UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

____________________________________________________________

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

___________________________________________________________________

 

Date of Report (Date of earliest event reported):   December 8, 2017

 

DIGITAL POWER CORPORATION

(Exact name of registrant as specified in its charter)

 

California

 

001-12711

 

94-1721931

(State or other jurisdiction of

incorporation or organization)

 

(Commission File Number)

 

(I.R.S. Employer Identification

No.)

 

48430 Lakeview Blvd, Fremont, CA 94538-3158

(Address of principal executive offices) (Zip Code)

 

(510) 657-2635

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

1

 

 

Item 1.01            Entry into a Material Definitive Agreement.

 

On December 5 , 2017, Digital Power Corporation, a California corporation (the “ Company ”), entered into an exchange agreement (the “ Agreement ”) with several accredited investors (each, an “ Investor ” and collectively, the “ Investor ”), pursuant to which the Company issued to each of the Investors, (a) shares of its common stock, no par value (the “ Conversion Shares ”), and (b) a warrant (the “ Warrant ”) to purchase shares of the Company’s common stock (the “ Warrant Shares ”), in exchange for cancellation of outstanding debt owed to the Investors by Microphase Corporation, an indirect majority owned subsidiary of the Company, in the amount of $690,000. Pursuant to the terms of the Agreement, the Investors were entitled to 10% interest payable on the debt until August 31, 2017 and an additional premium of 25%, resulting in an aggregate amount of debt of $896,939 (the “ Debt ”). The number of Conversion Shares issuable to each Investor was derived by dividing the individual’s portion of the Debt by the 10-day trailing volume-weighted average price ending on August 4, 2017, resulting in the issuance of an aggregate of 1,523,852 Conversion Shares. Each Investor was entitled to receive a Warrant to purchase that number of Warrant Shares equal to 25% of the Conversion Shares the Investor was issued. Each Warrant is exercisable for $1.10 per share, carries a term of three years, is exercisable on a cashless basis and contains standard anti-dilution provisions. The Agreement provides for registration rights under the Securities Act of 1933, as amended for the Conversion Shares and the Warrant Shares.

 

The Company and the Investor expect to consummate the closing of the Agreement (the “ Closing ”) as promptly as possible after the transaction contemplated thereby has received approval from the NYSE American. The Company and the Investors entered into the Agreement pursuant to an understanding reached on August 31, 2017.

 

In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

 

The foregoing descriptions of the Exchange Agreement and the Warrant do not purport to be complete and are qualified in their entirety by reference to the full text of the documents, which are filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 3.02            Unregistered Sales of Equity Securities.

 

The information provided in response to Item 1.01 of this report is incorporated by reference into this Item 3.02.

 

Item 9.01            Financial Statements and Exhibits.

 

(d) Exhibits.

 

The exhibits listed in the following Exhibit  Index are filed as part of this Current Report on Form 8-K.

 

Exhibit   No.

 

Description

4 .1

 

Form of Warrant

10.1

 

Form of Exchange Agreement

 

2

 

 

SIGNATURE

 

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 the undersigned hereunto duly authorized.

 

 

Digital Power Corporation

   
   

Dated: December 8, 2017  

/s/ Milton C. Ault, III

 

Milton C. Ault, III

Executive Chairman

 

 

3

 

Exhibit 4.1

 

DIGITAL POWER CORPORATION

Warrant No. ___

 

 

 

 

WARRANT TO PURCHASE COMMON STOCK

 

 

 

VOID AFTER 5:00 P.M., EASTERN TIME,

ON THE EXPIRATION DATE

 

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR WITHOUT DELIVERING AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

FOR VALUE RECEIVED, DIGITAL POWER CORPORATION, a California corporation (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, at any time commencing on the date hereof but no later than 5:00 p.m., Eastern Time, on August 31, 2020 (the “Expiration Date”) to _______________, or registered assigns (the “Holder”), under the terms as hereinafter set forth, _______________ (_____) fully paid and non-assessable shares of the Company’s Common Stock (the “Warrant Stock”), at a purchase price per share of $1.10 (the “Warrant Price”), pursuant to this warrant (this “Warrant”). The number of shares of Warrant Stock to be so issued and the Warrant Price are subject to adjustment in certain events as hereinafter set forth. The term “Common Stock” shall mean the common stock, no par value, of the Company.

 

1.

Exercise of Warrant .

 

 

(a)

The Holder may exercise this Warrant according to its terms by surrendering to the Company at the address set forth in Section 9, this Warrant and the election to purchase form attached hereto having then been duly executed by the Holder, accompanied by cash, certified check or bank draft in payment of the purchase price, in lawful money of the United States of America, for the number of shares of the Warrant Stock specified in the subscription form, or as otherwise provided in this Warrant prior to 5:00 p.m., Eastern Time, on the Expiration Date.

 

Confidential and Proprietary

 

 

X= Y (A-B)

 

A

 

 

 

(b)

The Holder may alternatively exercise this Warrant according to its terms by surrendering this Warrant to the Company at the address set forth in Section 9, the notice of cashless exercise attached hereto having then been duly executed by the Holder, in which event the Company shall issue to the Holder the number of shares of Warrant Stock determined as follows:

 

Where X= the number of shares of Common Stock to be issued to the Warrant Holder

 

Y=      the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation)

 

A=      Fair Market Value (as defined below)

 

B=      Exercise Price (as adjusted to the date of such calculation)

 

For purposes of this Section 1(b), the per share “ Fair Market Value ” of the Warrant Stock shall mean:

 

 

(i)

If the Company ’s Common Stock is publicly traded, the per share fair market value of the Warrant Stock shall be the average of the closing prices of the Common Stock as quoted on the principal quotation market for the Common Stock, or the principal exchange on which the Common Stock is listed, in each case for the fifteen trading days ending five trading days prior to the date of determination of Fair Market Value.

 

 

(ii)

If the Company ’s Common Stock is not so publicly traded, the per share fair market value of the Warrant Stock shall be such fair market value as is determined in good faith by the Board of Directors of the Company after taking into consideration factors it deems appropriate, including, without limitation, recent sale and offer prices of the capital stock of the Company in private transactions negotiated at arm’s length.

 

For purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood and acknowledged that the shares issued in a cashless exercise transaction in the manner described above shall be deemed to have been acquired by the Warrant Holder, and the holding period for such shares shall be deemed to have commenced, on the date this Warrant was originally issued.

 

 

(c)

This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional shares of Warrant Stock. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which new Warrant shall be signed by the Chairman, Chief Executive Officer or President of the Company. The term Warrant as used herein shall include any subsequent Warrant issued as provided herein.

 

2

 

 

 

(d)

N o fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. The Company shall pay cash in lieu of fractions with respect to the Warrants based upon the fair market value of such fractional shares of Common Stock (which shall be the closing price of such shares on the exchange or market on which the Common Stock is then traded) at the time of exercise of this Warrant.

 

 

(e)

In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time after such rights shall have been so exercised. The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which the stock transfer books are open. Except as provided in Section 4 hereof, the Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant.

 

2.

Disposition of Warrant Stock and Warrant .

 

 

(a)

The Holder hereby acknowledges that this Warrant and any Warrant Stock purchased pursuant hereto are not being registered (i) under the Act on the ground that the issuance of this Warrant is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Warrant does not involve any public offering; and that the Company ’s reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Warrant and will acquire the Warrant Stock for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same, subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control.

 

The Holder hereby agrees that it will not sell or transfer all or any part of this Warrant and/or Warrant Stock unless and until it shall first have given notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under the Act and without registration or qualification under any state law, or (ii) an interpretative letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act.

 

3

 

 

 

(b)

If, at the time of issuance of the shares issuable upon exercise of this Warrant, no registration statement is in effect with respect to such shares under applicable provisions of the Act, the Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder ’s investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant shall bear legends reading substantially as follows:

 

“TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE WARRANT PURSUANT TO WHICH THESE SHARES WERE PURCHASED FROM THE COMPANY. COPIES OF THOSE RESTRICTIONS ARE ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY, AND NO TRANSFER OF SUCH SHARES OR OF THIS CERTIFICATE, OR OF ANY SHARES OR OTHER SECURITIES (OR CERTIFICATES THEREFOR) ISSUED IN EXCHANGE FOR OR IN RESPECT OF SUCH SHARES, SHALL BE EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS THEREIN SET FORTH SHALL HAVE BEEN COMPLIED WITH.”

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.”

 

In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain appropriate “stop transfer” orders with respect to such certificates and the shares represented thereby on its books and records and with those to whom it may delegate registrar and transfer functions.

 

3.

Reservation of Shares . The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant. The Company further agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will be duly authorized and will, upon issuance and against payment of the exercise price, be validly issued, fully paid and non-assessable, free from all taxes, liens, charges and preemptive rights with respect to the issuance thereof, other than taxes, if any, in respect of any transfer occurring contemporaneously with such issuance and other than transfer restrictions imposed by federal and state securities laws.

 

4

 

 

4.

Exchange, Transfer or Assignment of Warrant . This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants that carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof.

 

5.

Capital Adjustments . This Warrant is subject to the following further provisions:

 

 

(a)

Recapitalization, Reclassification and Succession . If any recapitalization of the Company or reclassification of its Common Stock or any merger or consolidation of the Company into or with a corporation or other business entity, or the sale or transfer of all or substantially all of the Company’s assets or of any successor corporation’s assets to any other corporation or business entity (any such corporation or other business entity being included within the meaning of the term “successor corporation”) shall be effected, at any time while this Warrant remains outstanding and unexpired, then, as a condition of such recapitalization, reclassification, merger, consolidation, sale or transfer, lawful and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the exercise hereof as provided in Section 1 and in lieu of the shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant had such recapitalization, reclassification, merger, consolidation, sale or transfer not taken place, and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.

 

 

(b)

Subdivision or Combination of Shares . If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Warrant Price shall be proportionately adjusted.

 

 

(c)

Stock Dividends and Distributions . If the Company at any time while this Warrant is outstanding and unexpired shall issue or pay the holders of its Common Stock, or take a record of the holders of its Common Stock for the purpose of entitling them to receive, a dividend payable in, or other distribution of, Common Stock, then the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Common Stock that Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto.

 

5

 

 

 

(d)

Warrant Price Adjustment . Whenever the number of shares of Warrant Stock purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be adjusted to that price determined by multiplying the Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and (ii) the denominator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately thereafter.

 

 

(e)

Certain Shares Excluded . The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.

 

 

(f)

Deferral and Cumulation of De Minimis Adjustments . The Company shall not be required to make any adjustment pursuant to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue fractional shares of Common Stock or fractional portions of any securities upon the exercise of the Warrants.

 

 

(g)

Duration of Adjustment . Following each computation or readjustment as provided in this Section 5, the new adjusted Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

 

6.

Notice to Holders .

 

 

(a)

Notice of Record Date . In case:

 

 

(i)

the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

 

6

 

 

 

(ii)

of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

 

 

(iii)

of any voluntary dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of Common Stock (or such stock  or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution or winding-up. Such notice shall be mailed at least twenty (20) calendar days prior to the record date therein specified, or if no record date shall have been specified therein, at least twenty (20) days prior to such specified date.

 

 

(b)

Certificate of Adjustment . Whenever any adjustment shall be made pursuant to Section 5 hereof, the Company shall promptly make available and have on file for inspection a certificate signed by its Chairman, Chief Executive Officer, President or Vice President, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant after giving effect to such adjustment.

 

7.

Loss, Theft, Destruction or Mutilation . Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof.

 

8.

Warrant Holder Not a Stockholder . The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company, including but not limited to voting rights.

 

7

 

 

9.

Notices . Any notice required or contemplated by this Warrant shall be in writing and shall be deemed to have been duly given if delivered to the addressee in person, deposited with a reputable overnight courier or transmitted by registered or certified mail, return receipt requested, to the Company at 48430 Lakeview Boulevard, Fremont, California 94538, Attention: Chief Financial Officer, or to the Holder at the name and address set forth in the Warrant Register maintained by the Company, or to such other addresses as any of them, by notice to the others, may designate from time to time.

 

10.

Choice of Law . THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES.

 

IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by a duly authorized officer, as of this 5 th day of December 2017.

 

 

 

 

DIGITAL POWER CORPORATION

 

 

 

 

 

 

         

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

     

 

8

 

 

ELECTION TO PURCHASE

 

(To be executed by the registered holder if such holder desires to exercise the within Warrants)

 

 

Digital Power Corporation

48430 Lakeview Boulevard

Fremont, California 94538

Attention: Chief Financial Officer

 

The undersigned hereby (1) irrevocably elects to exercise his or its rights to purchase ____________ shares of Common Stock covered by the within Warrants, (2) makes payment in full of the Purchase Price by enclosure of cash, a certified check or bank draft, (3) requests that certificates for such shares of Common Stock be issued in the name of:

 

 

Please print name, address and Social Security or Tax Identification Number:

 

________________________________________________

 

________________________________________________

 

________________________________________________

 

________________________________________________

 

 

and (4) if said number of shares of Common Stock shall not be all the shares evidenced by the within Warrants, requests that a new warrant certificate for the balance of the shares covered by the within Warrants be registered in the name of, and delivered to:

 

Please print name and address:

 

________________________________________________

 

________________________________________________

 

________________________________________________

 

In lieu of receipt of a fractional share of Common Stock, the undersigned will receive a check representing payment therefor.

 

 

 

Dated:          
 

 

 

 

WARRANT HOLDER

 

 

 

 

 

 

 

           
 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

     

9

 

 

NOTICE OF CASHLESS EXERCISE

 

 

(To be executed upon exercise of warrant pursuant to Section 1(b))

 

 

The undersigned, the Holder of the attached Warrant, hereby irrevocably elects to exchange its Warrant for _______ shares of Warrant Stock pursuant to the cashless exercise provisions of the within Warrant, as provided for in Section 1(b) of such Warrant, and requests that a certificate or certificates for such shares of Warrant Stock (and any warrants or other property issuable upon exercise) be issued in the name of and delivered to ___________________, whose address is _________________________________ (social security or taxpayer identification number _______________) and, if such shares shall not include all of the shares issuable under such warrant, that a new warrant of like tenor and date for the balance of the shares issuable thereunder be delivered to the undersigned.

 

 

HOLDER:

 

 

 

_______________________________

Signature

 

 

________________________________

Signature, if jointly held

 

 

_________________________________

Date

 

10

 

 

ASSIGNMENT FORM

 

 

FOR VALUE RECEIVED,                                                                                                                                                                                         hereby sells, assigns and transfers unto

 

 

Name:

 
 

(Please typewrite or print in block letters)

 

Social Security or Taxpayer Identification Number :

 

 

the right to purchase Common Stock of Digital Power Corporation, a California corporation, represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ____________________________, Attorney, to transfer the same on the books of the Company with full power of substitution in the premises.

 

DATED: ______________________________

 

 

 

 

______________________________________

Signature

 

 

 

_______________________________________

Signature, if jointly held

 

 

 

 

Witness:

 

 

 

____________________________________

 

11

Exhibit 10.1

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “ Agreement ”) dated as of December 5, 2017, is made by and among DIGITAL POWER CORPORATION, a California corporation, having its principal place of business at 48430 Lakeview Boulevard, Fremont California 94538 (“DPC”) and___________, an individual having an address at _____________________ (the “Noteholder”).

 

WITNESSETH

 

WHEREAS, the Noteholder is the holder of a 10% Promissory Note issued by Microphase Corporation (“Microphase”) in the principal amount of $_________ (the “ Note ”);

 

WHEREAS, as of the date of this Agreement the accrued and unpaid interest under the Note is $ ___________;

 

WHEREAS, the Noteholder desires to exchange the Note for (i) ________shares of DPC common stock, no par value (the “DPC Common Stock”) and (ii) a warrant to purchase ______ shares of DPC Common Stock in the form annexed as Exhibit A hereto (the “Warrant”) and DPC is willing to issue the DPC Common Stock and Warrant in exchange for the Note on the terms and subject to the conditions set forth herein and therein; and

 

NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements herein contained, the parties agree as follows:

 

 

1.

E xchange . Contemporaneous with the execution of this Agreement, the parties hereto will effect the following transactions and by the execution and delivery of this Agreement, the Noteholder hereby assigns to DPC the Note and all of the Noteholder’s rights under the Note:

 

 

(a)

The Noteholder shall deliver the Note to DPC;

 

 

(b)

DPC shall deliver to the Noteholder a certificate representing _______ shares of DPC Common Stock (the “Shares”) registered in the name of the Noteholder or a copy of DPC’s irrevocable instructions to its transfer agent to prepare and issue such certificate, with delivery of such certificate to occur no later than three (3) business days thereafter;

 

 

(c)

DPC shall deliver the Warrant, duly executed by DPC, to the Noteholder.

 

2.

Representations and Warranties of DPC . DPC hereby represents and warrants to the Noteholder as follows:

 

 

(a)

Organization and Authority of DPC . DPC is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all necessary corporate power and authority to enter into this Agreement and to issue the DPC Common Stock and the Warrant, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, and the issuance of the DPC Common Stock and Warrant by DPC, the performance by DPC of its obligations hereunder and thereunder and the consummation by DPC of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of DPC. This Agreement and the Warrant have been duly executed and delivered by DPC, and each of this Agreement and the Warrant constitutes a valid and binding obligation of DPC enforceable against DPC in accordance with its terms.

 

 

 

 

 

(b)

No Conflict . The execution, delivery and performance of this Agreement and the issuance of the Shares and Warrant by DPC do not and will not (i) violate, conflict with or result in the breach of any provision of the Articles of Incorporation or By-laws of DPC, (ii) conflict with or violate any law or governmental order applicable to DPC or (iii) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation, or cancellation of, or result in the creation of any encumbrance on any of the assets or properties of DPC pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which DPC is a party or by which any of its assets or properties are bound or affected.

 

 

(c)

Governmental Consents and Approvals . The execution, delivery and performance of this Agreement and the issuance of the Shares and Warrant by DPC do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to, any governmental authority, except such filings as may be required under applicable federal and state securities laws as a result of the private placement of such securities to the Noteholder contemplated hereby.

 

 

(d)

Issuance of the Shares . The Shares and the shares of DPC Common Stock issuable upon the exercise of the Warrant are duly authorized and, when issued, sold and delivered for the consideration specified herein and in the Warrant, will be duly and validly issued, fully paid and non-assessable, free and clear of all liens, charges and encumbrances. DPC has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrant.

 

2

 

 

 

(e)

SEC Reports; Financial Statements . DPC has filed or furnished all reports, schedules, forms, statements and other documents required to be filed or furnished by it under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including all required exhibits thereto), including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (or such shorter period as DPC was required by law to file such material) (the foregoing materials, as the same may be amended, and including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”), and any notices, reports or other filings pursuant to applicable requirements of the NYSE MKT, LLC (the “Trading Market”), on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports and notices, reports or other filings pursuant to applicable requirements of the Trading Market prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations of the Securities and Exchange Commission (the “Commission”) promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of DPC (including its consolidated Subsidiaries) included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements (i) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and (ii) fairly present in all material respects the financial position of DPC and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. Except as set forth in the SEC Reports, DPC has no any material liability of any nature (whether accrued, absolute, contingent or otherwise) that is required by GAAP to be included in such financial statements other than liabilities arising after the date of the most recent balance sheet included in such financial statements which were incurred in the ordinary course of business consistent with past practice.

 

 

(f)

Material Changes . Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a material adverse effect on DPC’s business, operating results, financial condition or prospects, except as has been reasonably cured by DPC, (ii) DPC has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in DPC’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) DPC has not altered its method of accounting except as otherwise required pursuant to GAAP, (iv) DPC has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) DPC has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option and incentive plans.

 

3

 

 

3.

Representations and Warranties of Noteholder . Noteholder hereby makes the representations and warranties set forth below to DPC:

 

 

(a)

Experience of Noteholder . The Noteholder, either alone or together with Noteholder’s representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the investment in the Shares and Warrant, and has so evaluated the merits and risks of such investment. The Noteholder is able to bear the economic risk of an investment in the Shares and Warrant and, at the present time, is able to afford a complete loss of such investment.

 

 

(b)

Purchase for Own Account . The Shares and Warrant will be acquired for investment for Noteholder’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, and Noteholder has no present intention of selling, granting any participation in, or otherwise distributing same in violation of the Securities Act.

 

 

(c)

Restricted Securities . Noteholder understands that the Shares and Warrant are characterized as “restricted securities” under the Securities Act inasmuch as they are being acquired from DPC in a transaction not involving a public offering and that, under the Securities Act and the rules and regulations promulgated thereunder, such securities may be resold without registration under the Securities Act only in certain limited circumstances. Noteholder is familiar with Rule 144 and understands the resale limitations imposed thereby and by the Securities Act and applicable state securities laws.

 

 

(d)

Legends . Noteholder agrees and acknowledges that the certificates evidencing the Shares and the Warrant and the shares of DPC Common Stock issued upon the exercise of the Warrant (“Warrant Shares”) will bear a legend with respect to the restrictions imposed by the Securities Act and applicable state securities laws. Such legend or legends shall, upon the request of Noteholder, be promptly removed by DPC from any certificate evidencing Shares and/or Warrant Shares upon delivery to DPC of an opinion of counsel to the Noteholder, reasonably satisfactory to DPC, that the legended security can be freely transferred in a public sale without a registration statement being in effect under the Securities Act and in compliance with exemption requirements under applicable state securities laws and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which DPC issued the Shares.

 

 

(e)

Accredited Investor . The Noteholder is an “accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated by the Commission under the Securities Act and will submit to the Company such further assurances of such status as may be reasonably requested by the Company.

 

4

 

 

 

(f)

Authority . The Noteholder: (i) if a natural person, represents that the Noteholder has reached the age of 21 and has full power and authority to execute and deliver this Exchange Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Units, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Exchange Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the Units, the execution and delivery of this Exchange Agreement has been duly authorized by all necessary action, this Exchange Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Exchange Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Exchange Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Noteholder is executing this Exchange Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Exchange Agreement and make an investment in the Company, and represents that this Exchange Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Exchange Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Noteholder is a party or by which it is bound.

 

 

(g)

Title to the Note . The Noteholder hereby represents and warrants to DPC that, as of the date hereof, the Noteholder is the sole record and beneficial owner of the Note and will transfer and deliver to DPC at the Closing valid title to the Note, free from preemptive or similar rights, taxes, liens, charges and other encumbrances.

 

4.

Registration Rights .

 

 

(a)

The Company agrees, subject to applicable law or regulations including but not limited to Rule 415 of the Securities Act of 1933, to use its commercially reasonable efforts to file, by September 7, 2017 (the “Filing Deadline”), a Registration Statement on Form S-1 (the “Registration Statement”) with the Commission, which Registration Statement shall cover (i) the shares of DPC Common Stock issued pursuant to this Agreement, (ii) and the shares of DPC Common Stock issuable pursuant to the exercise of the Warrants (collectively, the “Registrable Shares”). The Company shall use commercially reasonable efforts to have the Registration Statement declared effective within 120 days from the Filing Deadline. The Company shall not file any other registration statements (except for Form S-8 registration statements) until the Registration Statement is declared effective by the Commission.

 

5

 

 

 

(b)

Re g istration Procedures . In furtherance of its obligations under this Section 10 the Company shall, as expeditiously as reasonably possible:

 

 

(i)

Use its commercially reasonable efforts to (i) cause the Registration Statement to become effective, and (ii) cause the Registration Statement to remain effective until the earliest to occur of (A) such date as the other selling shareholders (collectively, the “Selling Shareholders”) have completed the distribution described in the Registration Statement and (B) such time that all of such Registrable Shares are no longer, by reason of Rule 144 under the Securities Act, required to be registered for the sale thereof by the Selling Shareholders. The Company will also use its commercially reasonable efforts to, during the period that the Registration Statement is required to be maintained hereunder, file such post-effective amendments and supplements thereto as may be required by the Securities Act and the rules and regulations thereunder or otherwise to ensure that the Registration Statement does not contain any untrue statement of material fact or omit to state a fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading; provided, however, that if applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment that (i) includes any prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in the Registration Statement, the Company may incorporate by reference information required to be included in (i) and (ii) above to the extent such information is contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the Registration Statement.

 

 

(ii)

Prepare and file with the Commission such amendments and supplements to the Registration Statement, and the prospectus used in connection with the Registration Statement, as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement.

 

 

(iii)

Furnish to each Selling Shareholder, once the Registration Statement has been declared effective, such numbers of copies of a prospectus and such other documents as it may reasonably request in order to facilitate the disposition of Registrable Shares owned by the Selling Shareholder.

 

 

(iv)

Use commercially reasonable efforts to register and qualify the securities covered by the Registration Statement under such other federal or state securities laws of such jurisdictions as shall be reasonably requested by the Selling Shareholders; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

 

6

 

 

 

(v)

If applicable, c ause all such Registrable Shares registered on the Registration Statement to be listed on the national securities exchange on which shares of Common Stock are then listed.

 

 

(vi)

Cooperate with the Selling Shareholders to facilitate the timely preparation and delivery of certificates representing the Registrable Shares to be sold, which certificates will not bear any restrictive legends.

 

 

(c)

Furnish Information . It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Section 4 with respect to the Registrable Shares that the Selling Shareholders shall furnish to the Company such information regarding the Selling Shareholders, the Registrable Shares held by the Selling Shareholders, and the intended method of disposition of such securities as shall be reasonably required by the Company to affect the registration of the Registrable Shares.

 

 

(d)

Registration Expenses . The Company shall bear and pay all registration expenses incurred in connection with any registration, filing or qualification of the Registrable Shares with respect to registration pursuant to this Section 4 for the Selling Shareholders, but excluding legal or other expenses of the Selling Shareholders.

 

 

(e)

Indemnification . In the event that any Registrable Shares are included in a Registration Statement under this Section 4 :

 

 

(i)

To the extent permitted by law, the Company will indemnify and hold harmless the Selling Shareholders and each person, if any, who controls, within the meaning of the Securities Act, a Selling Shareholder against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, the Exchange Act, or any rule or regulation promulgated under the Securities Act or the Exchange Act, and the Company will pay to the Selling Shareholders, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided , however , that the indemnity agreement contained in this Section 4 ( e ) (i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by a Selling Shareholder or any underwriter or controlling person.

 

7

 

 

 

(ii)

Each Selling Shareholder will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Selling Shareholder selling securities in the Registration Statement and any controlling person of any such underwriter or other Selling Shareholder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Selling Shareholder expressly for use in connection with such registration; and each such Selling Shareholder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 4 ( e ) (ii) , in connection with investigating or defending any such loss, claim, damage, liability, or action; provided , however , that the indemnity agreement contained in this Section 4 ( e ) (ii) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Selling Shareholder, which consent shall not be unreasonably withheld; provided , further , that, in no event shall any indemnity under this Section 4 ( e ) (ii) exceed the dollar amount of the proceeds received by such Selling Shareholder upon the sale of the Registrable Shares included in the Registration Statement giving rise to such indemnification obligation.

 

8

 

 

 

(iii)

Promptly after receipt by an indemnified party under this Section 4(e) of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 4(e) , deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel selected by the indemnifying party and approved by the indemnified party (whose approval shall not be unreasonably withheld); provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 4(e) , but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 4(e) .

 

 

(iv)

If the indemnification provided for in this Section 4(e) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

 

 

(v)

The obligations of the Company and Consultant under this Section 4 shall survive the completion of the Offering.

 

 

(f)

Permitted Transferees . The rights to cause the Company to register Shares granted to the Consultant by the Company under this Section 4 may be assigned in full or in part by Selling Shareholders in connection with a transfer of the Shares upon the written approval of the Company, which shall not unreasonably be withheld.

 

 

(g)

Survival . The rights and obligations set forth in this Section 4 shall survive the expiration or termination of this Agreement.

 

9

 

 

5.

Miscellaneous .

 

 

(a)

Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, it being understood that all parties need not sign the same counterpart.

 

 

(b)

Entire Agreement; No Third-Party Beneficiaries . This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between DPC and the Noteholder with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.

 

 

(c)

GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

 

10

 

 

IN WITNESS WHEREOF, Spartan and DPC have each caused this Agreement to be duly executed as of the date first written above.

 

 

 

 

DPC

 

DIGITAL POWER CORPORATION

 

 

 

 

 

 

         

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

         
         
      NOTEHOLDER  
         
         
         
         

 

11