AMENDING AGREEMENT
NO. 2


 


 


THIS
AMENDING AGREEMENT is entered into as of the 11th day
of February, 2013


 


 


		BETWEEN:	BANK OF MONTREAL



(the "Lender")


 


		AND EACH OF:	PIONEER ELECTROGROUPCANADA
INC., a Canadian corporation



 


PIONEER TRANSFORMERS
LTD., a Canadian corporation


 


BEMAG TRANSFORMER
INC., a Canadian corporation


 


(collectively,
the "Borrowers")


 


 


WHEREAS
the Lender and the Borrowers have entered into a letter loan agreement dated June 28, 2011,
as amended by a first amending agreement dated December 7, 2012 pursuant to which the Lender
agreed to grant the Facilities to the Borrowers (collectively, the
''Letter Loan Agreement");


 


WHEREAS
each of Pioneer Transformers Ltd. and Bernard Granby Realty Inc. amalgamated on January 1st,
2013 and Pioneer Transformers Ltd. is the corporation resulting from such amalgamation.


 


WHEREAS
the parties wish to amend the Letter Loan Agreement to reflect such amalgamation and to amend other terms and conditions of the
Letter Loan Agreement;


 


NOW
THEREFORE in consideration of the mutual covenants herein
set forth, it is agreed as follows:


 


ARTICLE
1

INTERPRETATION


 


		1.1	All capitalized terms herein, unless otherwise expressly
defined herein, shall have the meanings ascribed to them in the Letter Loan Agreement.






		1.2	The Letter Loan Agreement and all documents or agreements
incidental or rela.ted thereto shall henceforth be read and construed in conjunction with this Agreement; and the Letter Loan
Agreement and this Agreement shall henceforth have effect as far as practicable as though the provisions thereof were contained
in one instrument.



 


		1.3	All the terms, conditions and provisions of the Letter
Loan Agreement not otherwise amended by this Agreement shall remain unchanged and have full force and effect.



 






    	 



    	 



    

 


ARTICLE
2


AMENDMENTS
TO THE LETTER LOAN AGREEMENT


 


		2.1	The section "BORROWERS"
of the Letter Loan Agreement is hereby deleted and replaced by the following:



 


		“BORROWERS:	Pioneer Electrogroup Canada
Inc. (“Electrogroup")



Pioneer Transformers
Ltd. (“Transformers")


Bemag
Transformer Inc. ("Bemag”)


(Electrogroup, Transformers and
Bemag, collectively the "Borrowers")"


 


		2.2	The section "GUARANTORS" of the Letter
Loan Agreement is hereby deleted and replaced by the following:



 


		“GUARANTORS:	The Borrowers and any other
present or future Subsidiaries of the Borrowers (collectively, the "Guarantors")"



 


		2.3	The section "SECURITY" of the Letter
Loan Agreement is hereby deleted and replaced by the following:



 


		“SECURITY:	All amounts owing from time
to time under or pursuant to any of the

Facilities shall be secured at all times by the following Security

Documents :



 


		-	First ranking hypothec in
the amount of $25,000,000 on the universality of all present and future immovable property and movable property of the Obligors
including, without limitation, the immovable property of
Bemag located at 33 Racine, Farnham, Quebec, but excluding
the immovable property of Transformers located at 612 Bernard Road, Granby, Quebec (the “Granby Property”);



		-	Security under section 427 of the Bank Act by the Borrowers;



		-	Movable hypothec and pledge by Electrogroup
on all shares of the other Borrowers;



		-	General Security Agreement by Transformers registered in the Province of
Ontario;



		-      	General
Security Agreement by Bemag registered in the Province of British Columbia;



		-	Cross corporate guarantee by each Borrower.



 





Unless otherwise specifically
indicated herein, all such security shall be first-ranking, subject only to Permitted Encumbrances."


 


		2.4	In the section "NO NOVATION"
of the Letter Loan Agreement, the words "and Granby'' are deleted.



 






    	 



    	 



    

 


		2.5	In Schedule II of the Letter Loan Agreement,
the reference to "Pioneer Wind Energy Systems Inc." in the first paragraph is deleted.



 


		2.6	In paragraph 1.15 of Schedule III (REPRESENTATIONS
AND WARRANTIES) of the Letter Loan Agreement, the reference to each of Pioneer Wind Energy Systems Inc., 7834080 Canada
Inc. and Bernard Granby Realty Inc. is deleted.



 


		2.7	In Schedule VI (NEGATIVE COVENANTS) of the Letter Loan
Agreement, paragraph 1.11 is deleted and replaced with the following:



 


		“1.11	make or pay any Distributions
for an amount exceeding 50% of Electrogroup's previous year's net income on a consolidated basis (non cumulative) and without
duplication for the calculation of Distributions."



 


ARTICLE
3


GENERAL
PROVISIONS


 


		3.1       
	Novation:  It is expressly understood
                   and agreed between the parties hereto that this Agreement does not constitute a novation of the terms and conditions
                   of the Facilities, the Letter Loan Agreement or the other Loan Documents, the Lender hereby reserving all of
                   its rights and recourses under the Facilities, the Letter Loan Agreement and the other Loan Documents. Nothing
                   set forth in this Agreement shall,
                   except as specifically set forth herein, be construed as altering the obligations
                   of the Obligors under the Facilities, the Letter Loan Agreement and the other Loan Documents. Nothing herein
                   shall in any way release the Obligors from their obligations to the Lender under the Facilities, the Letter
                   Loan Agreement and the other Loan Documents.



 


		3.2       
	Execution in Counterparts:  This
                   Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts,
                   each of which when so executed shall be deemed
                   to be an original and all of which taken together shall constitute but one and the same agreement.



 


		3.3	Governing Law: This Agreement shall be governed by and construed
in accordance with the Laws of the Province of Quebec and the federal laws of Canada applicable therein.



 


		3.4	Language: The parties hereby confirm
their express wish that this Agreement and all the documents and agreements directly or indirectly related thereto be drawn up
in English. Les parties reconnaissent leur volonté
expresse que la présente convention ainsi que tous les documents et conventions
qui s’y rattachent directement ou indirectement soient rédigés en langue anglaise.



 






    	 



    	 



    

 


S - 1


 


IN WITNESS
WHEREOF the parties hereto have executed this Agreement as of the day, month and year first above written.


 


LENDER:


 


BANK OF MONTREAL


 


 


	By:	/s/  Martin Bazinet
	 	Name:Martin Bazinet
	 	Title:Directeur / Director


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Signature page


 


Am ending Agreement No. 2


 






    	 



    	 



    

 


 


S - 2


  


 


 


 


ACCEPTANCE


 


Wc hereby accept the foregoing terms
and conditions.


 


Signed in Montreal, Quebec, thisday
of February, 2013


 


BORROWERS AND GUARANTORS


 


PIONEER ELECTROGROUP CANADA INC.,


herein acting and represented
by its shareholder Pioneer Power Solutions, Inc.


 


 


	By:	 	/s/  Andrew Minkow
	 	 	duly authorized
	 	 	Name:Andrew Minkow
	 	 	Title:CFO


 


 


 


PIONEER TRANSFORMERS
LTD.


 


 


	By:	 	/s/  James A. Wilkins
	 	 	duly authorized
	 	 	Name:James A. Wilkins
	 	 	Title:Vice-President


 


 


 


BEMAG TRANSFORMER
INC.


 


 


	By:	 	/s/  James A. Wilkins
	 	 	duly authorized
	 	 	Name:James A. Wilkins
	 	 	Title:Vice-President


 


 


 


 


 


 


 


 


 


Signature page


 


Am ending Agreement No. 2