Document:

EXHIBIT 10.1

 

Second Amendment to Credit
Agreement

 

This Second Amendment
to Credit Agreement (herein, the “Amendment”) is entered into as of September 30, 2013, 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 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 make certain amendments to the Credit Agreement, 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.          The
definition of “Eligible Receivables” appearing in Section 1.1 of the Credit Agreement shall be amended
by amending and restating clause (c) thereof to read as follows:

 

(c)          is
the valid, binding and legally enforceable obligation of the Account Debtor obligated thereon and such Account Debtor (i) is
not a Subsidiary or an Affiliate of any Loan Party, (ii) is not a shareholder, director, officer, or employee of any Loan
Party or of any of its Subsidiaries, (iii) is not the United States of America or Canada, or any state, province, or political
subdivision thereof, or any department, agency or instrumentality of any of the foregoing, unless the Assignment of Claims Act
or any similar state, provincial, or local statute, as the case may be, is complied with to the satisfaction of the Bank, (iv) is
not a debtor under any proceeding under any Debtor Relief Law, (v) is not an assignor for the benefit of creditors, (vi) has
not sold all or substantially all of its assets, or (vii) is not Siemens Corp. or any of its Affiliates;

 

    	- 1 -

    	 

    

 

1.2.          Section 8.10
of the Credit Agreement shall be amended by deleting the word “and” at the end of clause (f) and by replacing
clause (g) thereof with the following clauses (g) and (h):

 

(g)          the
sale of Receivables owing by Siemens Corp. or its Affiliates to Orbian and/or Orbian Corp. pursuant to a discounting agreement
which is non-recourse to the Borrower or any Subsidiary and which agreement is otherwise satisfactory to the Bank and which agreement
cannot be amended without the consent of the Bank; and

 

(h)          the
Disposition of Property of any Loan Party or any Subsidiary of a Loan Party (including any Disposition of Property as part of a
sale and leaseback transaction) aggregating for all Loan Parties and their Subsidiaries not more than $200,000 during any fiscal
year of the Borrower; provided, however, that this clause (h) shall not permit any Loan Party to factor any of its
Receivables with any party except as permitted by clause (g) above.

 

1.3.          Section
8.23(d) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

(d)          Special
Provision Regarding 6/30/13 and 9/30/13. With respect to the calculation of each of the foregoing covenants in this Section 8.23
for the fiscal quarters ending June 30, 2013 and September 30, 2013, the Borrower shall calculate such covenants as if the
proceeds of the initial public offering received by the Borrower on or about September 24, 2013 (the “IPO Proceeds”)
and which were subsequently applied to the Obligations had been received (and applied to the Obligations) on June 30, 2013.

 

1.4.          Schedule 6.2
shall be amended and restated in its entirety to read as set forth on Schedule 6.2 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 -

    	 

    

 

2.2.         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.

 

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.

 

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.

 

    	- 3 -

    	 

    

 

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]

 

    	- 4 -

    	 

    

 

This Second 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	Chief Financial Officer
	 	 	 
	 	“Guarantors”
	 	 	 
	 	Jefferson Electric, Inc.
	 	 	 
	 	By	/s/ Andrew Minkow
	 	Name	Andrew Minkow
	 	Title	Chief Financial Officer
	 	 	 
	 	Pioneer Critical Power Inc.
	 	 	 
	 	By	/s/ Andrew Minkow
	 	Name  	Andrew Minkow
	 	Title	Chief Financial Officer
	 	 	 
	 	Pioneer Custom Electrical Products Corp.
	 	 	 
	 	By	/s/ Andrew Minkow
	 	Name	Andrew Minkow
	 	Title	Chief Financial Officer
	 	 	 
	Accepted and agreed to.	 	 
	 	 	 
	 	Bank
    of Montreal, acting through its Chicago Branch
	 	 	 
	 	By	/s/ Larry Allan Swiniarski
	 	Name	Larry Allan Swiniarski
	 	Title	Director

 

    	- 1 -

    	 

    

 

Schedule 6.2

Subsidiaries

 

	Name	 	Jurisdiction of

Organization	 	Percentage

Ownership	 	Owner
	 	 	 	 	 	 	 
	Pioneer Critical Power, Inc.	 	Delaware	 	100%	 	Borrower
	 	 	 	 	 	 	 
	Jefferson Electric, Inc.	 	Delaware	 	100%	 	Borrower
	 	 	 	 	 	 	 
	Nexus Custom Magnetics, LLC	 	Texas	 	100%	 	Jefferson Electric, Inc.
	 	 	 	 	 	 	 
	JE Mexican Holdings, Inc.	 	Delaware	 	100%	 	Borrower
	 	 	 	 	 	 	 
	Jefferson Electric Mexico Holdings, LLC	 	Wisconsin	 	100%	 	JE Mexican Holdings, Inc.
	 	 	 	 	 	 	 
	Nexus Magneticos de Mexico, S. de R.L. de C.V.	 	Mexico	 	100%	 	Nexus Custom Magnetics, 

LLC—99%
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Jefferson Electric Mexico 

Holdings, LLC—1%
	 	 	 	 	 	 	 
	Pioneer Electrogroup Canada, Inc.	 	Quebec	 	100%	 	Borrower
	 	 	 	 	 	 	 
	Pioneer Transformers Ltd.	 	Quebec	 	100%	 	Pioneer Electrogroup Canada, Inc.
	 	 	 	 	 	 	 
	Pioneer Wind Energy Systems, Inc.	 	Quebec	 	100%	 	Pioneer Electrogroup Canada, Inc.
	 	 	 	 	 	 	 
	Bemag Transformer Inc.	 	Quebec	 	100%	 	Pioneer Electrogroup Canada, Inc.
	 	 	 	 	 	 	 
	Pioneer Custom Electrical Products Corp.	 	Delaware	 	100%	 	Borrower

 

    	- 1 -Exhibit 10.1

 

Liquid Capital Loan Contract

 

Loan Number:1501012130001033

 

(Unofficial Selective Summary
Translation)

  

		Borrower:	Inner Mongolia Yongye Nongfeng Biotech Co., Ltd.

		Address:	Yongye Industrial Park, Jinshan Boulevard,

Jinshan Development Zone, Hohhot

		Legal Representative:	SUN Shengfeng

		Telephone:	3395796

 

		Lender:	Agricultural Bank of China, Hohhot Branch

		Address:	83 Relimu Road, Xincheng District, Hohhot

		Legal	Representative:CUI Xiaorui

		Telephone:	6908444

 

		Article 1	Definitions

 

Unless otherwise specified, the following
terms used herein have the following definition:

 

1.1          Term of the Loan: the period between
the first disbursement of the loan to the day of full repayment of the loan principal and interest.

 

1.2          Amount of the Loan: the maximum amount
of the loan principal provided by the Lender to the Borrower during the effective period of the term of the loan.

 

1.3          Self-Directed Electronic Channel:
the electronic channel provided by the Lender to be used for loan withdrawal online, through telephone and for cash management
under the self-directed liquid capital loan method.

 

1.4          Period: as specified by date, month
and year.

 

1.5          LIBOR/HIBOR: the corresponding lending
rate in the markets of same industry in London/Hong Kong as published by Reuters two business days prior to the loan withdrawal
date.

 

1.6:          Law and Statutes: the PRC law, administrative
statutes, local statutes and regulations, judicial interpretation and other legal rules.

 

    	1

    	 

    

 

		Article 2	The Borrower’s
Representations

 

The Borrower represents as follows:

 

2.1          The Borrower is a duly incorporated
business legal person capable of being a borrower, has good credit and has no bad record; the use of the loan and the source of
repayment are specific and legal; there have been no instances of law violations.

 

2.2          The Borrower has completed all necessary
procedures for the execution and performance of this contract and processed corresponding registration filing; there have been
no instances that may affect the validity of this contract.

 

2.3          The Borrower warrants that the Guarantor
for the loan has completed all necessary procedures in accordance with the law and the company’s Articles of Association,
and the loan guarantee has no defect about its effectiveness and there is no instances that my lead to any material adverse effect.

 

2.4          The Borrower will use the loan in
accordance with the term, purpose and in the manner specified herein and will not use it in any illegal activities; will accept
and assist with the supervision and oversight over the loan by the government regulatory bodies and by the Lender; will seek approval
from the Lender before engaging in any major corporate actions; will inform the Lender promptly of any adverse events.

 

2.5          The Borrower has withheld no information
on any event regarding its financial situation and repayment ability, including but not limited to litigation, arbitration and
other claims.

 

2.6          All information and documents provided
by the Borrower regarding the Borrower, its guarantor and shareholders are authentic, complete, accurate, valid and effective.

 

		Article 3	General Terms

  

		3.1	The Amount, Type and Term of the Loan

 

		Loantype:	liquid capital loan

		Amount:	¥25,000,000.00

		Term:	One year (starting from July 18, 2013)

 

		3.2	Purpose of the Loan

 

		Purpose:	To purchase raw material

 

    	2

    	 

    

 

		3.3	Interest Rate, Penalty Interest and Compound Interest

 

		3.3.1	Lending rate:Fixed, floated upward of 20% of the
benchmark rate published by the People’s Bank of China for the loan of same type and same term.

 

		3.3.2	Interest calculation and settlement: the interest on the loan is calculated monthly and the interest settlement date is the
20th day of each month.

 

		3.3.3	Penalty rate: If the Borrower fails to repay the loan in accordance with the provisions herein, the penalty interest will be
charged at the rate floated upward 50% of the loan interest rate; if the Borrower fails to use the loan in accordance with the
loan purpose specified herein, the penalty interest will be charged at the rate floated upward 100% of the loan interest rate;
in the event of occurrence of both cases, the penalty interest will be charged at the higher of the two rates.

 

		3.4	Loan Withdrawal and Disbursement

 

		3.4.1	Conditions for loan withdrawal:

 

			The Borrower has obtained resolutions from its internal government bodies approving the loan and received approval from relevant
regulatory bodies; completed guarantee procedures required by the Lender and such guarantee is legal and valid; the use of the
loan is in compliance with the law and provisions herein; the representations herein remain true and valid at the time of each
withdrawal of the loan and there has been not occurrence of any material adverse change or event. If the Borrower fails to satisfy
the above conditions, the Lender shall have the right to dissolve the contract.

 

		3.4.2	Loan withdrawal method:

 

The Borrower must submit
loan withdrawal application to the Lender before each withdrawal for review;

If any one single withdrawal
amount is more than ¥10,000,000.00 and the recipient of this amount is specific, the Borrower must use the entrusted method
and let the Lender disburse the amount directly to the Borrower’s trading partner;

If not more than ¥10,000,000.00,
the Borrower may use self-payment method after the loan amount is released into the Borrower’s account.

 

		3.4.3	If the credit worthiness of the Borrower deteriorates, or there is any abnormality in the use of the loan or any act by Borrower
to evade the Lender’s supervision, the Lender may re-negotiate with the Borrower over the loan disbursement and payment conditions
or suspend the disbursement and payment of the loan.

 

    	3

    	 

    

 

		3.4.4	If, due to the failure to perform the commercial contract for which the loan withdrawn or such contract is dissolved, the Borrower
must return all or any unused portion of the loan amount in connection with such contract; if the Borrower fails to make payment
using the loan fund in accordance with the provisions herein, the Lender shall have the right to recall such amount, and interest
shall still apply.

 

		3.5	Financial Performance Supervision

 

The Borrower must put in place the measures
satisfactory to the Lender to ensure the security of the loan at the Lender’s request; otherwise, the Lender may demand remedial
measures in accordance with Article 5.3 herein.

 

		3.6	Monitoring of Accounts

 

The Borrower designates the following account
as the account for the return of funds:

 

		Account Title:	Inner Mongolia Yongye Nongfeng Biotech Co., Ltd.

		AccountNo.:	05490101040018262

 

		3.7	Repayment

 

		3.7.1	Repayment method

 

The Borrower must deposit
the amount of repayment for the loan principal and interest 2 days prior to the loan due date into the loan repayment account designated
by the Lender and irrevocably authorize the Lender to make deductions from this account.

 

If the Borrower fails to
repay the loan when it is due (including declared due in advance), the Lender shall have the right to make deductions of corresponding
amount from any of the Borrower’s accounts opened with the Lender.

 

The Lender will exercise
its right for offsetting in accordance with the law or the provisions herein; the Borrower will have 7 days to raise any objection.

 

    	4

    	 

    

 

		3.7.2	Order of Repayment

 

If there are multiple debts
due and the Borrower’s amount of repayment is insufficient, the Lender shall have the right to determine the order the amount
of repayment is applied.

 

		3.7.3	Early repayment

 

If the Borrower desires
to repay the loan earlier, the Borrower must submit written application to the Lender for review and the Lender shall have the
right to determine the order the amount of repayment is applied.

 

		3.7.4	Extension

 

If the Borrower is not
able to repay the loan on the due date specified herein, the Borrower may submit application to the Lender for extension 15 days
prior to the due date of the loan and, upon approval, enter into loan extension agreement with the Lender.

 

		3.8	Loan Notes

 

All loan notes are the component parts of
this contract. If there is any discrepancy regarding the loan amount, withdrawn amount, repayment amount, disbursement date and
due date, term of the loan, loan rate and purpose of the loan between this contract and the loan notes, the latter shall prevail.

 

		3.9	Guarantee

 

The guarantee method for the loan hereunder
is: pledge

 

		3.10	Rights and Obligations

 

		3.10.1	The Borrower’s rights and obligations

 

Make loan withdrawal, repay
the loan principal and interest, and use the loan in accordance with the provisions of this contract;

 

Accept the supervision and monitoring
by the Lender on its financial activities and the use and repayment of the loan and provide relevant documents and information
at the Lender’s request;

 

The Borrower must notify
in writing the Lender in advance and obtain the Lender’s approval if the Borrower engages any of the following:

 

Subcontracting, lease,
share restructure, joint venture, M&A, spin-off, reduction of registered capital, joint capital, transfer of major assets,
major external investment, issuance of debt, major financing, and major related party transaction;

Filing for restructuring or reorganization,
dissolution or bankruptcy;

Providing loan guarantee or pledging
any major asset to any third party;

Or any other material adverse
event that will affect the Borrower’s repayment ability.

 

    	5

    	 

    

 

The Borrower must notify
in writing the Lender within 5 days of the occurrence of any of the following:

 

Involvement of the Borrower’s
legal representative, major officer or actual control person in illegal activities;

Suspension of operation or going
out of business, license being revoked or cancelled;

Deterioration of financial situation
or major difficulty in production and operation;

Or any other material adverse
event that will affect the Borrower’s repayment ability.

 

The Borrower must notify
in writing the Lender within 7 days of the occurrence of any of the following:

 

Changes in the Borrower’s
parent/subsidiary relationship, senior management, corporate structure;

Changes in the company’s
name and address and scope of operation; registered capital or amendments to the company’s Articles of Association;

Or any other changes that will
affect the Borrower’s repayment ability.

 

The Borrower shall not
divert funds or transfer assets or securities to avoid its repayment obligations, and shall not engage in any activities harmful
to the Lender’s interest.

 

		3.10.2	The Lender’s rights and obligations

 

Disburse the loan amount
to the Borrower in full and on time, except when the Borrower or other factors not on the part of the Lender cause delay;

Supervise either on site or off
site and inspect the Borrower’s production and operation, financial situation, inventory and use of the loan and request
the Borrower to provide documents;

In the event of the occurrence of
any material adverse events affecting the Borrower’s repayment ability or of the guarantor’s suspension of operation
or going out of business, license being revoked or cancelled, material business loss affecting its ability to provide guarantee,
or of reduction of value of or damage to the pledged property, the Lender may request that the Borrower take remedial actions or
measures, make adjustment to the loan amount, suspend the loan or declare that the loan due in advance;

Other rights and obligations under
the law.

 

    	6

    	 

    

 

		3.10.3	Other obligations

 

Both parties must maintain confidentiality
on the other party’s business secrets and all other information obtained during the course of executing and performing the
loan contract; except when required by law approved by the other party, neither party can disclose such secrets or information
to any third party.

 

		Article 4	Supplemental Provisions

 

[None]

 

		Article 5	Legal Liability

  

		5.1	Any of the following on the part of the Borrower will
constitute a breach:

 

Violating the obligations hereunder;

Failure to perform the representations
made in Article II herein;

Failure to fulfill, or completely
fulfill, the obligations under other contracts between the Borrower and the Lender;

Other instances of failure or refusal
to perform this contract.

 

		5.2	Upon the occurrence of any of the following, the Lender
may dissolve this contract and other contracts between the two parties:

 

Breach by the Borrower or the guarantor;

The Borrower’s or the guarantor’s
repayment ability may experience material adverse change;

Major damage to or reduction in
value of the pledged/mortgaged properties;

Unfavorable adjustment to the security
of the loan caused by changes of the State policy;

The Borrower’s breaches under
other creditor’s claims;

Other instances in accordance with
the law or agreement between the two parties.

 

If the Lender dissolves
this contract, the Borrower will have 7 days to raise any objection.

 

    	7

    	 

    

 

5.3          Upon the occurrence of the situations
set forth in Section 5.1 and Section 5.2 above, the Lender make adopt the following remedial measures:

 

Demand that the Borrower or the
guarantor take corrective actions within a specific time or arrange for other guarantee;

If the Borrower fails to repay the
loan principal or interest or use the loan in accordance with the provisions hereunder, charge penalty interest and compound interest
until the loan is fully repaid;

Reduce or cancel the loan amount,
suspend the disbursement or declare the loan hereunder or under other loan contracts due in advance;

Exercise the right to offset and
other rights under the law;

Demand that the Borrower assume
responsibility for loss compensation and other legal liability;

Take actions to ensure the performance
of the loan and other legal actions;

Disclose the Borrower’s act
of breach.

 

5.4          The Borrower must be responsible
for legal fees, travel and lodging expenses, enforcement and appraisal cost and other fees incurred by the Lender in the course
of realizing its claims.

 

5.5          If the Lender fails to disburse the
loan in full to the Borrower, the Lender must compensate the Borrower for the resulting actual loss, provided that the Borrower
has fulfilled its obligations hereunder.

 

		Article 6	Other Matters

 

6.1          The addresses and contact information’s
specified herein will be used for notification sent by one party to the other party; if one party has any change in such information,
it must inform the other party immediately.

 

6.2          The Lender may charge other fees
for statutory items and at statutory rate.

 

6.3          The Lender may authorize other affiliated
agencies to perform the rights and obligations hereunder and assign the loan hereunder to other affiliated agencies for management.

 

6.4          The Lender has the right to report
the relevant information regarding this contract to the People’s Bank of China’s credit system or other credit information
database established in accordance with the law.

 

6.5          If, during the effective period of
this contract, any change or amendment to the law and statutes, government policies or regulatory rules causes the Lender to be
unable to continue the performance of this contract, the Lender shall have the right to cancel any amount of loan not yet disburse
and take other appropriate measures.

 

    	8

    	 

    

 

6.6          The Lender’s non-exercise of,
or delay in exercising, any right hereunder does not constitute any waiver of such right or any other rights, nor does it affect
its future exercise of such rights.

 

6.7          Any dispute arising from this contract
must be resolved though consultation between the two parties; if consultation fails, such dispute should be submitted to the people’s
court at the Lender’s location for resolution. The provisions not in dispute must continue to be performed.

 

6.8          This contract will become effective
upon execution by the respective representative of both parties.

  

		Borrower:	Inner Mongolia Yongye Nongfeng Biotech Co., Ltd.

		Legal Representative:	/s/ SUN Shengfeng

 

		Lender:	Agricultural Bank of China, Hohhot Branch

		Legal Representative:	/s/ CUI Xiaorui

 

July 8, 2013

 

    	9

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