Settlement of Derivative Litigation
As previously announced, on February 24,
2020, DPW Holdings, Inc., a Delaware corporation (the “Company”), entered into a definitive settlement agreement
(the “Settlement Agreement”) that is intended to settle the previously disclosed derivative litigation captioned
Ethan Young and Greg Young, Derivatively on Behalf of Nominal Defendant, DPW Holdings, Inc. v. Milton C. Ault, III, Amos Kohn,
William B. Horne, Jeff Bentz, Mordechai Rosenberg, Robert O. Smith, and Kristine Ault and DPW Holdings, Inc., as the nominal defendant
(Case No. 18-cv-6587) (as amended on March 11, 2019, the “Amended Complaint”) against the Company and certain
of its officers and directors pending in the United States District Court for the Central District of California (the “Court”).
As previously disclosed, the Amended Complaint alleges violations including breaches of fiduciary duties and unjust enrichment
claims based on the previously pled transactions. The derivative litigation is more fully described in the Company’s Quarterly
Report on Form 10-Q for the period ended September 30, 2019.
Order Approving a Motion for Preliminary
Approval of Settlement in the Derivative Action
On April 15, 2020, the Court issued an
Order (the “Order”) approving a Motion for Preliminary Approval of Settlement in the Derivative Action filed
against DPW as a Nominal Defendant and its directors who served on its board of directors on July 31, 2018.
Under the terms of the Order approving
the Agreement, the Company’s Board of Directors (the “Board”) shall adopt and/or maintain resolutions
and amendments to committee charters and/or the Company’s bylaws to ensure adherence to certain corporate governance policies
(collectively, the “Reforms”), which shall remain in effect for no less than five (5) years, subject to any
of the following: (a) a determination by a majority of the independent directors that the Reform is no longer in the best interest
of the Company, including, but not limited to, due to circumstances making the Reforms no longer applicable, feasible, or available
on commercially reasonable terms, or (b) modifications which the Company reasonably believes are required by applicable law or
regulation.
In connection with the Settlement Agreement,
the parties have agreed upon a payment of attorneys’ fees in the amount of $600,000.00 payable by the Company’s Director
& Officer liability insurance.
The Settlement Agreement contains no admission
of wrongdoing. The Company has always maintained and continues to believe that it did not engage in any wrongdoing or otherwise
commit any violation of federal or state securities laws or other laws.
While the Settlement Agreement has been
approved by the Court, there can be no assurance that the settlement will be finalized and approved by the Court or properly objected
to by any shareholders and, even if approved, whether the conditions to closing will be satisfied, and the actual outcome of this
matter may differ materially from the terms of the settlement described herein.
The Stipulation and Agreement of Settlement,
including its Exhibit A, which comprises the specific Reforms, can be found on the Company’s website under the Investor Relations
tab here: https://ir.dpwholdings.com/static-files/67cdcc90-d755-455d-bab0-362eca400b5e.
The Notice can be found on the Company’s
website under the Investor Relations tab here: https://ir.dpwholdings.com/static-files/2373e8c1-b050-46fa-9194-42bdafde64d5.
Where You Can Find Additional Information
Investors and security holders will be
able to obtain documents filed with the Securities and Exchange Commission free of charge at the Commission’s website, www.sec.gov. Security
holders may also read and copy any reports, statements and other information filed by the Company with the Commission, at the SEC
public reference room at 100 F Street, N.E., Washington D.C. 20549. Please call the Commission at 1-800-SEC-0330 or
visit the Commission’s website for further information on its public reference room.