SEVENTH AMENDMENT TO CREDIT AGREEMENT

This Seventh Amendment to Credit Agreement (herein, the “Amendment”) is entered
into as of May 15, 2015,  but effective as of March 31, 2015, by and among
PIONEER POWER SOLUTIONS, INC., a Delaware corporation (the “Borrower”), the
direct and indirect Domestic Subsidiaries of the Borrower, as Guarantors, and
BANK OF MONTREAL,  a Canadian chartered bank acting through its Chicago
branch (the “Bank”).

PRELIMINARY STATEMENTS

A.The Borrower, the Guarantors and the Bank entered into a certain Credit
Agreement, dated as of June 28, 2013 (the Credit Agreement, as the same has been
amended prior to the date hereof, being referred to herein as the “Credit
Agreement”).  All capitalized terms used herein without definition shall have
the same meanings herein as such terms have in the Credit Agreement.

B.The Borrower has requested that the Bank amend certain financial covenants,
and the Bank is willing to do so under the terms and conditions set forth in
this Amendment.

NOW, THEREFORE,  for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows: 

SECTION 1.AMENDMENTS.

Subject to the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement shall be and hereby is amended as follows:

1.1.Subsection (e) of Section 8.23 of the Credit Agreement (Special Provision
Regarding Financial Covenants) shall be amended and restated in its entirety to
read as follows:

(e)Special Provision Regarding Financial Covenants. Notwithstanding the
foregoing, if both (x) pursuant to Section 8.26(a), the calculated Total
Leverage Ratio is less than or equal to (i) 3.15 to 1.00 for the period ending
on December 31, 2014, (ii) 3.65 to 1.00 for the period ending on March 31, 2015,
(iii) 3.25 to 1.00 for the period ending on June 30, 2015, (iv) 3.65 to 1.00 for
the period ending on September 30, 2015, (v) 2.75 to 1.00 for the period ending
on December 31, 2015 and all periods thereafter, and (y) pursuant to Section
8.26(b), the calculated Fixed Charge Coverage Ratio is greater than or equal to
(i) 1.10 to 1.00 for the period ending on December 31, 2014, (ii) 1.25 to 1.00
for the period ending on March 31, 2015 and all periods thereafter, then the
Loan Parties and their Non-Canadian Subsidiaries shall not be required to comply
with the financial covenants set forth in Section 8.23(a), (b)

 

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and (c) or deliver such financial covenant calculations pursuant to Section
8.5(l).

1.2.Schedule I to Exhibit E to the Credit Agreement (Compliance Certificate)
shall be replaced with Schedule I attached hereto.

SECTION 2.CONDITIONS PRECEDENT.

The effectiveness of this Amendment is subject to the satisfaction of all of the
following conditions precedent:

2.1.The Borrower, the Guarantors and the Bank shall have executed and delivered
this Amendment.

2.2.The Bank shall have received copies (executed or certified, as may be
appropriate) of all legal documents or proceedings taken in connection with the
execution and delivery of this Amendment to the extent the Bank or its counsel
may reasonably request.

2.3.Legal matters incident to the execution and delivery of this Amendment shall
be satisfactory to the Bank and its counsel.

2.4.The Bank shall have received a non-refundable amendment fee of $7,500.

SECTION 3.REPRESENTATIONS.

In order to induce the Bank to execute and deliver this Amendment, the Borrower
hereby represents to the Bank that as of the date hereof (a)  the
representations and warranties set forth in Section 6 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 6.5 shall be deemed to refer to the most recent financial
statements of the Borrower delivered to the Bank) and (b) the Borrower is in
compliance with the terms and conditions of the Credit Agreement and no Default
or Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this Amendment.

SECTION 4.MISCELLANEOUS.

4.1.The Borrower and the Guarantors heretofore executed and delivered to the
Bank the Security Agreement and certain other Collateral Documents. The Borrower
and the Guarantors hereby acknowledge and agree that the Liens created and
provided for by the Collateral Documents continue to secure, among other things,
the Secured Obligations arising under the Credit Agreement as amended hereby;
and the Collateral Documents and the rights and remedies of the Bank thereunder,
the obligations of the Borrower and Guarantors thereunder, and the Liens created
and provided for thereunder remain in full force and effect and shall not be
affected, impaired or discharged hereby.  Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests created
and provided for by the Collateral Documents as to the indebtedness which would
be secured thereby prior to giving effect to this Amendment.

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4.2.Except as specifically amended herein, the Credit Agreement shall continue
in full force and effect in accordance with its original terms.  Reference to
this specific Amendment need not be made in the Credit Agreement, the Notes, or
any other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Credit Agreement, any reference in any of such items to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.

4.3.The Borrower agrees to pay on demand all costs and expenses of or incurred
by the Bank in connection with the negotiation, preparation, execution and
delivery of this Amendment, including the reasonable fees and expenses of
counsel for the Bank.

4.4.This Amendment may be executed in any number of counterparts, and by the
different parties on different counterpart signature pages, all of which taken
together shall constitute one and the same agreement.  Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original.  Delivery of a
counterpart hereof by facsimile transmission or by e‑mail transmission of an
Adobe portable document format file (also known as a “PDF” file) shall be
effective as delivery of a manually executed counterpart hereof.  This Amendment
shall be governed by, and construed in accordance with, the internal laws of the
State of Illinois.

[SIGNATURE PAGE TO FOLLOW]

 

 

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This Seventh Amendment to Credit Agreement is entered into as of the date and
year first above written.

 

“BORROWER”

 

 

PIONEER POWER SOLUTIONS, INC.

 

 

By

/s/ Andrew Minkow

 Name

Andrew Minkow

 Title

CFO

 

 

 

 “GUARANTORS”

 

 

 

JEFFERSON ELECTRIC, INC.

 

 

By

/s/ Andrew Minkow

 Name

Andrew Minkow

 Title

CFO

 

 

 

 

 

PIONEER CRITICAL POWER INC.

 

 

By

/s/ Andrew Minkow

 Name

Andrew Minkow

 Title

CFO

 

 

 

 

 

PIONEER CUSTOM ELECTRICAL PRODUCTS CORP.

 

 

By

/s/ Andrew Minkow

 Name

Andrew Minkow

 Title

CFO

 

 

 

 

 

TITAN ENERGY SYSTEMS INC.

 

 

By

/s/ Andrew Minkow

 Name

Andrew Minkow

 Title

CFO

 

 

 

[SIGNATURE PAGE TO SEVENTH AMENDMENT TO CREDIT AGREEMENT]

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Accepted and agreed to.

 

 

BANK OF MONTREAL, acting through its Chicago Branch

 

 

By

/s/ Randon Gardley

 Name

Randon Gardley

 Title

Vice President

 

 

 

 

 

[SIGNATURE PAGE TO SEVENTH AMENDMENT TO CREDIT AGREEMENT]

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SCHEDULE I

TO COMPLIANCE CERTIFICATE

PIONEER POWER SOLUTIONS, INC.

COMPLIANCE CALCULATIONS

FOR CREDIT AGREEMENT DATED AS OF JUNE 28, 2013, AS AMENDED

CALCULATIONS AS OF _____________, _______

 

CONSOLIDATED FINANCIAL CALCULATIONS (SECTION 8.26)

;  

 

A.Total Leverage Ratio for the Loan Parties and their Subsidiaries
(Section 8.26(a))

 

1.Funded Debt (per definition but modified)

$_________________

2.Net Income for past 4 quarters

$_________________

3.Interest Expense for past 4 quarters

$_________________

4.Federal, state and local income taxes for past 4 quarters

$_________________

5.Depreciation and amortization for past 4 quarters

$_________________

6.Extraordinary fees or expenses for past 4 quarters

$_________________

7.Sum of Lines A2-A6 (EBITDA)

$_________________

8.Adjustments per definition of Adjusted EBITDA

$_________________

9.Sum of Line A7 and A8 (Adjusted EBITDA)

$_________________

10.Ratio of Line A1 to Line A9

____:1.00

11.Threshold limit pursuant to Section 8.23(e)(x)

3.15:1.00 for 12/31/14; 3.65:1.00 for 3/31/15; 3.25:1.00 for 6/30/15; 3.65:

1.00 for 9/30/15; 2.75:1.00 for 12/31/15 and all periods thereafter

12.Is Line A10 less than or equal to A11 (circle yes or no)

yes/no

 

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B.Fixed Charge Coverage Ratio for the Loan Parties and their Subsidiaries
(Section 8.26(b))

 

1.Adjusted EBITDA (Line A9)

$_________________

2Unfinanced Capital Expenditures for past 4 quarters

$_________________

3.Cash taxes for past 4 quarters

$_________________

4.Restricted Payments paid in cash for past 4 quarters

$_________________

5.Line B1 minus the sum of Lines B2-B4

$_________________

6.Scheduled principal payments for past 4 quarters

$_________________

7.Interest Expense for past 4 quarters

$_________________

8.Sum of Lines B6 and B7 (Fixed Charges)

$_________________

9.Ratio of Line B5 to Line B8

____:1.00

10.Threshold limit pursuant to Section 8.23(e)(y)

1.10:1.00 for 12/31/14; 1.25:1.00 for 3/31/15 and all periods thereafter

11.Is Line B9 greater than or equal to B10 (circle yes or no)

yes/no

C.Calculation of Financial Covenants Pursuant to Section 8.23(a), (b) and (c)

 

1.If either of Line A12 or B11 is “no”, then the financial covenants set forth
below must be calculated

 

 

FINANCIAL COVENANTS (SECTION 8.23)

 

 

A.Total Leverage Ratio for the Loan Parties and their Non-Canadian Subsidiaries
(Section 8.23(a))

 

1.Funded Debt (per definition)

$_________________

2.Net Income for past 4 quarters

$_________________

3.Interest Expense for past 4 quarters

$_________________

4.Federal, state and local income taxes for past 4 quarters

$_________________

5.Depreciation and amortization for past 4 quarters

$_________________

6.Extraordinary fees or expenses for past 4 quarters

$_________________

7.Sum of Lines A2-A6 (EBITDA)

$_________________

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8.Adjustments per definition of Adjusted EBITDA

$_________________

9.Sum of Lines A7 and A8 (Adjusted EBITDA)

$_________________

10.Ratio of Line A1 to Line A9

____:1.0

11.Line A10 Ratio shall not exceed

____:1.0

12.The Borrower is in compliance?  (circle yes or no)

yes/no

B.Funded Debt to Capitalization Ratio for the Loan Parties and their
Non-Canadian Subsidiaries (Section 8.23(b))

 

1.Funded Debt (Line A1)

$_________________

2.Net Worth

$_________________

3.Sum of Lines B1 and B2 (Total Capitalization)

$_________________

4.Ratio of Line B1 to Line B3

____:1.0

5.Line B4 Ratio shall not exceed

0.50:1.0

6.The Borrower is in compliance?  (circle yes or no)

yes/no

C.Fixed Charge Coverage Ratio for the Loan Parties and their Non-Canadian
Subsidiaries (Section 8.23(c))

 

1.Adjusted EBITDA for past 4 quarters (Line A9)

$_________________

2.Unfinanced Capital Expenditures for past 4 quarters

$_________________

3.Cash taxes for past 4 quarters

$_________________

4.Restricted Payments paid in cash for past 4 quarters

$_________________

5.Line C1 minus the sum of Lines C2-C4

$_________________

6.Scheduled principal payments for past 4 quarters

$_________________

7.Interest Expense for past 4 quarters

$_________________

8.Sum of Lines C6 and C7 (Fixed Charges)

$_________________

9.Ratio of Line C5 to Line C8

____:1.0

10.Line C9 Ratio shall not be less than

1.35:1.0

11.The Borrower is in compliance?  (circle yes or no)

yes/no

 

 

 

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