preceding the date of a Change of Control.

1.31“Proportionate Share” has the meaning set forth in Section 4.5.

1.32“Subsidiary” means (i) any corporation more than 50% of the outstanding Voting Securities of which are owned by the Corporation or any Subsidiary, directly or indirectly, or (ii) a partnership, limited liability company or other Person in which the Corporation or any Subsidiary holds a general partnership or other equity interest sufficient to enable it to direct the management and policies thereof.

1.33“Surviving Corporation” has the meaning set forth in Section 1.8(a)(ii).

1.34“Tax Obligations” has the meaning set forth in Section 7.14.

1.35“Voting Securities” means securities of a corporation that have the power to vote generally for the election of directors.

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

2.1Attainment of Participant Status. Any Eligible Individual may become a Participant in this Plan by being selected to be a Participant hereunder by the Plan Committee. The Plan Committee shall have complete and absolute discretion to decide which Eligible Individuals shall be become Participants in this Plan and the Plan Committee’s decisions regarding Participant status shall be final and binding. In no event may any Eligible Individual become a Participant on the day of or after the occurrence of a Change of Control.

ARTICLE 3

CARS BENEFITS

3.1Initial Award of CARs Benefit. Upon being selected as a Participant pursuant to Article 2, each Participant shall have a CARs Award specified in such Participant’s Participation Agreement.

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3.2Additional Awards of CARS Benefit. Subject to Section 3.3, the Plan Committee may make additional grants of CARs Awards to any Participant with respect to the Corporation. If the Plan Committee makes an additional grant to a Participant, the Corporation and Participant shall execute an additional Participation Agreement for such Participant that indicates the additional CARs Award. Once a CARs Award has been designated for a Participant, it may not be decreased with respect to such Participant without the consent of the Participant. However, no Participant in this Plan shall earn any CARs Benefit under this Plan with respect to the Corporation unless and until the date of a Change of Control has occurred with respect to the Corporation in accordance with Section 3.4.

3.3Limitation on Board Authority to Award CARs Awards. The Plan Committee cannot make CARs Awards in excess of One Hundred Percent (100%) of the Aggregate Award Pool, and no CARs Award can be made on or after the occurrence of a Change of Control.

3.4Timing of Accrual of CARs Benefits. No Participant in this Plan shall earn any CARs Benefit under this Plan until a Change of Control with respect to the Corporation has occurred. Upon the date of such Change of Control, each Participant that holds CARs Awards shall immediately earn his or her CARs Benefit with respect to the Corporation, calculated as of the date of such Change of Control, and no further CARs Benefits shall be earned under this Plan with respect to the Corporation. The earned CARs Benefit of a Participant shall be paid to the Participant, and may be subject to forfeiture upon the occurrence of certain events, in accordance with Article 4.

3.5Operational Authority of the Corporation. The Corporation, in its sole discretion, shall have the right to make decisions relating to intercompany transactions, including without limitation the allocation of shared infrastructure expenses among the Corporation and its Subsidiaries, the incurrence of indebtedness by the Corporation and its Subsidiaries to fund the operations of the Corporation and any of its Subsidiaries and the deployment of capital generated by one Subsidiary to invest in other Subsidiaries. All decisions relating to the investment of capital or other resources shall be made by the Corporation in its sole discretion. In addition, the Corporation will continue to make decisions regarding the payment of dividends, cash management, investment management, tax planning, risk management and other similar issues with a view to providing the maximum value to the Corporation and its Subsidiaries as a whole.

3.6Termination of Employment. In the event a Participant’s employment is terminated prior to a Change of Control, the effect on such Participant’s CARS Award is set forth below:

(a)Death, Disability or Termination without Cause. In the event a Participant’s employment is terminated within nine (9) months prior to the occurrence of a Change of Control because of (i) the death of the Participant, (ii) the Disability of the Participant, (iii) the involuntary termination other than for Cause of employment of a Participant or (iv) the resignation or other voluntary termination of employment of a Participant with the consent of the remaining Participants holding a Majority of the CARs Awards (determined without regard to the CARs Award of the terminated Participant), then the CARs Benefit of such Participant shall be payable upon the occurrence of a Change of Control. In the event of the death of a Participant, such Participant’s CARs Benefit, the amount of which shall be determined as set forth above, shall be paid to the Participant’s Beneficiary in the same form and manner as if the Participant had not died, with such Beneficiary determined as of the date on which such subsequently payable amounts are paid and not on the date of the Participant’s death.

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(b)Other Terminations. In the event a Participant’s employment is terminated prior to the occurrence of a Change of Control because of (i) the resignation or other voluntary termination of employment by such Participant other than as described in Section 3.6(a) (iv), or (ii) the involuntary termination of employment of a Participant for Cause, then such Participant’s CARs Award shall be forfeited and no payment shall be made under the Plan with respect to such Participant. The Plan Committee may reallocate or award any forfeited CARs Award to other Participants.

ARTICLE 4

PAYMENT OF CARS BENEFITS

4.1General Liability for Payment. All payment obligations to Participants created under this Plan shall be the sole responsibility, liability and obligation of the Corporation. Payment of CARs Benefits to any Participant may be made by either the Subsidiary that is the employer of the Participant or the Corporation on behalf of the Subsidiary.

4.2Payment Procedures. All payments required to be made under this Plan shall be made in accordance with the following procedures:

(a)Notice of CARs Benefit. Following a Change of Control, the Plan Committee shall provide each Participant with a written statement that sets forth the amount of such Participant’s CARs Benefit under the Plan.

(b)Acceptance of CARs Benefit. The Participants acknowledge that the Corporation will need to quickly deal with any issues that might arise in connection with the determination of the value of individual CARs Benefits in connection with a Change of Control. Accordingly, within 10 days following receipt of the statement setting forth the CARs Award pursuant to Section 4.2(a), each Participant shall either (i) execute a written agreement accepting the CARs Award and agreeing that no further amount is due under the Plan, which agreement shall be in a form provided by the Plan Committee or (ii) provide a written notice that such Participant disagrees with the calculation of his or her CARs Award or with any other matter under the Plan. In the event any Participant disagrees with the calculation of CARs Benefits or any other matter, such disagreement shall be resolved in accordance with Sections 7.2 and 7.3 of the Plan. In the event any Participant fails to either accept the CARs Award or disagree with the calculation of the CARs Award or any other matter within the 10 day period following receipt of the statement, such Participant shall be deemed to have accepted the CARs Award.

(c)Payments in the Event of a Dispute. The resolution of any disagreement over the calculation of the amount of any Participant’s CARs Award or any other matter may affect the calculation of the CARs Awards for other Participants. In the event any Participant disagrees with the calculation of his or her CARs Benefit or any other matter, the Plan Committee shall have the right, in its sole discretion, to:

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(i)pay in accordance with Section 4.3 all CARs Benefits to Participants that have accepted their CARs Benefits and withhold payment of any CARs Benefits to any Participants that have disagreed with the calculation of CARs Benefit or any other matter until such disagreement is resolved in accordance with Sections 7.2 and 7.3 of the Plan; or

(ii)if the nature of the disagreement will not impact the calculation of CARs Benefits for all Participants, pay all CARs Benefits to Participants that will be unaffected by the resolution of the disagreement and withhold payment of CARs Benefits to Participants that might be affected by the resolution of such disagreement until such disagreement is resolved in accordance with Sections 7.2 and 7.3 of the Plan; or

(iii)pay any undisputed portion, if any, of the CARs Benefits to all Participants and withhold any disputed portion of the CARs Benefits to all Participants; or

(iv)withhold all CARs Benefits payable under the Plan until the resolution of all disagreements with respect to the calculation of CARs Benefits or any other matter in accordance with Sections 7.2 and 7.3.

No disagreement with respect to the calculation of CARs Benefits shall delay the payment of Change of Control Consideration to the stockholders the Corporation. In the event of a disagreement with respect to the calculation of CARs Benefits or any other matter, the Corporation shall have the right to make payments to the stockholders of the full amount of the Change of Control Consideration that the Plan Committee determines should be allocated to the stockholders. If the nature of the disagreement is such that the resolution of such disagreement might reduce the amount payable to the stockholders, the Corporation shall make adequate provision to ensure that any amounts required to be repaid as a result of the resolution will be repaid (which adequate provision may be an unsecured contractual agreement by each stockholder to make any required repayment).

4.3Payment of CARs Benefits. Subject to the provisions of Sections 4.2, 4.4 and 4.5, payment of CARs Benefits under this Plan shall be made in the same form and at the same time or times as the stockholders of the Corporation receive their Change of Control Consideration; provided, that such amounts shall be paid not later than five (5) years after the Change of Control.

4.4Provision for Tax Liability. If the Change of Control Consideration is comprised of property other than cash or freely tradable securities and the Participant will incur a Tax Obligation to any governmental entity with respect to, and relating to, the CARs Benefit for the taxable year in which payment of such Participant’s CARs Benefit occurs (after taking into account all tax withholdings of the Participant, including those in Section 7.14 hereof), such Participant shall receive a portion of his or her CARs Benefit that is sufficient to pay such Tax Obligation solely in cash or freely tradable securities. The determination of the amount of the Tax Obligation shall be made by the Company’s independent public accountants at the time of the Change of Control based on individual tax rates in effect at that time. For purposes of the preceding sentence, as an example to demonstrate when further cash payments might be necessary beyond the withholding described in Section 7.14, if 28% federal withholding is applied to the Participant’s CARs Benefit, but the Participant is actually in a 39% marginal federal income tax bracket, another 11% of the Participant’s CARs Benefit must be paid in cash to accommodate the extra 11% of tax (39% minus 28%) that the Participant will subsequently owe based on the CARs Benefit. To the extent that a Participant receives the payment of his or her CARs Benefit in common stock or other property, the value of such common stock or other property shall be the Fair Market Value of the common stock or other property as of the date of the Change of Control.

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4.5Indemnification and Contingent Payments. If in connection with a Change of Control of the Corporation, the stockholders of the Corporation are required to provide indemnification to the purchaser in connection therewith, each Participant agrees that accrual and payment of such Participant’s CARs Benefit shall be contingent on such Participant agreeing in writing to be liable for his or her Proportionate Share of such indemnification to the same extent as if such Participant was a stockholder. For purposes of this Section 4.5, “Proportionate Share” means (a) if the calculation is being made prior to the time a Participant has paid taxes with respect to the CARs Benefit, the percentage amount obtained by dividing such Participant’s CARs Benefit by the total Change of Control Consideration, and (b) if the calculation is being made after the Participant has paid taxes on the CARs Benefit, the percentage amount obtained by dividing (i) the total amount of such Participant’s CARs Benefit minus such Participant’s tax liability with respect to the CARs Benefit (as determined by the Company’s independent public accountants based on individual tax rates in effect at that time), by (ii) the total Change of Control Consideration. In no event shall a Participant be liable for more than the total amount of his or her CARs Benefit (or, if such Participant has paid taxes with respect thereto, the total amount of his or her CARs Benefit minus the tax liability determined as set forth above). To the extent any of the Change of Control Consideration is required to be escrowed in connection with such indemnification, each Participant agrees that his or her proportionate share of such escrowed amount may be paid directly into the same escrow account used for the stockholders’ escrow amount. In addition, to the extent payment of any of the Change of Control Consideration is deferred or contingent, each Participant will receive his or her proportionate share of such deferred or contingent Change of Control Consideration (based on the total amount of such Participant’s CARs Benefit compared to the total Change of Control Consideration) at the same time and to the same extent that the stockholders of the Corporation; provided, that such deferred amounts shall be paid not later than five (5) years after the Change of Control.

ARTICLE 5

ADMINISTRATION

5.1Powers and Responsibility. The Plan Committee shall have complete authority to administer the Plan hereunder, with all powers necessary to enable it to properly carry out its duties as set forth in this Plan. The Plan Committee shall have the following duties and responsibilities:

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(a)to construe the Plan and to determine answers to all questions that shall arise thereunder;

(b)to make determinations of Fair Market Value as provided herein;

(c)to engage assistants and professional advisers, including independent valuation experts;

(d)to provide procedures for determination of claims for benefits;

(e)to determine the Participants under the Plan and the benefits of the Plan to which any Participant may be entitled;

(f)to maintain and retain records relating to Participants;

(g)to prepare and furnish to Participants all information required to be furnished to them by law or the provisions of the Plan;

(h)to prepare and file or publish with appropriate government officials all reports and other information required under law to be so filed or published; and

(i)to have all other powers and responsibilities conferred under the Plan.

5.2Records of Plan Committee. All acts and determinations of the Plan Committee shall be duly recorded, and all such records, together with such other documents as may be necessary for the administration of the Plan, shall be preserved in the custody of the Plan Committee.

5.3Reporting and Disclosure. The Plan Committee shall keep all Participant and group records relating to Participants and all other records necessary for the proper operation of the Plan. Such records shall be made available to the Corporation and to any other person or entity that the Corporation authorizes. The Plan Committee shall prepare and shall file as required by law or regulation all reports, forms, documents and other items required by the Code and other relevant statutes and any regulations thereunder.

5.4Construction of the Plan. The Plan Committee shall take such steps as are considered necessary and appropriate to remedy any inequity that results from incorrect information received or communicated in good faith or as the consequence of an administrative error. The Plan Committee shall interpret the Plan and shall determine the questions arising in the administration, interpretation and application of the Plan. The Plan Committee shall correct any defect, reconcile any inconsistency or supply any omission with respect to the Plan.

5.5Assistants and Advisors.

(a)The Plan Committee shall have the right to hire, at the expense of the Corporation, such professional assistants and consultants (including without limitation attorneys, accountants, valuation experts and actuaries) as it, in its sole discretion, deems necessary or advisable.

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(b)The Plan Committee and the Corporation shall be entitled to rely upon all certificates and reports made by professional assistants and consultants selected pursuant to this Section 5.5. The Plan Committee and the Corporation shall be fully protected in respect to any action taken or suffered by them in good faith in reliance upon the advice or opinion of any such professional assistants and consultants, and any action so taken or suffered shall be conclusive upon all other Persons interested in the Plan.

5.6Indemnification. The Plan Committee and each member thereof shall be indemnified by the Corporation against judgment amounts, settlement amounts (other than amounts paid in a settlement to which the Corporation does not consent) and expenses reasonably incurred by the Plan Committee or such member in connection with any claim, proceeding, lawsuit or other action relating to or arising out of this Plan to which the Plan Committee or such member (by reason of his or her service as a member of the Plan Committee) may be a party. The Company shall not be liable to an indemnified person in any such case to the extent the claim, proceeding, lawsuit or other action is determined to have resulted directly and primarily from the bad faith, gross negligence or willful misconduct of such indemnified person. The foregoing right to indemnification shall be in addition to such other rights as such Board, Plan Committee or each Board member may enjoy as a matter of law or by reason of the Corporation’s charter, bylaws or insurance coverage.

5.7Decisions Binding. All determinations and decisions made by the Plan Committee pursuant to the provisions of this Plan, including without limitation all determinations of Fair Market Value, all related orders and resolutions of the Plan Committee shall be final, conclusive and binding on all Persons, including the Corporation, their respective successors and assigns, and their respective stockholders, directors, Eligible Individuals, Participants and their estates.

ARTICLE 6

AMENDMENT OR TERMINATION

6.1Continuation of Plan. The Corporation reserves and retains the right to amend or terminate this Plan as set forth in this Article 6.

6.2Right to Amend Plan.

(a)Amendment by the Corporation. Except as set forth herein, the Corporation reserves the right, if deemed necessary or desirable in the opinion of the Plan Committee in its sole discretion, to amend, in whole or in part, any or all the provisions of the Plan, including specifically the right to make such amendments effective retroactively. The Plan Committee shall make no amendment that diminishes the ability of a Participant who has already been awarded a CARs Award pursuant to this Plan to earn a CARs Benefit under this Plan unless it provides such Participant with a benefit determined by the Plan Committee in its sole discretion to be of comparable value. The Plan contemplates that additional Subsidiaries will be designated by the Plan Committee as Participating Companies and the designation of new Participating Companies by the Plan Committee shall not constitute an amendment to the Plan.

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(b)Amendments by the Corporation and the Participants. This Plan may be amended in any manner, including amendments that affect the rights of Participants that have already been awarded a CARs Award to receive a CARs Benefit, upon the affirmative vote of (i) the Corporation and (ii) Participants that hold a Majority of CARs Awards.

6.3Right to Terminate Plan.

(a)Termination by the Corporation. Except as set forth herein, the Corporation reserves the right, if deemed necessary or desirable in the opinion of the Plan Committee in its sole discretion, to wholly or partially terminate the Plan. Except as set forth in Section 3.5, the Plan Committee shall effect no termination that diminishes the ability of a Participant who has already been awarded a CARs Award pursuant to this Plan to earn a CARs Benefit under this Plan unless it provides such Participant with a benefit determined by the Plan Committee in its sole discretion to be of comparable value.

(b)Termination by the Corporation and the Participants. This Plan may be terminated, in whole or in part, including terminations that affect the rights of Participants that have already been awarded a CARs Award to receive a CARs Benefit, upon the affirmative vote of (i) the Corporation and (ii) Participants that hold a Majority of CARs Awards.

(c)Automatic Termination of Plan Upon a Change of Control. Upon the occurrence of a Change of Control of the Corporation, this Plan shall automatically terminate and no Participant shall earn any CARs Benefit under this Plan after such Change of Control. However, the termination of the Plan pursuant to this Section 6.3(c) shall not affect the accrual of a CARs Benefit pursuant to Article 3 upon such Change of Control.

ARTICLE 7

MISCELLANEOUS

7.1Participant’s Rights to Employment. Nothing contained in the Plan, any amendment thereof, the grant of any CARs Award or the payment of any benefits, shall be construed to give any individual or employee, whether or not a Participant, any rights to continued employment or continued performance of services for the Corporation or any Subsidiary, or any legal or equitable right against the Corporation or any Subsidiary, or any officer, director, stockholder or employee thereof.

7.2Claims Procedures.

(a)Filing a Claim. In the event a Participant has any dispute, claim or disagreement arising out of or relating to any decision made by the Plan Committee under this Plan, such Participant shall give written notice of such claim to the Plan Committee within ten (10) calendar days following the Participant’s receipt of such decision. The written notice must contain a complete description of the claim and be reasonably calculated to bring the claim to the attention of the Plan Committee. If the disagreement relates to the calculation of the amount of the CARs Benefit or any other matter following the occurrence of a Change of Control, a claim shall be deemed to have been made by the delivery of the notice required by Section 4.2(b). If a Participant fails to deliver written notice of a claim within the ten (10) calendar day period required by this Section 7.2, such Participant shall be deemed to have accepted the decision of the Plan Committee or the calculation of his or her CARs Benefit and no claim may be made hereunder.

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(b)Notification of Denial. If after reviewing a claim submitted in accordance with Section 7.2(a), the Plan Committee determines that any individual who has claimed a right to receive benefits under the Plan (a “Claimant”) is not entitled to receive all or any part of the benefits claimed, the Claimant shall be informed in writing of the specific reason or reasons for the denial, with specific reference to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the Claimant to perfect the claim, if applicable, and a description of the review procedures set forth in Section 7.2(d).

(c)Timing of Notification. The Claimant shall be so notified of the Plan Committee’s decision within thirty (30) calendar days after the receipt of the claim, unless the Plan Committee determines that special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, the Plan Committee shall furnish the Claimant written notice of the extension prior to the termination of the initial 30-day period. In no event shall said extension exceed a period of thirty (30) calendar days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Committee expects to render a final decision. If for any reason, the Claimant is not notified within the period described above, the claim shall be deemed denied and the Claimant may then request review of said denial, subject to the provisions of Section 7.2(d).

(d)Review Procedures. The Claimant or his duly authorized representative may, within ten (10) calendar days after receipt of notice of the Plan Committee’s decision, request a review of the Plan Committee’s decision, review pertinent documents and submit to the Plan Committee such further information as will, in the Claimant’s opinion, establish his rights to such benefits. If upon receipt of this further information, the Plan Committee determines that the Claimant is not entitled to the benefits claimed, it shall afford the Claimant or his representative reasonable opportunity to submit issues and comments in writing. If the Claimant wishes, he may request in writing that the Plan Committee hold a hearing. The Plan Committee may, in its discretion, schedule a hearing on the issue as soon as is reasonably possible under the circumstances. The Plan Committee shall render its final decision with the specific reasons therefor in writing and in a manner calculated to be understood by the Claimant.

(e)Timing of Final Decision. The Plan Committee’s final decision shall include specific references to the pertinent Plan provisions on which the decision is based and shall be transmitted to the Claimant by certified mail within thirty (30) calendar days of receipt of Claimant’s request for such review, unless the Plan Committee determines that special circumstances require a further extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than sixty (60) calendar days after receipt of a request for review. If the Plan Committee determines that such an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. If a decision on review is not furnished within the time period described above, the claim shall be deemed denied on review.

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7.3Arbitration of Disputed Claims. In the event that after a Claimant has filed a claim for benefits pursuant to the provisions of Section 7.2 and the Claimant does not agree with the Plan Committee’s decision with respect to such claim, the Claimant and the Plan Committee shall attempt in good faith to settle the matter by negotiations. If such negotiations do not resolve the claim, such claim shall be resolved exclusively by final and binding arbitration to be held in Charlotte, North Carolina, in accordance with the Commercial Arbitration Rules in effect at such time of the American Arbitration Association (the “Rules”) Any arbitration to resolve a claim with respect to the Plan or the determination or payment of CARs Benefits thereunder must be filed within thirty (30) calendar days of the date that the Participant receives notice from the Plan Committee that his or her claim has been finally denied pursuant to Section 7.2 or such claim shall be forfeited. If the amount of the claim is Five Hundred Thousand Dollars ($500,000) or less, there shall be a single neutral arbitrator chosen by the written consent of the parties, or, if they are unable to agree within thirty (30) calendar days after the demand for arbitration, a single neutral arbitrator shall be chosen in accordance with the Rules. If the amount of the claim exceeds Five Hundred Thousand Dollars ($500,000) (and unless the parties otherwise agree to arbitrate before a sole arbitrator), then there shall be three arbitrators, one appointed by each party within thirty (30) calendar days after receipt by the respondent of the demand for arbitration, and the two arbitrators so appointed shall, within thirty (30) calendar days after their appointment, appoint a third, presiding neutral arbitrator. If either party fails to nominate an arbitrator, or the two arbitrators appointed by the parties are unable to appoint a presiding arbitrator within the stated periods, such arbitrators shall be appointed in accordance with the Rules. In addition, if the amount of the claim exceeds $500,000, then the “Optional Procedures for Large, Complex Commercial Disputes” of the Rules shall apply to the arbitration. The arbitrator(s) shall have no right to award any consequential or punitive damages to either party. The arbitrator, or if there are three arbitrators, the arbitrators by majority vote, shall render a written award and the award shall be final. Judgment upon the award may be entered by any court of competent jurisdiction. The non-prevailing party shall pay all fees and expenses of the arbitration and shall pay to the prevailing party an amount equal to all costs and expenses of the prevailing party that are associated with the arbitration, including without limitation the reasonable legal, accounting and expert fees and expenses. The arbitrator(s) shall determine which party is the prevailing party and shall set forth such determination in the award. If no party isdetermined to be the prevailing party, then each party shall pay their own fees and expenses.

7.4Nonalienation or Assignment. Except as otherwise provided by applicable law, none of the benefits under this Plan is subject to the claims of creditors of Participants and will not be subject to attachment, garnishment or any other legal process whatsoever. A Participant may not assign, sell, borrow on or otherwise encumber any of his or her interest in the Plan.

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7.5Location of Payee; Unclaimed Benefits. In the event that all or any portion of the CARs Benefit payable to a Participant hereunder shall, at the expiration of a reasonable time after it has become payable, remain unpaid solely by reason of the inability of the Plan Committee to determine the whereabouts of a Participant after sending a certified letter, return receipt requested, to the last known address of such Participant, and after further diligent effort to ascertain the whereabouts of such Participant, the amount so payable may be placed in escrow for the benefit of such Participant. If such Participant does not claim the CARs Benefit within five years following the date of the Change of Control, the CARs Benefit shall be forfeited and the amount of the CARs Benefit shall be paid to the stockholders of the applicable Corporation on a proportional basis.

7.6Governing Law. This Plan shall be administered in the United States of America, and its validity, construction, and all rights hereunder shall be governed by the laws of the State of Delaware, without regards to its laws concerning choice of laws. If any provision of the Plan shall be held invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

7.7Correction of Participant’s CARS Benefits. If an error or omission is discovered in the CARs Benefit payable to a Participant, or in the amount paid to a Participant, the Plan Committee will make such equitable adjustments in the records of the Plan as may be necessary or appropriate to correct such error or omission as of the date on which such error or omission is discovered. The Corporation shall, as directed by the Plan Committee, make such equitable adjustments to the payment(s) to the Participant as are necessary to equitably account for the error or omission.

7.8Recovery of Mistaken Payments. If any CARs Benefit is paid to a Participant in an amount that is greater than the amount payable under the terms of the Plan, such Participant shall be liable to the Corporation for the amount of any excess payment and the Corporation may recover the excess amount by eliminating or reducing the Participant’s future payments, including without limitation salary or other payments, if any, from the Corporation or by such other means as are available under applicable law to recover the excess benefit amount on behalf of the Corporation from the Participant.

7.9Action of Corporation and Plan Committee. Except as may be specifically provided herein, any action required or permitted to be taken by the Corporation or the Plan Committee may be taken by any entity or individual who has been delegated the proper authority.

7.10Corporation Records. Records of the Corporation as to an employee’s or individual’s period(s) of employment or service will be conclusive on all Persons, unless determined by the Plan Committee to be incorrect.

7.11Gender and Number. Wherever applicable, the masculine pronoun shall include the feminine pronoun, and the singular shall include the plural.

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7.12Headings. The titles in this Plan are inserted for convenience of reference, constitute no part of the Plan and are not to be considered in the construction hereof.

7.13Liability Limited. To the extent permitted by applicable law, neither the Plan Committee nor any member thereof shall be liable for any acts of omission or commission in administering the Plan, except for his or her or its own willful misconduct. The Corporation and each member of the Plan Committee shall be entitled to rely conclusively on all tables, valuations, certificates, opinions and reports that are furnished by an actuary, accountant, insurance company, counsel or other expert who shall be employed or engaged by the Plan Committee or the Corporation.

7.14Withholding. The Corporation shall have the power and right to deduct or withhold an amount sufficient to satisfy federal, state or local taxes, domestic or foreign, required by law or regulation to be withheld (“Tax Obligations”) with respect to the payment of any CARs Benefit.

7.15Parachute Payments. Notwithstanding anything in this Plan to the contrary and subject to the provisions of this Section 7.15, in the event that the Corporation’s outside, independent accountants shall determine that any amount paid or distributed to a Participant pursuant to the Plan shall, as a result of a Change of Control of the Corporation, constitute a parachute payment within the meaning of Section 280G of the Code, and the aggregate of such parachute payments and any other amounts paid or distributed to the Participant from any other plans or arrangements maintained by the Corporation, or by any other member of the same affiliated group (as defined in Section 1504 of the Code determined without regard to Section 1504(b)) which includes the Corporation, would more likely than not, in the opinion of the Corporation’s outside, independent accountants, cause the Participant to be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such payment shall be approved in a manner that is in compliance with the requirements of Code Section 280G(b)(5)(B) and any regulations issued thereunder by those shareholders of the Corporation holding, directly or indirectly, not less than 75% of the Voting Securities of the Corporation entitled to vote pursuant to Code Section 280G(b)(5)(B) immediately prior to a Change of Control.

IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed by its duly authorized officers and its corporate seal to be affixed hereto, all as of the 9th day of April, 2008.

[CORPORATE SEAL] ATTEST: By: Name: Title: CORPORATION: COALOGIX, INC By: Name: Title:

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Exhibit A

PARTICIPATION AGREEMENT

21

Exhibit B

ELECTION FORM

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EX-10.4

Exhibit 10.4

COALOGIX, INC. AND SUBSIDIARIES

CAPITAL APPRECIATION RIGHTS PLAN

Participation Agreement

TO: William J. McMahon:

In accordance with the provisions of the CoaLogix, Inc. and Subsidiaries Capital Appreciation Rights Plan (the “Plan”), you are hereby notified that, subject to your execution of this Participation Agreement, effective as of April 9, 2008 (the“Award Date”),you are a Participant in the Plan and have been awarded 40% of the Aggregate Award Pool, if any, as your CARs Award under the Plan.

The terms and conditions of your CARs Award are governed by the Plan and whether you earn a CARs Benefit under the Plan will be determined in accordance with all the terms and provisions of the Plan.

You acknowledge and agree that the Statement of Purpose included in the Plan is an important part of the Plan and that you have read, carefully considered and agree that the matters set forth in the Statement of Purpose are important to the continued successful growth of the Corporation and its Subsidiaries taken as a whole.

The value of your CARs Award depends on many factors, including the future growth of the Corporation's business and the state of the capital markets at the time of a Change of Control. Accordingly, the Corporation is making no representation or warranty with respect to the future value of your CARs Award.

You are encouraged to consult with your legal and tax advisor prior to accepting your CARs Award. As you are aware, the Corporation provides you with an annual bonus to pay professional fees in connection with your employment with the Corporation that facilitates your ability to consult with your advisors.

Your execution of this Participation Agreement constitutes your representation and agreement that you have carefully reviewed the Plan and that you accept the terms and conditions set forth therein. In particular, you agree that nothing contained in the Plan shall be construed to give you any rights to continued employment or continued performance of services for CoaLogix Inc. or any Subsidiary thereof.

The CARs Award evidenced hereby fulfills the Corporation’s obligation to you under the letter dated June 4, 2007, to John A. Moore, CEO of Acorn Factor, Inc. This Participation Agreement and the Plan constitute the entire agreement between you and the Corporation with respect to your long term incentive compensation and the Corporation shall have no other obligation to you with respect thereto. This Participation Agreement can be amended or modified only in writing and only if such amendment is validly executed by both parties. If you have any questions regarding your participation in the Plan, please contact the Plan Committee.

IN WITNESS WHEREOF, the parties have duly executed and delivered this Participation Agreement under seal as of this ______ day of May, 2008.

	COMPANY: COALOGIX, INC.
ATTEST: By: Name: Title:	By: Name: Title:
	PARTICIPANT:
	_______________________________(SEAL)
	Name:William J. McMahon

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: August 14, 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 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: August 14, 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 June 30, 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

August 14, 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 June 30, 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

August 14, 2008