Document:

EXHIBIT 10.1

 

First Amendment to Credit
Agreement

 

This First Amendment
to Credit Agreement (herein, the “Amendment”) is entered into as of August 7, 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.          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
anticipated Permitted Acquisition (and any associated Indebtedness) had closed on June 30, 2013, so long as such Permitted
Acquisition has closed by no later than October 31, 2013. For further clarity, if the anticipated Permitted Acquisition does not
close on or before October 31, 2013, the Borrower shall recalculate the covenants as of June 30, 2013 and September 30, 2013 on
the basis of the actual results and deliver an updated compliance certificate required by Section 8.5(l).

 

    	- 1 -

    	 

    

 

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.

 

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.

 

    	- 2 -

    	 

    

 

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 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]

 

    	- 3 -

    	 

    

 

This First 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
	 	 	 
	Accepted and agreed
    to.	
	 	 
	 	Bank of Montreal,
    acting through its Chicago Branch
	 	 	 
	 	By	/s/
    Larry Allan Swiniarski
	 	Name	Larry Allan Swiniarski
	 	Title	Director, Bank of Montreal
	 	 	Chicago, Branch

 

    	- 4 -Exhibit
10.1

 

Option No.     

 

BAXANO SURGICAL, INC.

 

STOCK OPTION AGREEMENT

 

Type of Option (check one):  ̈
Incentive            ̈
Nonqualified

 

This Stock Option Agreement (the “Agreement”)
is entered into as of                     ,
by and between Baxano Surgical, Inc., a Delaware corporation (the “Company”), and                     
(the “Optionee”) pursuant to the Company’s 2007 Stock Incentive Plan (the “Plan”).
Any capitalized term not defined herein shall have the same meaning ascribed to it in the Plan.

 

1.   Grant of Option. The Company hereby grants
to Optionee an option (the “Option”) to purchase all or any portion of a total of             
          (          )
shares (the “Shares”) of the Common Stock of the Company at a purchase price of          
            ($         )
per share (the “Exercise Price”), subject to the terms and conditions set forth herein and the provisions of
the Plan. If the box marked “Incentive” above is checked, then this Option is intended to qualify as an “incentive
stock option” as defined in Section 422 of the Internal Revenue Code of l986, as amended (the “Code”).
If this Option fails in whole or in part to qualify as an incentive stock option, or if the box marked “Nonqualified”
is checked, then this Option shall to that extent constitute a nonqualified stock option. The effectiveness of this Option is expressly
conditioned upon the approval of an amendment to the Plan by the Company’s stockholders at or before the Company’s
2013 Annual Meeting of Stockholders to increase the limit on the number of shares of Common Stock reserved for awards under the
Plan to a number sufficient to allow for this Award. If approval for such additional shares under the Plan is not obtained from
the stockholders, the Optionee shall cease to have any rights hereunder.

 

2.   Vesting of Option. The
right to exercise this Option shall vest in installments, and this Option shall be exercisable from time to time in whole or in
part as to any vested installment. This Option shall be vested     % on       
              , following Optionee’s completion
of                      
months of Continuous Service, and thereafter commencing on                      ,
upon Optionee’s completion of each additional month of Continuous Service, the remaining       
               shares shall vest in       
                (      )
equal monthly installments.

 

No additional shares shall vest after the date of termination
of Optionee’s Continuous Service, but this Option shall continue to be exercisable in accordance with Section 3 hereof
with respect to that number of shares that have vested as of the date of termination of Optionee’s Continuous Service.

 

3.   Term of Option. The right of the Optionee
to exercise this Option shall terminate upon the first to occur of the following:

 

(a)  the expiration of ten (10) years
from the date of this Agreement;

 

(b)  the expiration of three (3) months
from the date of termination of Optionee’s Continuous Service if such termination occurs for any reason other than permanent
disability, death or voluntary resignation; provided, however, that if Optionee dies during such three-month period the provisions
of Section 3(e) below shall apply;

 

(c)  the expiration of one (1) month
from the date of termination of Optionee’s Continuous Service if such termination occurs due to voluntary resignation; provided,
however, that if Optionee dies during such one-month period the provisions of Section 3(e) below shall apply;

 

(d)  the expiration of one (1) year
from the date of termination of Optionee’s Continuous Service if such termination is due to permanent disability of the Optionee
(as defined in Section 22(e)(3) of the Code);

 

(e)  the expiration of one (1) year
from the date of termination of Optionee’s Continuous Service if such termination is due to Optionee’s death or if
death occurs during either the three-month or one-month period following termination of Optionee’s Continuous Service pursuant
to Section 3(b) or 3(c) above, as the case may be; or

 

(f)  upon the consummation of a Change
in Control, unless such Option is otherwise assumed or replaced with a new option of comparable value or other New Incentives pursuant
to Section 8 below.

 

4.   Exercise of Option. On or after the vesting
of any portion of this Option in accordance with Sections 2 or 8 hereof, and until termination of the right to exercise this
Option in accordance with Section 3 above, the portion of this Option which has vested may be exercised in whole or in part
by the Optionee (or, after his or her death, by the person designated in Section 5 below) upon delivery of the following to
the Company at its principal executive offices:

 

    	 	 	 

    	 

    

 

(a)  a
written notice of exercise which identifies this Agreement and states the number of Shares then being purchased (but no fractional
Shares may be purchased);

 

(b)  a check or cash in the amount of
the Exercise Price (or payment of the Exercise Price in such other form of lawful consideration as the Administrator may approve
from time to time under the provisions of Section 5.4 of the Plan);

 

(c)  a check or cash in the amount reasonably
requested by the Company to satisfy the Company’s withholding obligations under federal, state or other applicable tax laws
with respect to the taxable income, if any, recognized by the Optionee in connection with the exercise of this Option (unless the
Company and Optionee shall have made other arrangements for deductions or withholding from Optionee’s wages, bonus or other
compensation payable to Optionee, or by the withholding of Shares issuable upon exercise of this Option or the delivery of Shares
owned by the Optionee in accordance with Section 12.1 of the Plan, provided such arrangements satisfy the requirements of
applicable tax laws); and

 

(d)  a letter, if requested by the Company,
in such form and substance as the Company may require, setting forth the investment intent of the Optionee, or person designated
in Section 5 below, as the case may be.

 

5.   Death of Optionee; No Assignment. The
rights of the Optionee under this Agreement may not be assigned or transferred except by will or by the laws of descent and distribution,
and may be exercised during the lifetime of the Optionee only by such Optionee. Any attempt to sell, pledge, assign, hypothecate,
transfer or dispose of this Option in contravention of this Agreement or the Plan shall be void and shall have no effect. If the
Optionee’s Continuous Service terminates as a result of his or her death, and provided Optionee’s rights hereunder
shall have vested pursuant to Section 2 hereof, Optionee’s legal representative, his or her legatee, or the person who
acquired the right to exercise this Option by reason of the death of the Optionee (individually, a “Successor”)
shall succeed to the Optionee’s rights and obligations under this Agreement. After the death of the Optionee, only a Successor
may exercise this Option.

 

6.   Representation of Optionee. Optionee acknowledges
receipt of a copy of the Plan and understands that all rights and obligations connected with this Option are set forth in this
Agreement and the Plan.

 

7.   Adjustments Upon Changes in Capital Structure.
In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock
split, reverse stock split, reclassification, stock dividend or other change in the capital structure of the Company, then appropriate
adjustment shall be made by the Administrator to the aggregate number and kind of Shares subject to the unexercised portion of
this Option and to the Exercise Price per share, in order to preserve, as nearly as practical, but not to increase, the benefits
of the Optionee under this Option, in accordance with the provisions of Section 4.2 of the Plan.

 

8.   Change in Control. In the event of a Change
in Control:

 

(a)  The vesting of this Option shall
accelerate automatically effective as of immediately prior to the consummation of the Change in Control unless the Options
are to be assumed by the acquiring or successor entity (or parent thereof) or new options under a new stock incentive program (“New
Incentives”) are to be issued in exchange therefor, as provided in subsection (b) below. If vesting of outstanding Options
will accelerate pursuant to this subsection (a), the Administrator in its discretion may provide, in connection with the Change
in Control transaction, for the purchase or exchange of each Option for an amount of cash or other property having a value equal
to the difference (or “spread”) between: (x) the value of the cash or other property that the Optionee would have
received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise of the Option had the
Option been exercised immediately prior to the Change in Control, and (y) the Exercise Price of the Option.

 

    	 	 	 

    	 

    

 

(b)  The vesting of this Option shall
not accelerate if and to the extent that: (i) this Option (including the unvested portion thereof) is to be assumed by the
acquiring or successor entity (or parent thereof) or a new option of comparable value is to be issued in exchange therefor pursuant
to the terms of the Change in Control transaction, or (ii) in the event the consideration to be received by the stockholders
of the Company in connection with the Change in Control does not consist of securities, this Option (including the unvested portion
thereof) is to be replaced by the acquiring or successor entity (or parent thereof) with other incentives of comparable value containing
such terms and provisions as the Administrator in its discretion may consider equitable. If this Option is assumed, or if a new
option of comparable value is issued in exchange therefor, then this Option or the new option shall be appropriately adjusted,
concurrently with the Change in Control, to apply to the number and class of securities or other property that the Optionee would
have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had
this Option been exercised immediately prior to the Change in Control, and appropriate adjustment also shall be made to the Exercise
Price such that the aggregate Exercise Price of this Option or the new option shall remain the same as nearly as practicable.

 

(c)  If
this Option is assumed by an acquiring or successor entity (or parent thereof) or a New Incentive is issued in exchange therefor
pursuant to the terms of a Change in Control transaction, the vesting of the Option or the New Incentive shall accelerate if and
at such time as the Optionee’s service as an employee, director, officer, consultant or other service provider to the acquiring
or successor entity (or a parent or subsidiary thereof) is Terminated Without Cause within twelve (12) months following consummation
of the Change in Control.

 

9.   No
Employment Contract Created. Neither the granting of this Option nor the exercise hereof shall be construed as granting
to the Optionee any right with respect to continuance of employment by the Company or any of its subsidiaries. The right of the
Company or any of its subsidiaries to terminate at will the Optionee’s employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved.

 

10.   Rights
as Stockholder. The Optionee shall have no rights as a stockholder with respect to any Shares covered by this Option until
such person has duly exercised this Option, paid the Exercise Price and become a holder of record of the Shares purchased.

 

11.   “Market
Stand-Off” Agreement. Optionee agrees that, if requested by the Company or the managing underwriter of any proposed
public offering of the Company’s securities, Optionee will not sell or otherwise transfer or dispose of any Shares held by
Optionee without the prior written consent of the Company or such underwriter, as the case may be, during such period of time,
not to exceed 180 days following the effective date of the registration statement filed by the Company with respect to such
offering, as the Company or the underwriter may specify, but only if all directors, officers and affiliates of the Company are
similarly restricted.

 

12.   Interpretation.
This Option is granted pursuant to the terms of the Plan, and shall in all respects be interpreted in accordance therewith.
In the event of any conflict between a written employment agreement for the Optionee and this Agreement or the Plan, the provisions
of the employment agreement shall control. The Administrator shall interpret and construe this Option and the Plan, and any action,
decision, interpretation or determination made in good faith by the Administrator shall be final and binding on the Company and
the Optionee.

 

13.   Limitation
of Liability for Nonissuance. During the term of the Plan, the Company agrees at all times to reserve and keep available,
and to use its reasonable best efforts to obtain from any regulatory body having jurisdiction any requisite authority in order
to issue and sell, such number of shares of its Common Stock as shall be sufficient to satisfy its obligations hereunder and the
requirements of the Plan. Inability of the Company to obtain, from any regulatory body having jurisdiction, authority deemed by
the Company’s counsel to be necessary for the lawful issuance and sale of any shares of its Common Stock hereunder and under
the Plan shall relieve the Company of any liability in respect of the nonissuance or sale of such shares as to which such requisite
authority shall not have been obtained.

 

14.   Notices.
Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed
given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail,
with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and addressed, if
to the Company, at its principal place of business, Attention: the Chief Financial Officer, and if to the Optionee, at his or her
most recent address as shown in the employment or stock records of the Company.

 

15.   Governing
Law. The validity, construction, interpretation, and effect of this Option shall be governed by and determined in accordance
with the laws of the State of Delaware.

 

16.   Severability.
Should any provision or portion of this Agreement be held to be unenforceable or invalid for any reason, the remaining provisions
and portions of this Agreement shall be unaffected by such holding.

 

    	 	 	 

    	 

    

 

17.   Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together
shall be deemed one instrument.

 

18.   Tax
Consequences and Reporting Obligation Upon Sale of Shares. If this Option is an “incentive stock option,” the
tax benefits afforded to incentive stock options will be obtained by the Optionee only if the Shares received upon exercise of
this Option are held for at least one year after the date of exercise of this Option and two years after the date this Option was
granted to the Optionee. If the Optionee sells or otherwise transfers the Shares before the expiration of either of these one-
or two-year periods, the sale or transfer will be treated for tax purposes as a “disqualifying disposition,” resulting
in the following tax consequences: (a) the Optionee will not obtain the tax benefits afforded to incentive stock options,
(b) the “spread” as of the date of exercise will be taxed to the Optionee at ordinary income tax rates, and (c) the
amount of ordinary income resulting from the disqualifying disposition will be included in the Optionee’s W-2. These tax
consequences are described in more detail in the prospectus that relates to the Company’s 2007 Stock Incentive Plan, as amended,
a copy of which was delivered to the Optionee with this Option. To assure that the Company has the information necessary to comply
with its tax reporting obligations, Optionee agrees to promptly notify the Company if any Shares are sold or transferred less
than one year after the date of exercise or less than two years after the date this Option was granted, and report information
regarding the disqualifying disposition in accordance with procedures established by the Company for this purpose.

 

[The balance of this page intentionally
left blank]

 

    	 	 	 

    	 

    

 

     IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first above written.

 

	BAXANO SURGICAL, INC.,	 	OPTIONEE
	a Delaware corporation	 	 
	 	 	 	 
	By:	 	 	 
	 	 	 	(Signature)
	 	 	 	 
	Name:	 	 	 
	 	 	 	(Type or print name)
	 	 	 	 
	Its:	 	 	Address:

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