Document:

PIONEER POWER SOLUTIONS, INC. 10-K

Exhibit
10.25

 

Execution
version

 

Second
Amending Agreement

 

This
Second Amending Agreement (herein, the “Amendment”) is entered into as of March 28, 2018 by and among Pioneer
Power Solutions, Inc., a Delaware corporation (the “Borrower”), the direct and indirect Domestic Subsidiaries
of the Borrower party hereto, 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 Amended and Restated Credit Agreement, dated as of April 29, 2016
(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 waive a certain financial covenant default and amend certain provisions of 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.          Waiver.

 

The
Loan Parties and their Subsidiaries have failed to be in compliance with (i) the Current Ratio covenant as of the last day of
the fiscal quarter of the Borrower ending on or about December 31, 2017 as required by Section 8.23(a) of the Credit Agreement,
(ii) the EBITDA covenant as of the last day of the fiscal quarter of the Borrower ending on or about December 31, 2017 as required
by Section 8.23(b) of the Credit Agreement, and (iii) the Tangible Net Worth covenant as of the last day of the fiscal quarter
of the Borrower ending on or about December 31, 2017 as required by Section 8.23(c) of the Credit Agreement (collectively, the
“Existing Defaults”). The Borrower has requested that the Bank permanently waive the Existing Defaults. Subject
to the satisfaction of the conditions precedent set forth in Section 3 below, the Bank hereby permanently waives the Existing
Defaults. This waiver is limited to the matters and time periods expressly stated herein. Except as specifically waived hereby,
all of the terms and conditions of the Credit Agreement shall stand and remain in full force and effect.

 

     

     

    

 

Section
2.          Amendments.

 

Subject
to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement shall be and hereby is amended
as follows:

 

2.1.        Each
of the following definitions appearing in Section 1.1 of the Credit Agreement (Definitions) shall be amended and restated
in its entirety to read as follows:

 

“Applicable
Margin” means (a) with respect to U.S. Prime Rate Loans under the Revolving Facility and Reimbursement Obligations,
0.75% per annum, (b) with respect to Eurodollar Loans under the Revolving Facility and Letter of Credit Fees, 2.00% per annum,
(c) with respect to U.S. Prime Rate Loans under the Term Loan Facility, 1.25% per annum, (d) with respect to Eurodollar Loans
under the Term Loan Facility, 2.50% per annum, (e) with respect to the Standby Fees payable under Section 3.1(a), 0.625% per annum,
and (f) with respect to the MasterCard Facility the rate per annum set forth in accordance with the MasterCard Agreement and related
agreements.

 

“EBITDA”
means, with reference to any period, Net Income for such period plus all amounts deducted in arriving at such Net Income
amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income tax expense for such period, (c)
depreciation of fixed assets and amortization (including, but not limited to, the amortization of any employee stock option (or
similar) compensation plan) of (and other charges with respect to) intangible assets for such period, and (d) extraordinary fees
or expenses not to exceed (i) $2,000,000 for the applicable periods set forth in Section 8.23(b) ending on or prior to December
31, 2018 and (ii) $1,200,000 during any twelve month period thereafter, in each case including any fees and expenses paid by the
Loan Parties during such period in connection with this Agreement and the consummation of any Permitted Acquisition as defined
and under the Existing Credit Agreement.

 

“Interest
Period” means the period commencing on the date a Borrowing of Eurodollar Loans is advanced, continued, or created by
conversion and ending in the case of Eurodollar Loans, one (1) month or two (2) months thereafter, provided, however, that:

 

(i)          no
Interest Period shall extend beyond the final maturity date of the relevant Loans;

 

(ii)         no
Interest Period with respect to any portion of the Term Loan shall extend beyond a date on which the Borrower is required to make
a scheduled payment of principal on the Term Loan, unless the sum of (a) the aggregate principal amount of the Term Loan that
constitutes U.S. Prime Rate Loans plus (b) the aggregate principal amount of the Term Loan that constitutes Eurodollar
Loans with Interest Periods expiring on or before such date equals or exceeds the portion of the principal amount to be paid on
the Term Loan, on such payment date;

 

     -2-

     

    

 

(iii)        whenever
the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period
shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an
Interest Period for a Borrowing of Eurodollar Loans to occur in the following calendar month, the last day of such Interest Period
shall be the immediately preceding Business Day; and

 

(iv)        for
purposes of determining an Interest Period for a Borrowing of Eurodollar Loans, a month means a period starting on one day in
a calendar month and ending on the numerically corresponding day in the next calendar month; provided, however, that if
there is no numerically corresponding day in the month in which such an Interest Period is to end or if such an Interest Period
begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar
month in which such Interest Period is to end.

 

“Revolving
Credit Termination Date” means the date demand for payment of the Revolving Loans and cash collateralization of the
Letters of Credit is made by the Bank but if no such demand is sooner made, April 1, 2020, or such earlier date on which the Revolving
Credit Line is terminated in whole pursuant to Section 2.11, 9.2 or 9.3.

 

“Term
Loan Maturity Date” means April 1, 2020.

 

2.2.      Section
1.1 of the Credit Agreement (Definitions) shall be amended by adding the following new definition thereto in proper alphabetical
order:

 

“Second
Amendment Effective Date” means March 28, 2018 or such later Business Day upon which each condition described in Section
3 of the Second Amending Agreement, dated as of March 28, 2018, by and among the Borrower, the Guarantors and the Bank shall be
satisfied or waived in a manner acceptable to the Bank in its discretion.

 

2.3.      Section
2.1 of the Credit Agreement (Term Loan Facility) shall be amended and restated in its entirety to read as follows:

 

The
Bank previously on or about December 2, 2014 extended loans (the “Term Loan”) in U.S. Dollars to the Borrower
in the amount of $5,000,000, at which time the Term Loan Commitment has expired, and the Borrower agrees that such amount is justly
due and owing without offset or counterclaim. The parties acknowledge and agree that as of March 14, 2018, the outstanding principal
amount of the Term Loan is $4,500,000, and the Bank hereby agrees to continue such Term Loan subject to the terms and conditions
hereof. As provided in Section 2.6(a), the Borrower may elect that the Term Loan be outstanding as U.S. Prime Rate Loans or Eurodollar
Loans. No amount repaid or prepaid on the Term Loan may be borrowed again.

 

     -3-

     

    

 

2.4.         Clause
(a) Section 2.7 of the Credit Agreement (Scheduled Payments of Term Loan) shall be amended and restated in its entirety
to read as follows:

 

(a)
. The Borrower shall make principal payments on the Term Loan in installments on each due date as set forth in Column A
below, commencing with March 31, 2018, with the amount of each such principal installment to equal the amount set forth in Column
B below shown opposite of the relevant due date as set forth in Column A below:

 

	Column
A 

                                                                      

        Payment
Date 
	Column B 

 

Amount of Payment 

	03/31/18	$31,250.00	 
	06/30/18	$31,250.00	 
	07/31/18	$100,000.00	 
	08/31/18	$100,000.00	 
	09/30/18	$100,000.00	 
	10/31/18	$100,000.00	 
	11/30/18	$100,000.00	 
	12/31/18	$100,000.00	 
	01/31/19	$100,000.00	 
	02/28/19	$100,000.00	 
	03/31/19	$100,000.00	 
	04/30/19	$100,000.00	 
	05/31/19	$100,000.00	 
	06/30/19	$100,000.00	 
	07/31/19	$100,000.00	 
	08/31/19	$100,000.00	 
	09/30/19	$100,000.00	 
	10/31/19	$100,000.00	 
	11/30/19	$100,000.00	 
	12/31/19	$100,000.00	 
	01/31/20	$100,000.00	 
	02/29/20	$100,000.00	 
	03/31/20	$100,000.00	 
	04/01/20
    (Term Loan Maturity Date)	Bullet payment of $2,337,500.00

 

,
with a final payment of all principal and interest not sooner paid on the Term Loan due and payable on the Term Loan Maturity
Date.

 

     -4-

     

    

 

2.5.         Clause
(b) Section 3.1 of the Credit Agreement (Fees) shall be amended and restated in its entirety to read as follows:

 

(b)          Administration
Fee. On the Second Amendment Effective Date and on April 1, 2019 until the Revolving Loans are terminated, the Borrower shall
pay to the Bank an administration fee equal to 0.10% of the Revolving Credit Line then in effect, whether or not in use.

 

2.6.        Section
8.23 of the Credit Agreement (Financial Covenants) shall be amended and restated in its entirety to read as follows:

 

Section
8.23.     Financial Covenants. (a) Current Ratio. As of the last day of each fiscal quarter of the Borrower, the Loan
Parties and their Subsidiaries shall maintain a Current Ratio of not less than the corresponding ratio set forth opposite such
determination date below:

 

	Fiscal
    Quarter Ending on or about	 	Current
    Ratio shall not be less than:
	 	 	 
	3/31/18	 	0.90
    to 1.0
	 	 	 
	6/30/18	 	0.95
    to 1.0
	 	 	 
	9/30/18	 	1.00
    to 1.0
	 	 	 
	12/31/18
    and each fiscal quarter thereafter	 	1.05
    to 1.0

 

     -5-

     

    

 

 (b)          EBITDA.
The Loan Parties and their Subsidiaries shall not permit EBITDA, on a consolidated basis, (i) on or prior to December 31,
2018, for the period from and including January 1, 2018 and ending as of the last day of the fiscal quarter of the Borrower set
forth below and (ii) from and after January 1, 2019 for the four (4) consecutive fiscal quarters of the Borrower then most recently
completed, determined on the last day of each fiscal quarter of the Borrower to be less than the applicable amount set forth opposite
such determination date below in the “Minimum EBITDA Covenant Level” column:

 

	Fiscal
    Quarter Ending on or about	 	Borrower Budgeted Minimum EBITDA	 	Minimum
    EBITDA Covenant Level[reflects 20% maximum variance to Borrower Budgeted Minimum EBITDA]
	 	 	 	 	 	 
	3/31/18	 	$792,000	 	 	$633,600
	 	 	 	 	 	 
	6/30/18	 	$2,207,000	 	 	$1,765,600
	 	 	 	 	 	 
	9/30/18	 	$4,541,000	 	 	$3,632,800
	 	 	 	 	 	 
	12/31/18
    and each fiscal quarter thereafter	 	$7,200,000	 	 	$5,760,000

 

(c)       Tangible
Net Worth. As of the last day of each fiscal quarter of the Borrower, the Loan Parties and their Subsidiaries shall maintain
Tangible Net Worth of not less than the corresponding amount set forth opposite such determination date below in the “Minimum
Tangible Net Worth” column:

 

	Period(s)
    Ending	 	Borrower
    Budgeted Tangible Net Worth:	 	Minimum
    Tangible Net Worth [reflects 15% maximum variance to Borrower budgeted tangible net worth]:
	 	 	 	 	 
	3/31/18	 	$1,056,000	 	$897,600
	 	 	 	 	 
	6/30/18	 	$2,316,800	 	$1,969,280
	 	 	 	 	 
	9/30/18	 	$3,860,800	 	$3,281,680
	 	 	 	 	 
	12/31/18
    and at all times thereafter	 	$5,272,000	 	$4,481,200

 

     -6-

     

    

 

Section
3.          Conditions Precedent.

 

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

 

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

 

3.2.         The
Bank shall have received copies of resolutions of each Loan Party’s Board of Directors (or similar governing body) authorizing
the execution, delivery and performance of this Amendment and the other Loan Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby, certified by its Secretary or Assistant Secretary (or comparable Responsible
Officer).

 

3.3.         The
Bank shall have received (i) a non-refundable administration fee in the amount of $15,000 pursuant to Section 3.1(b) of the Credit
Agreement, and (ii) all legal fees of the Bank’s U.S. legal counsel invoiced prior to the date hereof.

 

3.4.         The
Bank shall have received confirmation that all conditions precedent for the Second Amending Agreement to the Canadian Credit Facilities,
dated as of the date hereof, have been met to the satisfaction of the Bank and its legal counsel.

 

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

 

Section
4.          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
5.          Miscellaneous.

 

5.1.         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.

 

5.2.         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.

 

     -7-

     

    

 

5.3.         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.

 

5.4.         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
PAGES FOLLOW]

 

     -8-

     

    

 

This
Second Amending Agreement is entered into as of the date and year first above written.

 

	 	“Borrower”

	 	 
	 	Pioneer
    Power Solutions, Inc.
	 	 
	 	By	 
	 	 	 
	 	 	Name: Nathan
    Mazurek
	 	 	Title: CEO
	 	 	 
	 	“Guarantors”

	 	 
	 	Jefferson
    Electric, Inc.
	 	 	 
	 	By	 
	 	 	Name: Nathan
    Mazurek
	 	 	Title: CEO
	 	 	 
	 	Pioneer
    Critical Power Inc.
	 	 	 
	 	By	 
	 	 	Name: Nathan
    Mazurek
	 	 	Title: CEO
	 	 	 
	 	Pioneer
    Custom Electrical Products Corp.
	 	 	 
	 	By	 
	 	 	Name: Nathan
    Mazurek
	 	 	Title: CEO
	 	 	 
	 	Titan
                    Energy Systems Inc.

	 	 	 
	 	 By	 
	 	 	Name: Nathan
    Mazurek
	 	 	Title: CEO

 

[Signature
Page to Second Amending Agreement] 

 

    

     

    

 

Accepted
and agreed to.

 

	 	Bank
of Montreal, acting through its Chicago Branch
	 	 	 
	 	By	 
	 	 	Name	 
	 	 	Title	 	 

 

[Signature
Page to Second Amending Agreement]NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS PROMISSORY NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

PRESSURE
BIOSCIENCES, inc.

 

amendment
number 2 to october 26, 2016 PROMISSORY NOTE

 

	Original
    Principal: US$2,000,000	Original
    Issue Date: October 26, 2016

 

	Amendment
    No. 1	 
	Principal:
    US$3,000,000	Amendment
    No. 1 Issue Date: May 2, 2017

 

	Amendment
    No. 2	 
	Principal:
    US$3,500,000	Amendment
    No. 2 Issue Date: August 18, 2017

 

WHEREAS,
PRESSURE BIOSCIENCES, INC., a corporation incorporated under the laws of the Commonwealth of Massachusetts and located
at 14 Norfolk Avenue, South Easton, MA 02375 (the “Company”) previously issued a Promissory Note (the “Original
Note”) on October 26, 2016 (the “Original Issue Date”), in favor of XXXXX, an individual residing
at 175 West Jackson Blvd, Suite 400, Chicago, IL 60091 (the “Holder”) for the principal sum of Two Million
United States Dollars (US$2,000,000);

 

WHEREAS,
the Company and the Holder amended the Original Note on May 2, 2017 (the “Amendment Number 1 Issue Date”),
to, among other amendments, increase the principal sum to Three Million United States Dollars (US$3,000,000) (“Amendment
Number 1”); and

 

WHEREAS,
the Company and the Holder wish to again amend the Original Note with such amendment having an issue date of August 18, 2017 (this
“Amendment Number 2”), the Original Note having the Original Issue Date, and Amendment Number 1 having the
Amendment Number 1 Issue Date.

 

    	 

    	 

    

 

NOW,
THEREFORE, in consideration of, among other things, the premises, representations, respective covenants and agreements contained
herein, each party hereby agrees to the following:

 

	 	1.	Capitalized
    terms used, but not defined, herein, shall have the meanings ascribed to such terms in the Original Note as amended by Amendment
    Number 1.
	 	 	 
	 	2.	The
    definition of Principal Amount in the Original Note as amended by Amendment Number 1 is changed to Three Million Five Hundred
    United States Dollars (US$3,500,000).
	 	 	 
	 	3.	All
    other terms and conditions of the Original Note as amended by Amendment Number 1 shall remain in full force and effect.
	 	 	 
	 	4.	This
    Amendment Number 2 may be executed in any number of counterparts and by the different signatories hereto on separate counterparts,
    each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same
    instrument. This Amendment Number 2 may be executed by facsimile transmission, PDF, electronic signature or other similar
    electronic means with the same force and effect as if such signature page were an original thereof.

 

[Signature
page follows]

 

    	 

    	 

    

 

IN
WITNESS WHEREOF, this Amendment Number 2 has been executed and delivered on the Amendment No. 2 Issue Date specified above.

 

	 	COMPANY:
	 	 	 
	 	PRESSURE
    BIOSCIENCES, INC.
	 	 	 
	 	By:	
	 	Name:	Richard
T. Schumacher
	 	Title:	President
    and CEO
	 	 	 
	 	HOLDER:
	 	 
	 	XXXXXX	 

 

[signature
page to Amendment Number 2]

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