DIGITAL POWER CORP
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit102.txt
<TEXT>

                                                                    EXHIBIT 10.2
                          SECURITIES PURCHASE AGREEMENT

     THIS  SECURITIES  PURCHASE  AGREEMENT  (the  "Agreement")  is  made  as  of
________,  2004,  by  and  between  Digital  Power  Corporation,   a  California
corporation (the "Company") and _____________________________ (the "Purchaser").

     WHEREAS,  the Company  desires to sell shares of its common  stock,  no par
value, to the Purchaser who is an "accredited  investor" as that term is defined
in Rule 501(a) of Regulation D, promulgated by the United States  Securities and
Exchange  Commission  ("SEC") under the  Securities Act of 1933, as amended (the
"Securities Act") upon the terms and conditions contained herein; and

     WHEREAS,  the Purchaser  desires to purchase  shares of common stock of the
Company upon the terms and subject to the conditions set forth herein.

     NOW  THEREFORE,  for and in  consideration  of the  premises and the mutual
representations,  warranties,  covenants,  and  agreements  set  forth  in  this
Agreement,  and for other  good and  valuable  consideration,  the  receipt  and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereby  agree as
follows:

SECTION 1.  PURCHASES

     1.1 Purchase of Common Stock.  Upon the terms and subject to the conditions
set forth in this  Agreement,  the Purchaser  hereby agrees to purchase from the
Company and the Company  hereby agrees to issue and sell to the Purchaser on the
Closing Date, as defined  below,  _______  shares of common stock of the Company
(the "Common Stock").  The per share price shall be the average closing price of
the  Company's  shares of common  stock  during the  twenty  (20)  trading  days
immediately  preceding  _______,  2004, or $____ per share for a total  purchase
price of $__________  (the  "Consideration").  All references to dollars in this
Agreement shall mean United States dollars.

     1.2 Additional  Common Stock.  Upon the terms and subject to the conditions
set forth in this Agreement, the Company and the Purchaser hereby agree that the
Purchaser  shall be  entitled,  at its sole  discretion,  to  purchase  from the
Company  (and the Company  shall be obliged to issue and sell,  if so elected by
the  Purchaser) at any time before or on December 31, 2004, the number of shares
of common  stock of the Company (the  "Additional  Common  Stock")  equal to the
quotient of (i) Two Hundred Fifty Thousand dollars  ($250,000);  divided by (ii)
the average closing price of the Company's shares during the twenty (20) trading
days  immediately  preceding  the  date  of  delivery  of a  written  notice  (a
"Notice").  The  purchase  price of the  Additional  Common  Stock  shall be the
average  trading  price of the  Company's  shares during twenty (20) day trading
period  immediately  preceding the date of delivery of a Notice (the "Additional
Consideration").  The Notice  shall  specify the number of shares of  Additional
Common  Stock  to  be  purchased  and  the  aggregate   amount  to  be  paid  in
consideration thereof.

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<PAGE>

     The  Common  Stock  and the  Additional  Common  Stock  are,  collectively,
referred to herein as the "Securities".

     1.3  Wire  Transfer  Instructions.  The  Consideration  and the  Additional
Consideration  will be  delivered  to the  Company  by the  Purchaser  via  wire
transfer  upon  written  instruction  to be  delivered  to the  Purchaser by the
Company.

     1.4 Closing  Date.  The  closing of all  transaction  contemplated  hereby,
including the issuance of the shares of Common Stock, shall be on ________, 2004
(the "Closing Date") at the offices of the Company.

     1.5 Delivery of Shares of Common Stock on the Closing  Date. On the Closing
Date,  the Company shall deliver,  (i) against  payment  therefore,  certificate
representing the shares of Common Stock;  and (ii) all other documents  required
to be delivered on the Closing Date  pursuant to this  Agreement.  The shares of
Common Stock and the Additional Common Stock, if and when issuable, will be duly
authorized and issued to the Purchaser. The certificate evidencing the shares of
Common Stock and the Additional  Common Stock (if and to the extent issuable) as
delivered to the Purchaser will be in due and proper legal form.

SECTION 2.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to the Purchaser as of the date
hereof and on the Closing Date as follows:

         2.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted,
and is qualified or licensed to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where its failure
so to qualify to be licensed would not have a material adverse effect on the
Company.

         2.2 Capitalization and Voting Rights. On the Closing Date, the
authorized capital stock of the Company will consist of 10,000,000 shares of
Common Stock, no par value, of which 5,710,703 shares shall be issued and
outstanding, excluding the Common Stock to be issued under this Agreement, and
2,000,000 shares of Preferred Stock, no par value, of which no shares are issued
and outstanding. All of such issued and outstanding shares of common stock
(including the shares of Common Stock to be issued hereunder and the Additional
Common Stock, if and when issued) are and will be validly issued, fully paid and
the holders thereof are not entitled to any preemptive or other similar rights
other than as set forth in Schedule 2.2. The rights, privileges, preferences and
restrictions of the Common Stock and Preferred Stock are as stated in the


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Company's Articles of Incorporation, which have not been changed since September
6, 2001. Schedule 2.2 contains a capitalization table which includes all
securities issued by the Company (on a fully diluted basis) as of the Closing
Date, immediately prior to the issuance of the shares of Common Stock hereunder.
All of such issued and outstanding securities have been validly issued and the
holders thereof will not be entitled to any preemptive or other similar rights,
except as set forth in Schedule 2.2. Except as set forth in Schedule 2.2, there
are no outstanding rights, plans, options, warrants, conversion rights or
agreements for the purchase or acquisition from the Company of capital stock.

     2.3  Authorization:  Validity.  The  Company has full  corporate  power and
authority  to  enter  into  the  Agreement  and to  carry  out  its  obligations
thereunder.  When issued in  accordance  with this  Agreement  and the shares of
Common Stock and the shares of Additional  Common Stock,  respectively,  will be
validly issued, fully paid and nonassessable.  The execution and delivery of the
Agreement  and  the  consummation  of  the  transactions   contemplated  hereby,
including  without  limitation,  the  issuance  of  the  Common  Stock  and  the
Additional  Common Stock  hereunder,  have been duly  authorized by the Board of
Directors of the Company,  which authorization  remains in full force and effect
and has not been modified or amended by any  subsequent  action of such Board of
Directors,  and no other  corporate  actions or  proceedings  on the part of the
Company is necessary to authorize the Agreement or the transactions contemplated
hereby.  This  Agreement  constitutes  the valid and binding  obligations of the
Company enforceable in accordance with their terms.

     2.4 No Violation. The execution, delivery and performance by the Company of
the  Agreement  and  the  consummation  by it of the  transactions  contemplated
thereby,  including,  without limitation, the issuance, sale and delivery of the
shares of Common  Stock and the  Additional  Common  Stock,  do not  require the
consent, waiver,  approval,  license or authorization of or filing of any notice
or report  with any person,  entity or public  authority  and will not  violate,
result in a breach of or the acceleration of any obligation under, or constitute
a default under,  any provision of the Company's  Articles of  Incorporation  or
Bylaws or any indenture, mortgage, lien, lease, agreement, contract, instrument,
order,  judgment,  decree, law, ordinance or regulation to which any property of
the  Company  is  subject  or by which  the  Company  is bound or  result in the
creation  or  imposition  of any lien,  claim,  charge,  restriction,  equity or
encumbrance  of any  kind  whatsoever  upon,  or give to any  other  person  any
interest  or  right  in or  with  respect  to,  any of the  properties,  assets,
business, agreements or contracts of the Company.

     2.5 Compliance With Law. To the best of its knowledge,  the Company and its
subsidiary are in compliance with the  governmental  laws,  environmental  laws,
safety laws, codes, orders,  rules,  regulations and requirements  applicable to
its business and conditions of employment,  except where noncompliance could not
reasonably  be  expected  to have a  material  adverse  effect on the  business,
assets, properties or financial condition of the Company and its subsidiary. The
Company and its  subsidiary  have  obtained  all permits,  licenses,  variances,


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<PAGE>

exemptions,  orders,  contracts and approvals  from  Federal,  state,  local and
foreign governmental and regulatory bodies which are material,  singularly or in
the aggregate, to the operation of its business (collectively, the "Permits" and
each individually, a "Permit"). The Company and its subsidiary are in compliance
with the material terms of each Permit and with all requirements,  standards and
procedures of the federal,  state, local and foreign  governmental or regulatory
bodies  which  issued the  Permits or any of them and there does not exist under
any of the Permits any default or event of default or event which with notice or
lapse of time or both would constitute an event of default by the Company or its
subsidiary.

     2.6 Tax  Matters.  The  Company and its  subsidiary  have fully and timely,
properly and accurately  filed all material tax returns and reports  required to
be filed by them,  including all federal,  foreign,  state and local returns and
reports  for all years and periods  for which any such  returns or reports  were
due. All income, sales, use, occupation, property, or other taxes or assessments
due from the Company and its subsidiary have been paid, and there are no pending
assessments,  asserted deficiencies or claims for additional taxes that have not
been paid.  There are no tax liens on any  property or assets by any  applicable
government  agency  except  those not yet due.  No state of facts  exists or has
existed which would constitute  grounds for the assessment of any penalty or any
further  tax  liability  beyond  that  shown on the  respective  tax  reports or
returns.  There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state or local income tax return
or report for any period.  All taxes which the  Company or its  subsidiary  have
been required to collect or withhold  have been duly withheld or collected  and,
to the  extent  required,  have  been  paid  to  the  proper  taxing  authority.
Currently,  the Company is under audit by the Internal  Revenue  Service for the
year 2002.

     2.7 SEC Filings.  The Company  previously  has delivered to the Purchaser a
copy of the Company's  Annual Report on Form 10-KSB for the year ended  December
31, 2003,  and the quarterly  reports on Form 10-Q for the quarters  ended March
31, 2004, Proxy Statement for the annual shareholders  meeting held on August 4,
2003 and the current report on Form 8-K filed on May 20, 2004 (collectively, the
"Reports").  Since 1996, the Company has made all filings required to be made by
it under the  Securities  Act,  the  Securities  Exchange Act of 1934 (the "1934
Act") and the  securities  laws of any  state,  and any  rules  and  regulations
promulgated  thereunder.  The consolidated  financial  statements of the Company
included in the Reports have been prepared in accordance with generally accepted
accounting  principles  consistently  applied (except as may be indicated in the
notes  thereto) and fairly  present the financial  position of Company as at the
dates  thereof and the results of its  operations  and changes in cash flows for
the  periods  then ended.  The  information  contained  in the Reports is or was
accurate and complete as of the date given.  No stop order asserting that any of
the transactions  contemplated by this Agreement are subject to the registration
requirements  of the Securities Act has been issued by the SEC. The Reports,  at
the time they were or are hereafter  filed or last amended,  as the case may be,
with the SEC,  complied  and  will  comply  in all  material  respects  with the
requirements of the 1934 Act. Neither the Agreement nor the Reports,  taken as a
whole, contain any untrue statement of material fact or omit to state a material
fact  necessary  to  make  the  statements   made  therein,   in  light  of  the
circumstances  under which they were made,  not  misleading.  To the best of the
Company's knowledge, it is not currently under investigation by the SEC, AMEX or
other governmental authority.

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<PAGE>

     2.8 As of the Closing Date,  Real  Property.  As of the Closing  Date,  the
Company and its subsidiary own all real property  described in the Reports.  All
real  property  leases of the Company and its  subsidiary  as  described  in the
Reports  are in full force and effect and the  Company or  subsidiary  is not in
breach thereof.

     2.9 As of the Closing  Date,  Intellectual  Property.  As  described in the
Reports,  the Company owns or possesses all patents,  patent  rights,  licenses,
inventions,  copyrights,  know-how (including trade secrets and other unpatented
and/or  unpatentable  proprietary  or  confidential   information,   systems  or
procedures), trademarks, service marks and trade names ("Intellectual Property")
currently  employed  or  utilized  by it in  connection  with the  business  now
operated and proposed to be operated. The Company has not received any notice of
infringement  of or conflict with asserted  rights of others with respect to any
Intellectual  Property.  The  description  of the  Intellectual  Property in the
Reports  does not contain  any untrue  statement  of a material  fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.

     2.10 AMEX Compliance.  The Company does and will take all necessary actions
to ensure its  continued  inclusion  in, and the  continued  eligibility  of the
Common  Stock for  listing  on,  the AMEX  under  all  currently  effective  and
currently proposed inclusion requirements.

     2.11 Private Offering.  Subject to the accuracy of the  representations  of
the Purchaser in Section 3 hereof, the offer, sale and issuance of the shares of
Common Stock and the  Additional  Common Stock  constitute a transaction  exempt
from the  registration  requirements  of  Section  5 of the  Securities  Act and
neither  the  Company  nor  anyone  acting on its  behalf  will take any  action
hereafter that would cause the loss of such exemption.

     2.12  Undisclosed  Litigation.  Except the  Tek-Tron  dispute,  the Company
and/or the  subsidiary  thereof are not  currently  involved in, and to the best
knowledge of the Company,  there is no threat of, any material civil,  criminal,
administrative action, suit, claim, hearing, investigation or proceeding.

SECTION 3.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

     The Purchaser understands that the issuance and sale of the Securities have
not been  registered  under the  Securities Act on the grounds that the issuance
and sale of such  Securities to the Purchaser is exempt pursuant to Section 4(2)
of the Securities Act and/or  Regulation D promulgated  under the Securities Act
or Regulation S promulgated  under the Securities  Act, and that the reliance of
the  Company  on such  exemptions  is  predicated  in  part  on the  Purchaser's
representations,  warranties,  covenants and  acknowledgments  set forth in this
Section 3.

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<PAGE>

     3.1  Authorization.  The Purchaser  represents  and warrants to the Company
that he is a resident of the state set forth in Section 10.4.

     3.2 Purchase  Without View to  Distribute.  The  Purchaser  represents  and
warrants to the Company that the shares of Common Stock,  being purchased by him
are being acquired for his own account,  not as a nominee or agent, and not with
a view to resale or  distribution  within the meaning of the  Securities Act and
the rules and regulations thereunder.

     3.3 Restrictions on Transfer.

          (a)  The  Purchaser  (i)  acknowledges  that  the  Securities  are not
registered  under  the  Securities  Act and  that  the  Securities  must be held
indefinitely by him unless they are subsequently registered under the Securities
Act or an  exemption  from  registration  is  available,  (ii) is aware that any
routine sales of the Securities  under Rule 144 promulgated by the SEC under the
Securities  Act may be made only in limited  amounts and in accordance  with the
terms and  conditions  of that Rule and that in such cases where the Rule is not
applicable,  compliance with some other registration exemption will be required,
(iii) is aware that Rule 144 is not presently available for use by the Purchaser
for resale of any such  Securities  and that there can be no assurance that Rule
144 will be available at any time in the future,  (iv) is aware that,  except as
provided in Section 6 hereof, the Company is not obligated to register under the
Securities Act any sale,  transfer or other  disposition of the Securities , (v)
is aware that the Company  shall not be required to register the transfer of the
Securities  on the books of the  Company  unless  the  Company  shall  have been
provided with an opinion of counsel  satisfactory  to him prior to such transfer
to the effect that registration under the Securities Act or any applicable state
securities  law has been  effected  or is not  required in  connection  with the
transaction  resulting in such transfer,  and (vi) is aware that the Securities,
and each  certificate  representing  the shares of Common Stock,  the Additional
Common  Stock  and any  shares  of common  stock or other  securities  issued in
respect of such shares of Common Stock or shares of Additional Common Stock upon
any stock split,  stock dividend,  recapitalization,  merger,  consolidation  or
similar  event,  shall  (unless  otherwise  permitted by  paragraph  (b) of this
Section 3.3) be stamped or otherwise imprinted with the following legend:

         "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
         AND MAY NOT BE SOLD, OFFERED TO SALE, TRANSFERRED, PLEDGED,
         HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (i) A
         REGISTRATION STATEMENT RELATING TO THE SECURITIES WHICH IS EFFECTIVE
         UNDER THE SECURITIES ACT, (ii) RULE 144 PROMULGATED UNDER THE
         SECURITIES ACT OR (iii) AN OPINION OF COUNSEL OR OTHER EVIDENCE
         SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT AN EXEMPTION FROM THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY APPLICABLE STATE
         SECURITIES LAWS IS AVAILABLE."

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<PAGE>

          (b) The  restrictions on the  transferability  of the shares of Common
Stock and the Additional Common Stock shall cease and terminate when such shares
of Common Stock and the Additional Common Stock,  respectively,  shall have been
registered  under the  Securities  Act and are  proposed to be sold or otherwise
disposed of in accordance  with an intended  method of disposition  set forth in
the  registration  statement  covering such Common Stock and  Additional  Common
Stock  required  by  Section  6.1 or 6.2 or any  other  applicable  registration
statement,  or when such shares of Common Stock or  Additional  Common Stock are
transferable in accordance with the provisions of Rule 144(k)  promulgated under
the Securities  Act.  Whenever the  restrictions  on transfer shall terminate as
hereinabove  provided  with  respect  to any of the  shares of  Common  Stock or
Additional  Common  Stock,  the  holder of any such  shares  of Common  Stock or
Additional  Common Stock  bearing the legend set forth in paragraph  (a) of this
Section 3.3 as to which such conditions  shall have terminated shall be entitled
to receive  from the  Company,  without  expense  (except for the payment of any
applicable   transfer  tax)  and  as  expeditiously   as  possible,   new  stock
certificates not bearing such legend.

     3.4 Access to  Information.  The  Purchaser  acknowledges  that he has been
provided  with a copy of the Reports and has  carefully  reviewed the same.  The
Purchaser  further  acknowledges  that the Company has made available to him the
opportunity to ask questions of and receive answers from the Company's  officers
and  directors  concerning  the terms and  conditions  of the  offering  and the
business  and  financial  condition  of the  Company,  and to  acquire,  and the
Purchaser has received to its satisfaction,  such information about the business
and  financial  condition  of the  Company and the terms and  conditions  of the
offering as he has requested.

     3.5 Additional  Representations of the Purchaser.  The Purchaser represents
that (i) he is an  "accredited  investor"  as such term is  defined  in Rule 501
promulgated  under the Securities  Act, or is a non-U.S.  person as such term is
defined in Regulation S, (ii) its financial situation is such that he can afford
to bear the economic risk of holding the securities for an indefinite  period of
time and suffer complete loss of its investment in the securities,  (iii) he has
the funds  necessary to purchase the Common Stock  immediately  available to him
and (iv) his knowledge and experience in financial and business matters are such
that he is capable of  evaluating  the merits and risks of its  purchase  of the
Common Stock as contemplated by this Agreement.

SECTION 4.  COVENANTS OF THE COMPANY.

     4.1  Consummation  of Agreement.  The Company shall perform and fulfill all
conditions and  obligations on its part to be performed and fulfilled  under the
Agreement, to the end that the transactions  contemplated by the Agreement shall
be carried  out.  The Company  has  obtained  all  necessary  authorizations  or
approvals of its Board of Directors  for the execution  and  performance  of the
Agreement, which include as integral parts thereof the issuance to the Purchaser
of the Securities upon the terms and conditions set forth in the Agreement.

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<PAGE>

     4.2 Securities Compliance. The Company agrees to file a Form D with the SEC
within  fifteen days of the date of the Closing and to file,  on a timely basis,
any amendments or supplements to such Form D as may be required under Regulation
D promulgated  under the Securities  Act. The Company also agrees to comply with
the filing  requirements  of AMEX applicable to the sale of the shares of Common
Stock hereunder.  All expenses,  costs and fees incurred in connection with this
Section 4.2 shall be borne by the Purchaser.

     4.3 Good Faith Effort to Effect Transfers.  Upon registration of the shares
of Common  Stock,  or the  termination  under the  provisions of Rule 144 of the
restriction on transfer,  the Company agrees to issue or cause its corporate and
securities  counsel  to issue all  required  consents  or  opinions  that may be
required to effect the transfer of the  Securities  and removal of any legend on
such shares of Common Stock upon transfer.  The Company agrees that he shall use
all reasonable  best efforts to cause such consents or opinions of counsel to be
transmitted  to the  Company's  transfer  agent  within 72 hours of receipt of a
request  by  the  Purchaser,   provided  that  all  required  certifications  or
representations  required to effect such  transfer  have been provided with such
request.  The  Company  will pay all legal  expenses  required  to  effect  such
transfer contemplated by this Section 4.3.

SECTION 5.  OMITTED

SECTION 6.  REGISTRATION.

     6.1 Piggyback Registration. If, at any time, the Company shall determine to
register any of its securities for its own account or for the account of others,
other than a  registration  relating  solely to "employee  benefit  plans" (Form
S-8), or a registration  relating  solely to an SEC Rule 145  transaction  (Form
S-4), or a registration on any registration form which does not permit secondary
sales, the Company will give written notice to the Purchaser of its intention to
effect such a registration not later than thirty (30) calendar days prior to the
anticipated date of filing with the SEC of a registration statement with respect
to such  registration.  Such notice shall offer the Purchaser the opportunity to
include  in  such  registration  statement  all  or  part  of  the  Registerable
Securities  of  Common  Stock  (a  "Piggyback  Registration").  Subject  to  the
provisions hereof, the Company shall include in such Piggyback  Registration all
Registerable  Securities  of Common  Stock with respect to which the Company has
received a written  request from the  Purchaser  for  inclusion  therein  within
fifteen  (15)  calendar  days after the  receipt by the  Company of  Purchaser's
notice. The Company shall be obligated to effect not more than one (1) Piggyback
Registration.

     If a Piggyback  Registration  is being made with respect to an underwritten
registration  on  behalf  of  the  Company  and  the  managing   underwriter  or
underwriters  advise  the  Company in writing  that in their  opinion  the total
number or dollar amount of  securities of any class  requested to be included in
such registration is sufficiently  large to adversely affect the success of such
offering,  the  Company  shall  include in such  registration:  (i)  first,  all
securities  the Company  proposes to sell to the public,  the  proceeds of which
shall go to the Company (ii) second,  up to the full number of the  Registerable


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<PAGE>

Securities of Common Stock or Additional  Common Stock  requested to be included
in such  registration in excess of the number or dollar amount of securities the
Company  proposes to sell which, in the opinion of such managing  underwriter or
underwriters, can be sold without adversely affecting the offering.

     6.2 Expenses.  All expenses  incurred in connection  with any  registration
pursuant to this Section 6,  including  without  limitation,  all  registration,
filing and qualification  fees (including those  attributable to the Registrable
shares of Common Stock),  printing  expenses,  fees and disbursements of counsel
for the  Company  and fees and  expenses  of counsel  for the  Company  incurred
pursuant to Section 6 of this  Agreement and expenses of any comfort  letters or
special audits of the Company's financial  statements  incidental to or required
by such  registration  shall  be borne by the  Company  (excluding  underwriting
discounts  and  selling   commissions  payable  with  respect  to  the  sale  of
Registrable shares of Common Stock or Additional Common Stock).

     6.3   Registration   Procedures.   In  the   case  of  each   registration,
qualification or compliance  effected by the Company pursuant to this Section 6,
the Company will, at its expense:

          (a) keep such registration  statement effective and file any necessary
post-effective amendments and use its best efforts to maintain the effectiveness
thereof until the earlier of (i) such time as the Company reasonably determines,
based upon an opinion of counsel,  that the  Purchaser  will be eligible to sell
all of the  Registrable  shares  of Common  Stock  then  owned by the  Purchaser
without  registration  in the open market in compliance  with the Securities Act
and without regard to volume restrictions or (ii) for a period of 18 months from
the date of effectiveness of the Registration Statement;

          (b) prepare and file with the SEC such  amendments and  supplements to
such  Registration  Statement  as may be  necessary  to keep such  registration,
qualification  or  compliance  effective  and comply with the  provisions of the
Securities Act with respect to the disposition of all securities covered thereby
during the applicable period;

          (c)  update,   correct,   amend  and  supplement  such   registration,
qualification or compliance as necessary;

          (d) furnish  such number of  preliminary  and final  prospectuses  and
other documents incident thereto as the Company from time to time may reasonably
request;

          (e)  register or qualify such  Registrable  shares of Common Stock for
offer and sale under the Blue Sky or securities  laws of such  jurisdictions  as
the Company may reasonably designate to enable him to consummate the disposition
of the Registrable shares of Common Stock in such jurisdiction,  except that the
Company shall not be required in connection  therewith or as a condition thereof
to qualify as a foreign  corporation or to execute a general  consent to service
of process in any State;

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<PAGE>

          (f)  timely  file all  reports  required  to be filed by it under  the
Securities Act or the 1934 Act and the rules and regulations  adopted by the SEC
thereunder,  all to the  extent  required  to enable the  Purchaser  to sell the
Registrable shares of Common Stock without registration under the Securities Act
pursuant  to (i) Rule 144 adopted by the SEC under the  Securities  Act, as such
rule may be amended from time to time,  or (ii) any similar  rule or  regulation
hereafter adopted by the SEC;

          (g) take all  action  necessary  to render the  Registrable  shares of
Common Stock eligible for inclusion on AMEX for trading thereon; and

          (h) upon the sale of any  Registrable  shares of Common Stock pursuant
to  such  Registration   Statement  remove  all  restrictive  legends  from  all
certificates or other  instruments  evidencing the Registrable  shares of Common
Stock.

     6.4 Further Information. If Registrable shares of Common Stock owned by the
Purchaser  are included in the  Registration  Statement,  such  Purchaser  shall
furnish to the  Company  such  information  regarding  itself as the Company may
reasonable request and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 6.

SECTION 7.  INDEMNIFICATION.

     7.1  Indemnification of the Purchaser.  The Company agrees to indemnify and
hold harmless, to the extent permitted by law, the Purchaser,  its directors and
officers  and each person who control the  Purchaser  (within the meaning of the
Securities  Act) against any and all losses,  claims,  damages,  liabilities and
expenses caused, by arising out of or directly or indirectly relating to (i) any
inaccuracy in or any breach of the  representations,  warranties,  covenants and
agreements  of the Company  contained in the  Agreement  and all  Schedules  and
Exhibits  thereto;  or (ii) any untrue or alleged  untrue  statement of material
fact  contained  in  any  registration  statement,   prospectus  or  preliminary
prospectus  filed  pursuant  to  Section 6 hereof  or any  omission  or  alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the statements  therein not misleading,  except insofar as the
same are caused by or contained in any  information  furnished in writing to the
Company by the  Purchaser  expressly for use in such  registration  statement or
prospectus. Notwithstanding anything to the contrary herein, the Purchaser shall
be entitled to receive the indemnification  amount (i) in cash; (ii) by issuance
of additional  shares of common stock of the Company in the amount (based on the
price per share at which the  shares of Common  Stock have been  puchased  under
this Agreement) equivalent to the indemnification  amount (as determined in good
faith by the Company's Board of Directors),  which shares shall be issued to the
Purchaser by the Company for no consideration;  or (iii) any combination of cash
and shares, provided all such issuances of shares are in compliance with federal
securities laws.

                                       10
<PAGE>

     7.2 Indemnification of the Company.  The Purchaser agrees to furnish to the
Company in writing such  information  and  affidavits as the Company  reasonably
requests for use in connection with any registration statement or prospectus and
agrees to  indemnify  and hold  harmless,  to the extent  permitted  by law, the
Company,  its  directors  and  officers and each person who controls the Company
(within the meaning of the Securities  Act) against any and all losses,  claims,
damages,   liabilities   and   expenses   caused  by  (i)  any   breach  of  the
representations,   warranties,   covenants,  and  agreements  of  the  Purchaser
contained in this Agreement;  or (ii) any untrue or alleged untrue  statement of
material  fact or any omission of a material  fact  required to be stated in any
registration  statement,  prospectus or preliminary prospectus filed pursuant to
Section 6 hereof or necessary to make the statements therein not misleading, but
only to the extent that such untrue or alleged  untrue  statement or omission is
contained or omitted in any  information or affidavit so furnished in writing by
the Purchaser,  and in no event will the Purchaser be obligated to indemnify the
Company,  its  directors,  officers or any person who controls the Company in an
amount in excess of the  proceeds  to be derived  from the sale of  Registerable
Securities  of  Common  Stock  in  the  offering  giving  rise  to a  claim  for
indemnification.

     7.3 Contribution.  If the indemnification provided for in this Section 7 is
judicially  determined to be unavailable to an indemnified  person in respect of
any losses,  claims, damages or liabilities referred to herein, then, in lieu of
indemnifying such indemnified  person hereunder,  each party shall contribute to
the  amount  paid or  payable  by such  indemnified  person  as a result of such
losses,  claims,  damages or liabilities (and expense  relating  thereto) (i) in
such  proportion  as is  appropriate  to reflect  the  relative  benefits to the
Company,  on the one hand, and the Purchaser,  on the other hand, or (ii) if the
allocation provided by clause (i) above is not available,  in such proportion as
is  appropriate  to reflect not only the relative  benefits  referred to in such
clause (i) but also the relative  fault of each,  as well as any other  relevant
equitable considerations.

     7.4 Defense of Action.  Any person  entitled to  indemnification  hereunder
will (i) give prompt written notice to the indemnifying  party of any claim with
respect  to which it or him  seeks  indemnification;  and  (ii)  unless  in such
indemnified  party's  reasonable  judgment a conflict of interest  between  such
indemnified  and  indemnifying  parties  may exist with  respect to such  claim,
permit the  indemnifying  party to assume the defense of such claim with counsel
reasonably  satisfactory  to the  indemnified  party.  If  such  defense  is not
assumed,  the  indemnifying  party will not be subject to any  liability for any
settlement  made without its consent (but such consent will not be  unreasonably
withheld).  An  indemnifying  party  will not be  obligated  to pay the fees and
expenses  of  more  than  one  counsel  for  all  parties  indemnified  by  such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any  indemnified  party  a  conflict  of  interest  may  exist  between  such
indemnified party and any other of such indemnified parties with respect to such
claim.

                                       11
<PAGE>

     7.5 Remedies Non Exclusive. The remedies provided for in this Section 7 are
not  exclusive  and shall not limit any rights or remedies that may otherwise be
available to any indemnified party at law or in equity.

SECTION 8.  CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.

     8.1  Conditions.  The  obligations  of  the  Purchaser  to  consummate  the
Agreement  and  the  transactions   contemplated   hereby  are  subject  to  the
satisfaction of the following  conditions on or prior to the Closing Date except
to the extent that any such condition can be and is waived by the Purchaser:

          (a)   Representations;    Warranties;    Covenants.    Each   of   the
representations  and  warranties  of the Company  contained  in Section 2 hereof
shall be true and correct in all material respects as though made at the time of
and as of the Closing Date;  the Company  shall,  at or before the Closing Date,
have performed all of its obligations hereunder which by the terms hereof are to
be performed on or before the Closing Date, including the covenants set forth in
Section 4.

          (b)  Certificate  of  Good  Standing.   The  Company  will  deliver  a
Certificate of Good Standing of the Company  issued by the California  Secretary
of State as of the  Closing  Date.  The Good  Standing  Certificate  is attached
hereto as Exhibit 8.1(b).

          (c) Qualifications. All authorizations,  approvals or permits, if any,
of any governmental  authority or regulatory body of the United States or of any
foreign  country that are required in  connection  with the lawful  issuance and
sale of the shares of Common  Stock  pursuant  to this  Agreement  shall be duly
obtained and effective as of the Closing Date.

          (d) Proceedings and Documents.  All corporate and other proceedings in
connection with the  transactions  contemplated at the closing and all documents
incident  thereto  shall be  reasonably  satisfactory  in form and  substance to
Purchaser's  special counsel,  and they shall have received all such counterpart
original and certified or other copies of such  documents as they may reasonably
request.

SECTION 9.  CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS.

     9.1 Conditions.  The obligations of the Company to consummate the Agreement
and the transactions  contemplated hereby are subject to the satisfaction of the
following  conditions  on or prior to the Closing Date except to the extent that
any such condition can be and is waived by the Company:

     9.2 Representations; Warranties; Covenants. Each of the representations and
warranties  of the  Purchaser  contained  in Section 3 hereof  shall be true and
correct in all  material  respects  as though  made at the time of and as of the
Closing;  the Purchaser  shall, at or before the Closing,  have performed all of
its  obligations  hereunder  which by the terms hereof are to be performed on or
before the Closing.  Unless the Company  receives  written  notification  to the
contrary at the Closing,  the Company  shall be entitled to assume the preceding
is accurate at the Closing.

                                       12
<PAGE>

SECTION 10.  MISCELLANEOUS.

     10.1 Law Governing. This Agreement shall be construed under and governed by
the laws of the State of California applicable to contracts made and to be fully
performed therein.

     10.2  Arbitration.  Disputes  arising under this Agreement other than under
Section 1.3 shall be settled by three  arbitrators  pursuant to the rules of the
American  Arbitration  Association  (the "AAA") for Commercial  Arbitration (the
"Rules").  Such arbitration  shall be held in Alameda County,  California or New
York, New York, at the Purchaser's option, or at such other location as mutually
agreed to by the parties to the dispute.  Subject to any applicable  limitations
contained  in this  Agreement,  arbitration  may be commenced at any time by any
party  giving  notice to the other  party that a dispute  has been  referred  to
arbitration  under this Section 10.2. The  arbitrators  shall be selected by the
joint agreement of the parties hereto, but if they do not so agree within twenty
(20) days after the date of the notice referred to above, the selection shall be
made pursuant to the Rules from the panel of arbitrators  maintained by the AAA.
Any award of the  arbitrators  shall be accompanied by a written  opinion giving
the reasons for the award. The expense of the arbitration  shall be borne by the
parties in the manner determined in writing by the arbitrators. This arbitration
provision shall be specifically enforceable by the parties. The determination of
the arbitrators  pursuant to this Section 10.2 shall be final and binding on the
parties  and may be  entered  for  enforcement  before  any  court of  competent
jurisdiction.

     10.3 Broker or Finder. The Purchaser represents and warrants that no broker
or finder  has acted for such party in  connection  with this  Agreement  or the
transactions  contemplated  by this  Agreement  and that no  broker or finder is
entitled to any broker's or finder's fee or other  commission in respect thereof
based  in any way on  agreements,  arrangements  or  understandings  made by the
Purchaser.

     10.4  Notices.  All notices or other  communications  required or permitted
hereunder shall be in writing (except as otherwise provided herein) and shall be
deemed duly given when received by delivery in person,  by  facsimile,  telex or
telegram or by an overnight  courier  service or three (3) days after deposit in
the U.S. Mail, certified with postage prepaid, addressed as follows:

           If to the Company:        Digital Power Corporation
                                     41920 Christy Street
                                     Fremont, California 94538
                                     Attn: Jonathan Wax, CEO
                                     Fax: (510) 657-6634

                                       13
<PAGE>

            With copies to:          Bartel Eng & Schroder
                                     300 Capitol Mall, Suite 1100
                                     Sacramento, California 95814
                                     Attn: Daniel B. Eng, Esq.
                                     Fax: (916) 442-3442

            If to the Purchaser:     --------------------------
                                     --------------------------
                                     --------------------------

            With copies to:          --------------------------
                                     --------------------------
                                     --------------------------

or to such other  addresses  as a party may  designate  by five (5) days'  prior
written notice to the other party.

     10.5 Survival of Representations, Warranties and Covenants. Notwithstanding
any  investigation  made by any party to this  Agreement,  all  representations,
warranties,  covenants  and  obligations  made by the Company and the  Purchaser
herein shall survive  indefinitely  the execution of this Agreement and the sale
and  delivery  of the  shares of Common  Stock and shares of  Additional  Common
Stock.

     10.6 Entire Agreement. This Agreement, including the exhibits and schedules
referred   to  herein,   is   complete   and  all   promises,   representations,
understandings,  warranties and agreements  with reference to the subject matter
hereof,  and all  inducements  to the making of this  Agreement  relied  upon by
either  party  hereto,  have  been  expressed  herein  or in such  exhibits  and
schedules.

     10.7 Assignment. This Agreement may not be assigned by either the Purchaser
or the  Company  without  the prior  written  consent of the other  party.  This
Agreement  shall be  enforceable  by and shall  inure to the  benefit  of and be
binding upon the parties hereto and their successors and no others.

     10.8 Fees and Expenses.  Except as otherwise  specifically provided herein,
each party will bear its own expenses in  connection  with the  negotiation  and
consummation of the transactions contemplated by this Agreement.

                                       28
<PAGE>

     10.9  Publicity  and  Disclosure.  Except  as may be  required  by  federal
securities laws, no press release or public disclosure,  either written or oral,
of the  transactions  contemplated  by  this  Agreement  shall  be  made  by the
Purchaser without the prior approval of the Company.

     10.10  Counterparts.  This  Agreement  may be  executed  simultaneously  in
multiple  counterparts,  each of which shall be deemed an  original,  but all of
which together shall constitute one and the same document.

     10.11  Amendments and Waivers.  Except as otherwise  provided  herein,  any
provision in any of the  Agreement  may be amended or waived only if the Company
and the Purchaser consent in writing.

                   [THIS SPACE WAS INTENTIONALLY LEFT BLANK.]


<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed as of the date set forth above.


                                  COMPANY

                                  DIGITAL POWER CORPORATION



                                  By:      ______________________________
                                           Jonathan Wax, Chief Executive Officer




                                  PURCHASER




                                  By:      ________________________________

</TEXT>
</DOCUMENT>
