8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

_________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

_________________

Date of Report (Date of earliest event reported):  April 30, 2010

PIONEER POWER SOLUTIONS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	333-155375	26-3387077
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One Parker Plaza 400 Kelby Street, 9th Floor Fort Lee, New Jersey	07024
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 867-0700

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.                      Entry Into a Material Definitive Agreement.

Merger Agreement

On April 30, 2010, Pioneer Power Solutions, Inc. (“Pioneer”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Jefferson Electric, Inc., a Delaware corporation (“Jefferson”), Thomas Klink, the sole stockholder of Jefferson, and JEI Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of Pioneer (“Merger Sub”), pursuant to which, on such date, Merger Sub merged with and into Jefferson (the “Merger”), with Jefferson continuing as the surviving corporation and becoming a wholly owned subsidiary of Pioneer.

Upon consummation of the Merger, an aggregate of 2,295 shares of Jefferson common stock, par value $1.00 per share, issued and outstanding was cancelled and converted into the right to receive an aggregate of 486,275 shares of Pioneer common stock, par value $0.001 per share (the “Merger Shares”).

Each of Pioneer, Jefferson and Merger Sub made customary representations, warranties and covenants and indemnities in the Merger Agreement.  The board of directors of each of Pioneer, Jefferson and Merger Sub approved the Merger Agreement and the Merger.

Jefferson is a manufacturer and supplier of dry-type transformers and lighting ballasts for commercial, industrial and original equipment manufacturer (OEM) customers.

In accordance with the Merger Agreement, upon consummation of the merger, Pioneer advanced $3.0 million to Jefferson (the “Bank Loan Advance”), which was utilized for the following purposes: (i) $2.8 million to pay the principal amount of the revolving credit facility under the Bank Loan Agreement (defined and described under “Bank Loan Agreement” below) and (ii) $200,000 to pay the principal amount of the term loan facility under the Bank Loan Agreement.  The Bank Loan Advance constitutes a loan made by Pioneer to Jefferson and is subordinated to the Bank Loan Agreement.

Employment Agreement and Election of Director

On April 30, 2010, in connection with the Merger, Jefferson, entered into an Employment Agreement (the “Employment Agreement”) with Mr. Klink pursuant to which Mr. Klink shall serve as Jefferson’s President on a full time basis, subject to the authority of the chief executive officer of Jefferson, for a term of three years following the consummation of the Merger, unless Mr. Klink is terminated earlier in accordance with the provisions of the Employment Agreement. Mr. Klink will receive an annual base salary of $312,000. Mr. Klink’s employment may be terminated upon his death or disability, upon the occurrence of certain events that constitute “cause,” and without cause.  If terminated without cause, Mr. Klink shall be entitled to receive as severance an amount equal to his base salary for the remainder of the three year employment period, conditioned upon his execution of a release in form reasonably acceptable to counsel to Jefferson.

In connection with the Merger, Mr. Klink was appointed to the board of Pioneer effective upon the consummation of the Merger. The Merger Agreement provides that, with certain exceptions, including resignation, termination or removal as a director, Pioneer will cause Mr. Klink to be nominated as a director of Pioneer during the three year term of the Employment Agreement. In addition, on April 30, 2010, Mr. Klink entered into a Voting Agreement with Provident Pioneer Partners, L.P. (“Provident”), which beneficially owns 23.8 million, or 78.1%, of Pioneer’s outstanding common stock after the issuances described herein, pursuant to which Provident agreed to vote all of its shares to elect Mr. Klink as a director of Pioneer during the three year term of the Employment Agreement, subject to certain exceptions, including resignation, termination or removal as a director.

Lock-Up Agreement

In accordance with the Merger Agreement, Pioneer, Mr. Klink and Jefferson entered into a Lock-Up Agreement (the “Lock-Up Agreement”) pursuant to which Mr. Klink may not, subject to certain exemptions, sell or transfer any of the Merger Shares during the period commencing as of the effective time of the Merger and ending 18 months thereafter.  The Klink Warrant (defined and described under “Warrant Purchase Agreement” below) also provides for a concurrent 18 month lock-up period that covers the Klink Warrant Shares.

JEM Purchase Agreement

In accordance with the Merger Agreement, JE Mexican Holdings, Inc, a Delaware corporation and wholly owned subsidiary of Pioneer (“JEMH”) and Mr. Klink entered into a Purchase Agreement (the “JEM Purchase Agreement”), providing for the sale by Mr. Klink to JEMH of one hundred percent (100%) of the membership interests in Jefferson Electric Mexico Holdings LLC, a Wisconsin limited liability company (“JE Mexico”), for nominal consideration. JE Mexico is the holder of a less than 0.1% minority equity interest in Nexus Magneticos de Mexico, S. de R.L. de C.V. (“Nexus Mexico”), the principal manufacturing subsidiary of Jefferson which is located in Reynosa, Mexico.

Warrant Purchase Agreement

On April 30, 2010, Pioneer entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”) with Mr. Klink, pursuant to which, in exchange for $10,000, Pioneer sold a five year warrant (the “Klink Warrant”) to Mr. Klink that is exercisable for up to 1.0 million shares of Pioneer common stock (the “Klink Warrant Shares”) at an initial exercise price of $3.25 per share, subject to customary anti-dilution adjustments.  Pursuant to the Klink Warrant, the Klink Warrant Shares are subject to an 18-month lock-up period that is concurrent with and contains similar terms as the Lock-Up Agreement.  See “Item 3.02 Unregistered Sales of Equity Securities” hereto for more information on the issuance.

Bank Loan Agreement

Prior to the Merger, Jefferson was a party to a Loan and Security Agreement, dated as of January 2, 2008, as amended, between Jefferson, as borrower, and Johnson Bank, as lender (the “Bank Loan Agreement”). In accordance with the Merger Agreement, concurrently with the Merger, Jefferson and Johnson Bank entered into a Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”) providing for a restructuring of the credit facilities provided in the Bank Loan Agreement, waiving and releasing all prior defaults by Jefferson under the Bank Loan Agreement, and any claims or rights relating thereto, and providing the consent and approval of Johnson Bank to the Merger and other transactions contemplated by the Merger Agreement.

Neither Pioneer nor any of its affiliates, other than Jefferson, are responsible for, or guarantors of, or have otherwise assumed, any debts, liabilities or obligations under the Bank Loan Agreement, as amended. In addition, under the Fifth Amendment, Mr. Klink and Nexus Mexico are guarantors under the Bank Loan Agreement, as amended.  Borrowings under the Bank Loan Agreement, as amended, are collateralized by substantially all assets of Jefferson as well as by the Merger Shares and the Klink Warrant.

The Bank Loan Agreement, as amended, includes a revolving credit facility with a borrowing base of $5.0 million and a term credit facility.  Monthly payments of accrued interest must be made under the revolving credit facility and monthly payments of principal and accrued interest must be made under the term credit facility, with a final payment of all outstanding amounts under both on October 31, 2011.  Following certain payments in connection with the Merger, approximately $1.4 million is currently outstanding under the revolving credit facility and approximately $3.3 million is currently outstanding under the term credit facility.

The interest rate under the revolving credit facility is equal to the greater of (a) the rate of interest announced from time to time by Johnson Bank as its reference rate for interest rate determinations (currently 3.25% annually) or (b) 6.5% annually.  The interest rate under the term credit facility is 7.27% annually.  The unpaid balances on the credit facilities will bear interest after default or maturity at five percentage points annually in excess of the otherwise applicable rate.

The Bank Loan Agreement, as amended, contains certain financial covenants, including a requirement that Jefferson achieve minimum tangible net worth targets over the next six fiscal quarters and maintain a minimum debt service coverage ratio, each as defined and set forth in the Bank Loan Agreement, as amended.

The Bank Loan Agreement, as amended, restricts Jefferson’s ability to pay dividends or make distributions, advances or other transfers of assets to Pioneer.

Repayment of amounts outstanding under the Bank Loan Agreement may be accelerated upon an event of default.  Events of default include, on the part of Jefferson or the guarantor, as applicable, certain bankruptcy proceedings, failure to pay certain amounts due, failure to perform any warranty undertaking or covenant under the Bank Loan Agreement, failure to perform under or breach pursuant to any other agreement with Johnson Bank, termination, revocation or repudiation by guarantor of his obligations, certain failures of a creditor of Jefferson to honor a subordination or intercreditor agreement with Johnson Bank, Jefferson or guarantor dies, ceases to exist or becomes insolvent, certain misrepresentations by Jefferson to Johnson Bank, certain injunctions or attachments, and acceleration of other obligations of Jefferson.

The foregoing descriptions of the Merger, the Merger Agreement, the Employment Agreement, the Voting Agreement, the Lock-Up Agreement, the JEM Purchase Agreement, the Warrant Purchase Agreement, the Klink Warrant, the Bank Loan Agreement, as amended, and the Fifth Amendment do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement, the Employment Agreement, the Voting Agreement, the Lock-Up Agreement, the JEM Purchase Agreement, the Warrant Purchase Agreement, the Klink Warrant, the Bank Loan Agreement, the Amendment to Loan and Security Agreement dated January 29, 2008, the Second Amendment to Loan and Security Agreement dated May 2, 2008, the Third Amendment to Loan and Security Agreement dated December 3, 2008, the Forbearance Agreement and Fourth Amendment to Loan Agreement dated August 28, 2009, the First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement dated December 8, 2009, the First Amendment to First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement dated March 31, 2010 and the Fifth Amendment, which are filed as Exhibits 2.1, 4.1 and 10.1 through 10.13 hereto and incorporated by reference herein.

The Merger Agreement has been included to provide investors and security holders with information regarding its terms and conditions. It is not intended to provide any other factual information about Pioneer. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of such agreement and as of specific dates, were for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. The representations, warranties and covenants therein may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Pioneer or its respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Pioneer’s public disclosures.

Item 2.01.                      Completion of Acquisition or Disposition of Assets.

           The information set forth in Item 1.01 of this report is incorporated herein by reference.

Item 2.03.                      Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 of this report is incorporated herein by reference.

Item 3.02                      Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this report is incorporated herein by reference.

The Merger Shares were issued in an offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) under Section 4(2) of the Securities Act. Mr. Klink represented to Pioneer that he was an “accredited investor” as defined in Regulation D under the Securities Act and signed the Lock-Up Agreement restricting the resale of the Merger Shares.

The Klink Warrant was issued in an offering exempt from registration under the Securities Act under Section 4(2) of the Securities Act. Mr. Klink represented to Pioneer that he was an “accredited investor” as defined in Regulation D under the Securities Act and was acquiring the Klink Warrant and will acquire the Klink Warrant Shares for investment for his own account, with no present intention of dividing his participation with others or reselling or otherwise distributing the same.

The foregoing descriptions of the Merger, the Merger Agreement and the Klink Warrant do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement, the Warrant Purchase Agreement and the Klink Warrant, which are filed as Exhibits 2.1, 4.1 and 10.5 hereto and incorporated by reference herein.

Item 5.02                      Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information set forth in Item 1.01 of this report is incorporated herein by reference.

Item 7.01                      Regulation FD Disclosure.

On May 3, 2010, Pioneer issued a press release announcing the execution of the Merger Agreement and consummation of the Merger, a copy of which is furnished as Exhibit 99.1 hereto.

In accordance with general instruction B.2 to Form 8-K, the information contained in Exhibit 99.1 is being “furnished” and not “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and such information shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

The information furnished pursuant to this Item 7.01 shall not be deemed to constitute an admission that such information is required to be furnished pursuant to Regulation FD or that such information or exhibit contains material information that is not otherwise publicly available.  In addition, Pioneer does not assume any obligation to update such information in the future.

Item 9.01.                      Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

The required financial statements of Jefferson will be filed by amendment pursuant to Item 9.01(a)(4) within 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.

(b) Pro forma financial information.

The required pro forma information with respect to Jefferson will be filed by amendment pursuant to Item 9.01(b)(2) within 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.

(d) Exhibits.

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated April 30, 2010, by and among Pioneer Power Solutions, Inc., Jefferson Electric, Inc., Thomas Klink, and JEI Acquisition, Inc.
4.1	Warrant to Purchase Common Stock, dated April 30, 2010, issued to Thomas Klink.
10.1	Employment Agreement, dated April 30, 2010, by and between Jefferson Electric, Inc. and Thomas Klink.
10.2	Voting Agreement, dated April 30, 2010, by and between Provident Pioneer Partners, L.P. and Thomas Klink.
10.3	Lock-Up Agreement, dated April 30, 2010, by and among Thomas Klink, Pioneer Power Solutions, Inc. and Jefferson Electric, Inc.
10.4	Purchase Agreement, dated April 30, 2010, by and between Thomas Klink and JE Mexican Holdings, Inc.
10.5	Warrant Purchase Agreement, dated April 30, 2010, by and between Pioneer Power Solutions, Inc. and Thomas Klink.
10.6	Loan and Security Agreement, dated January 2, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.7	Amendment to Loan and Security Agreement, dated January 29, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.8	Second Amendment to Loan and Security Agreement, dated May 2, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.9	Third Amendment to Loan and Security Agreement, dated December 3, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.10	Forbearance Agreement and Fourth Amendment to Loan Agreement, dated August 28, 2009, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.11	First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, dated December 8, 2009, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.12	First Amendment to First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, dated March 31, 2010, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.13	Fifth Amendment to Loan and Security Agreement, dated April 30, 2010, by and between Jefferson Electric, Inc. and Johnson Bank.
99.1	Press Release, dated May 3, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PIONEER POWER SOLUTIONS, INC.
Dated: May 3, 2010	By:	/s/ Nathan J. Mazurek
		Name:	Nathan J. Mazurek
		Title:	Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated April 30, 2010, by and among Pioneer Power Solutions, Inc., Jefferson Electric, Inc., Thomas Klink, and JEI Acquisition, Inc.
4.1	Warrant to Purchase Common Stock, dated April 30, 2010, issued to Thomas Klink.
10.1	Employment Agreement, dated April 30, 2010, by and between Jefferson Electric, Inc. and Thomas Klink.
10.2	Voting Agreement, dated April 30, 2010, by and between Provident Pioneer Partners, L.P. and Thomas Klink.
10.3	Lock-Up Agreement, dated April 30, 2010, by and among Thomas Klink, Pioneer Power Solutions, Inc. and Jefferson Electric, Inc.
10.4	Purchase Agreement, dated April 30, 2010, by and between Thomas Klink and JE Mexican Holdings, Inc.
10.5	Warrant Purchase Agreement, dated April 30, 2010, by and between Pioneer Power Solutions, Inc. and Thomas Klink.
10.6	Loan and Security Agreement, dated January 2, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.7	Amendment to Loan and Security Agreement, dated January 29, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.8	Second Amendment to Loan and Security Agreement, dated May 2, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.9	Third Amendment to Loan and Security Agreement, dated December 3, 2008, by and between Jefferson Electric, Inc. and Johnson Bank.
10.10	Forbearance Agreement and Fourth Amendment to Loan Agreement, dated August 28, 2009, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.11	First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, dated December 8, 2009, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.12	First Amendment to First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, dated March 31, 2010, by and among Johnson Bank, Jefferson Electric, Inc. Thomas Klink and Diane Klink.
10.13	Fifth Amendment to Loan and Security Agreement, dated April 30, 2010, by and between Jefferson Electric, Inc. and Johnson Bank.
99.1	Press Release, dated May 3, 2010.

EX-2.1

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

among

JEFFERSON ELECTRIC, INC.

and

THOMAS KLINK

and

PIONEER POWER SOLUTIONS, INC.

and

JEI ACQUISITION CORP.

dated as of

April 30, 2010

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 30, 2010, by and among JEFFERSON ELECTRIC, INC., a Delaware corporation (the "Company"), PIONEER POWER SOLUTIONS, INC., a Delaware corporation ("Parent"), JEI ACQUISITION CORP., a Delaware corporation and a wholly-owned Subsidiary of Parent ("Merger Sub"), and THOMAS KLINK, an individual residing at 2323 Ridgewood Road, Grafton, WI 53024 (the “Company Stockholder”).  Capitalized terms used herein (including in the immediately preceding sentence) and not otherwise defined herein shall have the meanings set forth in Section 8.01 hereof.

RECITALS:

WHEREAS, the parties intend that Merger Sub be merged with and into the Company, with the Company surviving that merger on the terms and subject to the conditions set forth herein; and

WHEREAS, in the Merger, upon the terms and subject to the conditions of this Agreement, each share of common stock, par value $1.00 per share, of the Company will be converted into the right to receive the Merger Consideration consisting of Parent Common Stock; and

WHEREAS, the Company Stockholder constitutes the sole stockholder of the Company and owns beneficially and of record all of the issued and outstanding shares of common stock of the Company; and

WHEREAS, the Board of Directors of the Company (the "Company Board") has unanimously (a) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement with Parent and Merger Sub, (b) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger (as defined below), and (c) resolved to recommend adoption of this Agreement by the stockholders of the Company; and

WHEREAS, the respective Boards of Directors of Parent and Merger Sub have unanimously approved this Agreement; and

WHEREAS, the Company Stockholder, as the sole stockholder of the Company, has duly approved and adopted this Agreement and approved the Merger; and

WHEREAS, prior to the Effective Time, the Company has been converted from a Wisconsin corporation to a Delaware corporation in accordance with the respective laws of Delaware and Wisconsin (the “Company Conversion”); and

WHEREAS, the Company Conversion has been duly approved by the Board of Directors of the Company and the Company Stockholder in accordance with the respective laws of Wisconsin and Delaware; and

WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the transactions contemplated by this Agreement and also to prescribe certain conditions to the Merger; and

WHEREAS, the parties intend that the Merger qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");

NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained in this Agreement, the parties, intending to be legally bound, agree as follows:

ARTICLE I

THE MERGER

Section 1.01    The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), at the Effective Time, (a) Merger Sub shall merge with and into the Company (the "Merger"), and (b) the separate corporate existence of Merger Sub shall cease and the Company shall continue its corporate existence under the DGCL as the surviving corporation in the Merger (the "Surviving Corporation").

Prior to the Effective Time, the Company Conversion has been effected under the respective laws of Delaware and Wisconsin and the certificates of conversion have been duly filed and recorded under the respective laws of Delaware and Wisconsin. Pursuant to the Company Conversion, the Company has been converted from a Wisconsin corporation into a Delaware corporation.

Section 1.02    Closing. Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the "Closing") will take place at 1 p.m., New York City time, on April 30, 2010, i.e., concurrently with the execution of this Agreement, unless another time or date is mutually agreed upon in writing by the parties hereto. The Closing shall be held at the offices of Shiboleth LLP, One Penn Plaza, Suite 2527, New York, NY 10119, unless another place is mutually agreed upon in writing by the parties hereto, and the actual date of the Closing is hereinafter referred to as the "Closing Date".

Section 1.03    Effective Time.  Subject to the provisions of this Agreement, at the Closing, the Company, Parent and Merger Sub shall cause a certificate of merger (the "Certificate of Merger") to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL.   The Merger shall become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Parent in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the "Effective Time").

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Section 1.04    Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Corporation.

Section 1.05    Certificate of Incorporation; By-laws. At the Effective Time: (a) the Certificate of Incorporation of the Company shall be amended so as to read in its entirety as set forth in Schedule A, and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended in accordance with the terms thereof or as provided by applicable Law; and (b) the By-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation until thereafter amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Corporation or as provided by applicable Law.

Section 1.06    Directors and Officers.  The directors and officers of Merger Sub, in each case, immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation.

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK

Section 2.01    Effect of the Merger on Capital Stock.  At the Effective Time, as a result of the Merger and without any action on the part of Parent, Merger Sub or the Company or the holder of any capital stock of Parent, Merger Sub or the Company:

(a)           Conversion of Company Common Stock.  The shares (each, a “Share” and, collectively, the “Shares”) of Common Stock, par value $1.00 per share, of the Company (the "Company Common Stock") then issued and outstanding immediately prior to the Effective Time, i.e., an aggregate of 2,295 Shares of Company Common Stock then issued and outstanding (other than those Shares of Company Common Stock held by the Company in the treasury as set forth in Section 2.01(b) below), shall, subject to and in accordance with Section 2.02 hereof, be automatically cancelled and extinguished and thereafter represent the right to receive an aggregate of 486,275 shares of Common Stock of Parent, par value $0.001 per share (the “Parent Common Stock”). The aggregate number of shares of Parent Common Stock (486,275) issuable pursuant to this Section 2.01 is referred to collectively in this Agreement as the "Merger Consideration."

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(b)           Treasury Shares.  Each Share of Company Common Stock then held by the Company as a treasury share immediately prior to the Effective Time shall be cancelled and extinguished without payment of any consideration therefor and without conversion thereof.

(c)           Cancellation of Shares. At the Effective Time, all Shares of Company Common Stock shall no longer be outstanding and all such Shares of Company Common Stock shall be cancelled and retired and shall cease to exist, and each holder of a certificate formerly representing any such Shares of Company Common Stock (each, a "Certificate") shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration pursuant to the terms hereof.

Section 2.02    Surrender and Payment.

(a)           Each holder of Shares of Company Common Stock that have been converted into a right to receive the Merger Consideration, upon surrender to Parent of a Certificate (or as contemplated by Section 2.04), together with properly completed documents of transfer covering such Shares of Company Common Stock, will be entitled to receive the Merger Consideration in exchange for such Shares of Company Common Stock. After the Effective Time, each such Certificate shall, until so surrendered, represent for all purposes only the right to receive such Merger Consideration.

(b)           After the Effective Time, there shall be no further registration of transfers of Shares of Company Common Stock outstanding prior to the Effective Time.  If, after the Effective Time, Certificates representing Shares of Company Common Stock outstanding prior to the Effective Time are presented to the Surviving Corporation, then such Certificates shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Agreement.

(c)           All shares of Parent Common Stock constituting Merger Consideration shall be delivered at the Effective Time, in exchange for and against receipt by Parent of Certificates representing Shares of Company Common Stock (or as contemplated by Section 2.04), together with appropriate and proper instruments of transfer, by delivery of Certificates representing Shares of Company Common Stock.

(d)           No fraction of a share of Parent Common Stock shall be issued by virtue of the Merger, but in lieu thereof, each holder of Shares of Company Common Stock who would otherwise be entitled to a fraction of a Share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder) shall receive from Parent one share of Parent Common Stock.

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Section 2.03    Withholding Rights.Each of Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article II such amounts as may be required to be deducted and withheld with respect to the making of such payment under any provision of any applicable Tax Law. To the extent that amounts are so deducted and withheld by Parent or the Surviving Corporation, as the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which Parent or the Surviving Corporation, as the case may be, made such deduction and withholding.

Section 2.04    Lost Certificates.If any Certificate shall have been lost, stolen or destroyed, upon (i) the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and (ii) if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against Parent with respect to such Certificate, then Parent will issue or cause to be issued, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the Shares of Company Common Stock formerly represented by such Certificate as contemplated under this Article II.

Section 2.05    Certificate Legends.  The shares of Parent Common Stock to be issued pursuant to this Article II shall not have been registered and shall be characterized as “restricted securities” under the federal securities laws, and under such laws such shares may be resold without registration under the Securities Act of 1933, as amended (the “Securities Act”), only in certain limited circumstances.  Each certificate evidencing shares of Parent Common Stock to be issued pursuant to this Article II shall bear the standard securities legends (including any legends as may be required by applicable state securities laws) and/or any other legends required pursuant to the Lock-Up Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND COMPANY STOCKHOLDER

Except as set forth in the correspondingly numbered Section of the disclosure letter, dated as of the date of this Agreement and delivered by the Company and Company Stockholder to Parent prior to the execution of this Agreement (the "Company Disclosure Letter"), the Company and Company Stockholder hereby, jointly and severally, represent and warrant to Parent and Merger Sub as follows:

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Section 3.01    Organization; Standing and Power; Charter Documents; Minutes; Subsidiaries; Affiliates.

(a)           Organization; Standing and Power. The Company and each of its Subsidiaries is a corporation, limited liability company or other legal entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of its jurisdiction of organization, and has the requisite corporate, limited liability company or other organizational, as applicable, power and authority to own, lease and operate its assets and to carry on its business as now conducted.  Each of the Company and its Subsidiaries is duly qualified or licensed to do business as a foreign corporation, limited liability company or other legal entity and is in good standing (with respect to jurisdictions that recognize the concept of good standing) in each jurisdiction where the character of the assets and properties owned, leased or operated by it or the nature of its business makes such qualification or license necessary, except where the failure to be so qualified or licensed or to be in good standing, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b)           Charter Documents. The Company has delivered or made available to Parent a true and correct copy of the certificate of incorporation (including any certificate of designations), by-laws or like organizational documents, each as amended to date (collectively, the "Charter Documents"), of the Company and each of its Subsidiaries. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its Charter Documents.

(c)           Minutes.  The Company has furnished to Parent true and correct copies of the minutes of all meetings of stockholders, the Company Board and the Board of Directors of each its Subsidiaries (and each committee thereof) since January 1, 2005.  The minute books of the Company and its Subsidiaries, as previously furnished to Parent, set forth, in all material respects, complete and accurate records of all meetings and accurately reflect all other corporate action of the stockholders and boards of directors of such entities.   The corporate minutes of the Company and its Subsidiaries posted prior to the date hereof on the Company’s due diligence website set forth all of such corporate minutes of the Company and its Subsidiaries since January 1, 2005, and there are no other corporate minutes of the Company and its Subsidiaries.

(d)           Subsidiaries; JEM Purchase Agreement.  Section 3.01(d)(i) of the Company Disclosure Letter lists each of the Subsidiaries of the Company as of the date hereof and its place of organization. Section 3.01(d)(ii) of the Company Disclosure Letter sets forth, for each Subsidiary that is not, directly or indirectly, a wholly-owned by the Company, (x) the number and type of any capital stock of, or other equity or voting interests in, such Subsidiary that is outstanding as of the date hereof; and (y) the number and type of shares of capital stock of, or other equity or voting interests in, such Subsidiary that, as of the date hereof, are owned, directly or indirectly, by the Company. All of the outstanding shares of capital stock of, or other equity or voting interests in, each Subsidiary of the Company that is owned, directly or indirectly, by the Company have been validly issued, were issued free of pre-emptive rights and are fully paid and non-assessable, and are free and clear of all Liens, including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity or voting interests, except for any Liens (x) imposed by applicable securities Laws or (y) arising pursuant to the Charter Documents of any non-wholly-owned Subsidiary of the Company. Except for the capital stock of, or other equity or voting interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other equity or voting interests in, any Person.

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Prior to the Effective Time, the Company Stockholder, as seller, and a designee of Parent, as purchaser, will enter into and consummate the Purchase Agreement, (the “JEM Purchase Agreement”) pursuant to which the Company Stockholder will sell and transfer to such purchaser all of the equity interests owned by such Company Stockholder in Jefferson Electric Mexico Holdings LLC, a Wisconsin limited liability company (“JEM Holdings”).  The entire membership interest of JEM Holdings is owned by the Company Stockholder.

Section 3.01(d)(iv) of the Company Disclosure Letter sets forth each of the Subsidiaries and/or Affiliates of the Company and/or Company Stockholder which has: (i) merged with or into the Company; (ii) ceased or otherwise terminated business operations; and/or (iii) liquidated and/or dissolved, in each case, since January 1, 2008 (the “Terminated Company Affiliates”).  Prior to the Effective Time, the Company shall furnish or cause to be furnished to Parent evidence of such merger, liquidation or otherwise of each of the Terminated Company Affiliates.

Section 3.02    Capital Structure.

(a)           Capital Stock. The authorized capital stock of the Company consists of 9,000 shares of Company Common Stock, of which 2,295 are issued and outstanding.  All of the outstanding shares of capital stock of the Company are duly authorized and validly issued, fully paid and non-assessable and not subject to any pre-emptive rights. No other shares of capital stock (including any preferred stock) or other voting or other securities of the Company are issued, reserved for issuance or outstanding other than Common Stock. As of the date hereof, there are 4,590 shares of Common Stock held in the treasury of the Company.  No Subsidiary of the Company owns any Shares of Company Common Stock.

(b)           Company Securities.

(i)           As of the date hereof, there are no outstanding (x) securities of the Company or any of its Subsidiaries convertible into or exchangeable for Voting Debt or shares of capital stock of the Company, (y) options, warrants or other agreements or commitments to acquire from the Company or any of its Subsidiaries, or obligations of the Company or any of its Subsidiaries to issue, any Voting Debt or shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company or (z) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, "phantom" stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company, in each case that have been issued by the Company or any of its Subsidiaries (the items in clauses (x), (y) and (z), together with the capital stock of the Company, being referred to collectively as "Company Securities"). All outstanding Shares of Company Common Stock, and all outstanding shares of capital stock, voting securities or other ownership interests in any Subsidiary of the Company, have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws.

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(ii)           There are no outstanding Contracts requiring the Company and/or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities or Company Subsidiary Securities. Neither the Company nor any of its Subsidiaries is a party to any stockholders, voting trust or other similar agreement with respect to any Company Securities or Company Subsidiary Securities.

(c)           Voting Debt.   As of the date hereof, there are no bonds, debentures, notes or other indebtedness issued by the Company or any of its Subsidiaries (i) having the right to vote on any matters on which stockholders or equityholders of the Company or any of its Subsidiaries may vote (or which is convertible into, or exchangeable for, securities having such right), or (ii) the value of which is directly based upon or derived from the capital stock, voting securities or other ownership interests of the Company or any of its Subsidiaries, are issued or outstanding (collectively, "Voting Debt").

(d)           Company Subsidiary Securities. As of the date hereof, there are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for Voting Debt, capital stock, voting securities or other ownership interests in any Subsidiary of the Company, (ii) options, warrants or other agreements or commitments to acquire from the Company or any of its Subsidiaries, or obligations of the Company or any of its Subsidiaries to issue, any Voting Debt, capital stock, voting securities or other ownership interests in (or securities convertible into or exchangeable for capital stock, voting securities or other ownership interests in) any Subsidiary of the Company, or (iii) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, "phantom" stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or voting securities of, or other ownership interests in, any Subsidiary of the Company, in each case, that have been issued by a Subsidiary of the Company (the items in clauses (i), (ii) and (iii), together with the capital stock, voting securities or other ownership interests of such Subsidiaries, being referred to collectively as "Company Subsidiary Securities").

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(e)           Buckna Redemption Agreement.  As of the date hereof, all of the obligations of each of the parties under the Buckna Redemption Agreement have been fully satisfied in accordance with the terms thereof.  Accordingly, the entire redemption transaction set forth in such Buckna Redemption Agreement has been fully consummated, including without limitation, payment of the entire purchase price to Buckna and the delivery by Buckna of all shares and/or certificates evidencing such shares of each of the entities set forth therein.  Buckna is not entitled to receive any additional payments whatsoever under the Buckna Redemption Agreement.  There are no pending, or to the Knowledge of the Company, threatened, claims or other Legal Actions in connection with the Buckna Redemption Agreement involving any of the parties thereto. The “Buckna Redemption Agreement” shall mean the Redemption Agreement, dated as of December 31, 2007, by and among Mike and Patricia Buckna (collectively, “Buckna”), the Company Stockholder, the Company and Jefferson Electric Leasing, LLC, Jefferson Electric Staffing, Inc., Jefferson Electric Sales, Inc. and Jefferson Electric Manufacturing, Inc.  In addition, following the Effective Time, the Company Stockholder shall utilize his best efforts to obtain, as promptly as possible thereafter, a general release from Buckna in favor of Parent and the Surviving Corporation and/or their respective Affiliates (in form acceptable to Parent and its counsel) relating to any claims under or in respect of the Buckna Redemption Agreement (the “Buckna Release”)

Section 3.03    Authority; Non-Contravention; Governmental Consents.

(a)           Authority. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and other transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of the Company, including without limitation, the approval of the Board of Directors and stockholders of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and other transactions contemplated hereby. The Company Conversion and the transactions contemplated thereby have been duly approved by the Board of Directors and stockholders of the Company by the requisite vote required under the laws of Delaware and Wisconsin, respectively.  This Agreement and consummation of the Merger and other transactions contemplated hereby have been unanimously approved by all of the stockholders of the Company by the requisite vote under the DGCL and the Company’s Charter Documents.  This Agreement and consummation of the transactions contemplated hereby (other than the Company Conversion) have, if and to the extent required, been duly approved under applicable Wisconsin law and/or the Company’s Charter Documents.  This Agreement has been duly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company and the Company Stockholder in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors rights generally and by general principles of equity.

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(b)           Non-Contravention. The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the Merger and other transactions contemplated by this Agreement do not: (i) contravene or conflict with, or result in any violation or breach of, the Charter Documents of the Company or any of its Subsidiaries; (ii) subject to compliance with the requirements set forth in clauses (i) through (iii) of Section 3.03(c), materially conflict with or materially violate any Law applicable to the Company, any of its Subsidiaries or any of their respective properties or assets; (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a default) under, or materially alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation, or require any material Consent under, any Contract to which the Company or any of its Subsidiaries is a party or otherwise bound as of the date hereof; or (iv) result in the creation of a Lien (other than Permitted Liens) on any of the properties or assets of the Company or any of its Subsidiaries.

(c)           Governmental Consents.  No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to (any of the foregoing being a "Consent"), any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority, or any quasi-governmental or private body exercising any regulatory or other governmental or quasi-governmental authority (a "Governmental Entity") is required to be obtained or made by the Company in order to enable the Company to enter into, execute, deliver and perform this Agreement and to consummate the Merger and other transactions contemplated hereby in all material respects, except for: (i) the filing of certificates of conversion in respect of the Company Conversion with the Secretary of State of Delaware and Wisconsin Department of Financial Institutions, respectively; (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (iii) such Consents as may be required under applicable state securities or "blue sky" Laws and the securities Laws of any foreign jurisdiction; and (iv) the other Consents of Governmental Entities listed in Section 3.03(c) of the Company Disclosure Letter.

(d)           Board Approval. The Company Board, by resolutions duly adopted by unanimous vote at a meeting of all directors of the Company duly called and held and, as of the date hereof, not subsequently rescinded or modified in any manner, has, as of the date hereof: (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company's stockholders; (ii) approved and declared advisable the "agreement of merger" (as such term is used in Section 251 of the DGCL) contained in this Agreement and the transactions contemplated by this Agreement, including the Merger, in accordance with the DGCL; (iii) directed that the "agreement of merger" contained in this Agreement be submitted to Company's stockholders for adoption; and (iv) resolved to recommend that Company stockholders adopt the "agreement of merger" set forth in this Agreement and directed that such matter be submitted for consideration of the stockholders of the Company.  In addition, all approvals of the Company Board, if any, required pursuant to applicable Wisconsin law to the transactions contemplated by this Agreement, including without limitation, the Company Conversion, have been duly obtained and adopted.

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(e)           Company Stockholder Approval. The Company Stockholder, constituting the sole stockholder of the Company, by resolutions duly adopted by unanimous written consent has, on or prior to the date hereof, duly approved by the requisite vote under Delaware law and the Company’s Charter Documents and the terms and provisions hereof, the execution and delivery by the Company of this Agreement and consummation of the Merger and other transactions contemplated by this Agreement, and such resolutions of the Company Stockholder have not been subsequently rescinded or amended in any manner.  The Company Stockholder has voted in favor of adoption of this Agreement and the Merger, and such Company Stockholder has not exercised any appraisal and/or other rights relating to dissenting shares pursuant to applicable Law.  In addition, all approvals of the Company Stockholder, if any, required pursuant to applicable Wisconsin law to the transactions contemplated by this Agreement, including without limitation, the Company Conversion, have been duly obtained and adopted.

(f)           Takeover Statutes. No "fair price", "moratorium", "control share acquisition", "business combination" or other similar antitakeover statute or regulation (including Section 203 of the DGCL) enacted under any federal, state, local or foreign laws applicable to the Company is applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement. The Company Board has taken all actions so that the restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in such Section 203) will not apply to the execution, delivery or performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby.

(g)           Third Party Consents. Except as set forth on Section 3.03(g) to the Company Disclosure Letter, no material consent or approval from any third party is required to be obtained by or with respect to the Company and/or Company Stockholder in connection with the execution and delivery of this Agreement and/or the consummation by the Company and/or Company Stockholder of the Merger and other transactions contemplated hereby.

Section 3.04    Financial Statements; Other Liabilities.

(a)           Financial Statements. Annexed hereto as Section 3.04(a) of the Company Disclosure Letter are true and correct copies of the following: (a) audited consolidated balance sheets of the Company and each of its Subsidiaries as of and for the years ended December 31, 2007, December 31, 2008 and December 31, 2009, respectively, and audited consolidated statements of income, stockholders’ equity and cash flows for each of the fiscal years then ended (the “Audited Statements”), which Audited Statements have each been duly prepared by Vrakas/Blum, S.C., independent certified public accountants, whose report thereon is included therein; and (b) an unaudited consolidated balance sheet of the Company and each of its Subsidiaries (the “ Unaudited Balance Sheet”) as of March 31, 2010 (the “Unaudited Balance Sheet Date”) and unaudited statements of income, stockholders equity and cash flows for the three (3) month period then ended, which Unaudited Balance Sheet and unaudited financial statements as certified by the Company Stockholder, as the principal financial officer of the Company (the Audited Statements, Unaudited Balance Sheet and other unaudited financial statements are hereinafter collectively referred to as the “Financial Statements”). The Financial Statements fairly present the financial position and the results of operations and cash flows of the Company and each of its Subsidiaries for the relevant dates and periods, and were prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered thereby (except as otherwise stated therein or, in the case of interim unaudited financial statements, for the omission of footnotes and subject to normal, recurring year-end audit adjustments, which are not expected to be material).  The financial statements of Mexico Sub have been restated to U.S. GAAP.

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(b)           Accounting Systems.  The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed with management’s general or specific authorizations; (ii) transactions recorded as necessary to permit preparation of financial statements of the Company in conformity with GAAP and to maintain accountability for assets; (iii) access to the  assets the Company and its Subsidiaries is permitted only in accordance with management’s authorization; and (iv) the recorded value for the existing assets is compared with the actual levels thereof at reasonable intervals and appropriate action is taken with respect to any differences.

(c)           Books and Records.  The books and records of the Company and each of its Subsidiaries are complete and correct in all material respects, and together with Seller’s accounting records, fairly reflect, in accordance with GAAP: (i) all material financial transactions relating to the business operations of the Company and its Subsidiaries; and (ii) all items of income and expense, assets and liabilities and accruals in excess of $50,000.00.

(d)           Other Liabilities.  The Company and each of its Subsidiaries have no debts, liabilities or obligations of any nature whatsoever (whether known or unknown, due or to become due, accrued, fixed, contingent, liquidated or unliquidated, or otherwise), including any “off balance sheet arrangements”, in each case, in excess of $50,000.00 other than liabilities and obligations: (i) which are reflected or reserved the consolidated audited balance sheet of the Company and its Subsidiaries as of December 31, 2009; or (ii) which are set forth on Section 3.04(d) of the Company Disclosure Letter.

Section 3.05    Absence of Certain Changes; Actions Since Year-End Date.

(a)           Absence of Certain Changes. Since December 31, 2009 (the “Year-End Date”), the respective businesses of the Company and its Subsidiaries have been conducted in the ordinary course thereof as theretofore conducted  and consistent with past custom and practice (the “Ordinary Course”) and, since the Year-End Date, there has not been or occurred: (i) any Company Material Adverse Effect or any event, condition, change or effect that could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (ii) property damage or destruction resulting in a loss or cost to the Company and its Subsidiaries of more than $50,000.00 in the aggregate, whether or not covered by insurance; or (iii) any material transaction entered into by the Company and its Subsidiaries with any third party.

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(b)           Actions Since Year-End Date.  Except as otherwise expressly set forth in this Agreement, or as set forth in Section 3.05(b) of the Company Disclosure Letter, since Year-End Date, the Company and its Subsidiaries have not: (i) incurred any material obligation or liability, absolute or contingent, except those arising in the Ordinary Course; (ii) discharged or satisfied any Lien, or paid or satisfied any liability, absolute or contingent, other than liabilities as at the Year-End Date and current liabilities incurred since the Year-End Date in the Ordinary Course; (iii) mortgaged, pledged or subjected to any Lien any of the assets or properties of the Company and its Subsidiaries, or permitted any of such assets or properties to be subjected to any Lien; (iv) sold, assigned or transferred any of its assets or properties or any rights therein other than in the Ordinary Course; (v) incurred any indebtedness for borrowed money; (vi) delayed payment of any accounts payable or other liability beyond its due date or the date when such liability would have been paid in the Ordinary Course; (vii) prepaid any obligation having a fixed maturity of more than thirty (30) days from the date such obligation was issued or incurred; (viii) permitted the levels of raw materials, supplies, work-in-process or other materials included in the inventory of the Company and its Subsidiaries to vary in any material respect from the levels customarily maintained in the respective businesses of the Company and its Subsidiaries; (ix) provided for any increase in any profit-sharing, bonus, incentive, deferred compensation, insurance, pension, retirement, medical, hospital, disability, welfare or other employee benefit plan; (x) waived any rights of substantial value, or cancelled, modified or waived any indebtedness for borrowed money, except in the Ordinary Course; (xi) issued or sold, or agreed to issue or sell, any of its capital stock, options, warrants, rights or calls to purchase such interests or capital stock, or any securities convertible into or exchangeable for such capital stock or other securities, or effected any subdivision or other recapitalization affecting the capital stock of the Company and its Subsidiaries; (xii) declared, paid or set aside any dividends or other distributions or payments on its capital stock, or redeemed or repurchased, or agreed to redeem or repurchase, any shares of the capital stock of the Company and its Subsidiaries; (xiii) made any loans or advances to any party or assumed, guaranteed, endorsed or otherwise became responsible for the obligations of any party; or (xiv) entered into any transaction or course of conduct not in the Ordinary Course.

Section 3.06    Taxes.

(a)           Tax Returns and Payment of Taxes. The Company and each of its Subsidiaries have duly and timely filed or caused to be filed in accordance with all applicable Laws (after giving effect to available extensions properly and effectively requested) all Tax Returns required to be filed by the Company and each of the Subsidiaries (including Mexico Sub).  Neither Company nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business consistent with past practice. All Taxes due and owing by the Company or any of its Subsidiaries (whether or not shown on any Tax Return) have been timely paid or, where payment is not yet due, the Company has made an adequate provision for such Taxes in the Company's financial statements (in accordance with GAAP). The Company's most recent financial statements reflect an adequate reserve (in accordance with GAAP) for all Taxes payable by the Company and its Subsidiaries through the date of such financial statements. Neither the Company nor any of its Subsidiaries has incurred any liability for Taxes since the date of the Company's most recent financial statements outside the ordinary course of business or otherwise inconsistent with past practice.

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(b)           Availability of Tax Returns.  The Company has furnished to Parent complete and accurate copies of all federal, state, local and foreign income and/or franchise Tax Returns filed by or on behalf of the Company or its Subsidiaries for any Tax period ending after December 31, 2006.  All such Tax Returns filed by the Company and/or its Subsidiaries were true and correct in all material respects as of the dates on which they were filed or as subsequently amended to the date hereof.

(c)           Withholding. The Company and each of its Subsidiaries have withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and materially complied with all information reporting and backup withholding provisions of applicable Law.

(d)           Liens. There are no Liens for Taxes upon the assets of the Company or any of its Subsidiaries other than for current Taxes not yet due and payable.

(e)           Tax Deficiencies and Audits.  No deficiency for any amount of Taxes which has been proposed, asserted or assessed in writing by any taxing authority against the Company or any of its Subsidiaries remains unpaid. There are no waivers or extensions of any statute of limitations currently in effect with respect to Taxes of the Company or any of its Subsidiaries. There are no audits, suits, proceedings, investigations, claims, examinations or other administrative or judicial proceedings ongoing or pending with respect to any Taxes of the Company or any of its Subsidiaries.

(g)           Tax Jurisdictions.  No claim has ever been made in writing to the Company and its Subsidiaries by any taxing authority in any jurisdiction where the Company and its Subsidiaries do not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to Tax in such jurisdiction.

(h)           Consolidated Groups, Transferee Liability and Tax Agreements. Neither Company nor any of its Subsidiaries (i) has been a member of a group filing Tax Returns on a consolidated, combined, unitary or similar basis, (ii) has any liability for Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any comparable provision of local, state or foreign Law), as a transferee or successor, by Contract, or otherwise, or (iii) is a party to, bound by or has any material liability under any Tax sharing, allocation or indemnification agreement or arrangement.

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(i)           Post-Closing Tax Items. The Company and its Subsidiaries will not be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date, (ii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date.

Section 3.07    Intellectual Property.

(a)           Company IP.  Section 3.07(a) of the Company Disclosure Letter contains a complete and accurate list, as of the date hereof, of the following Company IP: (i) all registered Trademarks and material unregistered Trademarks; (ii) all Patents; (iii) all material invention disclosures within the past two (2) years; (iv) all material registered Copyrights; (v) all material Internet domain names; and (vi) all material Software (excluding any off-the-shelf shrinkwrap, clickwrap or similar commercially available non-custom Software).

(b)           Good Standing. All of the Owned Company IP is duly registered, issued and/or filed in the name of the Company or any of its Subsidiaries, as applicable, all registrations of Owned Company IP are currently in good standing and the correct chain of title has been recorded with the applicable Governmental Entity, including the U.S. Patent and Trademark Office and the U.S. Copyright Office, against each item of registered, issued or applied for, Owned Company IP.

The Company and each of its Subsidiaries has made all prosecution and maintenance payments and all filings currently due or required to be filed, to prosecute and maintain each item of registered, issued and applied for material Owned Company IP.

(c)           Enforceability.  The Company and its Subsidiaries own and have good and exclusive title to each item of the Owned Company IP, free and clear of any Liens (other than any applicable licenses) other than Permitted Liens.The Company and its Subsidiaries are the sole and exclusive owners of all Trademarks currently used in connection with the operation or conduct of their respective businesses.

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(d)           Company IP Agreements.  Section 3.07(d) of the Company Disclosure Letter contains a complete and accurate list, as of the date hereof, of all Contracts (i) granting to the Company or any of its Subsidiaries a license, covenant not to sue or any other interest in, or any right to use or exploit, any Licensed Company IP (other than off-the-shelf shrinkwrap, clickwrap or similar commercially available non-custom Software), or (ii) under which the Company or any of its Subsidiaries has granted to any other party a license, covenant not to sue or any other interest in, or any right to use or exploit, any Owned Company IP (collectively, the "Company IP Agreements"). No Company IP Agreement may be unilaterally terminated by any third party which is a party thereto as a result of the consummation of the transactions provided for herein.

(e)           Sufficiency of Company IP. The Company owns or has the right to use all Intellectual Property that is necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted.

(f)            No Liens. The Company and its Subsidiaries collectively own all right, title and interest in and to the Owned Company IP free and clear of all Liens other than Permitted Liens. No license fees in respect of any Owned Company IP that is owned by any Person jointly with the Company or its Subsidiaries will be payable by Parent following the Closing to any such Person for the use or exploitation of such Owned Company IP. The Company and/or its Subsidiaries have not transferred ownership of, or granted any exclusive license with respect to, any Intellectual Property presently used in their respective businesses that is Company IP, to any third party.

(g)           Protection of Trade Secrets. The Company and each of its Subsidiaries has taken all commercially reasonable steps to protect and preserve the secrecy and confidentiality of all Trade Secrets that are comprised by the Owned Company IP.

(h)           IP Legal Actions and Orders.  As of the date hereof, there is no Legal Action pending or, to the Knowledge of the Company, threatened, with respect to: (i) any alleged infringement, misappropriation or violation of the Intellectual Property of any Person by the Company or any of its Subsidiaries or any of their current products or services or otherwise by the conduct of the businesses of the Company and/or its Subsidiaries; (ii) any claim challenging the validity or enforceability of any Owned Company IP, or the ownership by the Company or the respective Subsidiary of such Owned Company IP; or (iii) any claim contesting the Company's or any of its Subsidiaries' rights with respect to any Licensed Company IP.  As of the date hereof, the Company and its Subsidiaries are not subject to any Order that restricts or impairs the use or validity of any Company IP. As of the date hereof, to the Knowledge of the Company, no Person or any of such Person's products or services, Intellectual Property or other operation of such Person's business is infringing upon, violating or misappropriating any Owned Company IP.

Section 3.08    Compliance with Laws; Permits.

(a)           Compliance. Except as set forth in Section 3.08(a) of the Company Disclosure Letter, the Company and each of its Subsidiaries is and, since January 1, 2007, has been, in material compliance with, all Laws or Orders of any Governmental Entities having jurisdiction over the Company or any of its Subsidiaries and/or any of their respective businesses or properties.  Except as set forth in Section 3.08(a) of the Company Disclosure Letter, since January 1, 2007, the Company and/or its Subsidiaries have not received any oral or written notice or statement from any Governmental Entity asserting any liability for any present or past failure of the Company and its Subsidiaries to comply in all material respects with any applicable Law or Order which remains outstanding and unresolved.

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(b)           Permits.  Section 3.08(b) of the Company Disclosure Letter sets forth all permits, licenses, clearances, authorizations and approvals from Governmental Entities held by the Company and its Subsidiaries (collectively, the "Permits").  The Permits constitute all of the permits and licenses required to be obtained by the Company and its Subsidiaries in order to carry on their respective businesses as presently being conducted in all material respects. All such Permits are in full force and effect, and to the Knowledge of the Company, no suspension or cancellation of any such Permits is pending or threatened. The Company and each of its Subsidiaries is in material compliance with the requirements and procedures of the Governmental Entities which have issued such Permits.

Section 3.09    Litigation.  Except as set forth on Schedule 3.09 of the Company Disclosure Letter, as of the date hereof, there is no claim, action, suit, arbitration, proceeding or governmental investigation, at law or in equity  (each, a "Legal Action"), pending, or to the Knowledge of the Company, threatened, relating to or involving the Company or any of its Subsidiaries and/or any of their respective properties or assets, or any executive officer or director of the Company or any of its Subsidiaries in their capacities as such, in each case, by or before any Governmental Entity, except for any such Legal Action that involves an amount in controversy of less than $25,000.00.  Except as set forth on Schedule 3.09 of the Company Disclosure Letter, none of the Company and/or any of its Subsidiaries and/or their respective properties or assets is subject to any order, writ, assessment, decision, injunction, decree, ruling or judgment of a Governmental Entity (an "Order"), whether temporary, preliminary or permanent.

Section 3.10    Finders' Fees.  Except as set forth in Section 3.10 of the Company Disclosure Letter, the Company has not incurred, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, the Merger and any other transaction contemplated hereby other than any such finders and/or similar fees due and payable to Strategic Business Solutions of America, Inc., an Illinois corporation, and Joseph Cecala and/or their respective Affiliates (collectively, the “Finder”).  Prior to the Effective Time, the Company shall have received a release from the Finder pursuant to which the Finder will furnish a general release in favor of the Company and/or Parent and/or their respective Affiliates in form acceptable to Parent and its counsel (the “Finder Release”).

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Section 3.11.  Related Party Transactions.  Except as set forth in Section 3.11 of the Company Disclosure Letter, to the Knowledge of the Company, the Company and its Subsidiaries is not indebted to any director, officer, employee or agent of the Company and its Subsidiaries (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and no such person is indebted to the Company and its Subsidiaries.  Except as set forth in Section 3.11 of the Company Disclosure Letter, no: (a) stockholder, (b) officer, director or Affiliate of the Company and its Subsidiaries, (c) immediate family member of any such officer, director or Affiliate, or of a stockholder, and (d) Person controlled by any one or more of the foregoing (excluding the Company and its Subsidiaries) (collectively, the “Related Parties”), presently or since January 1, 2007: (i) owns or has owned, directly or indirectly, any interest (of more than five (5%) percent of the total issued and outstanding interests) in, or is an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, customer, distributor, sales agent or supplier of the Company and its Subsidiaries; (ii) owns or has owned, directly or indirectly, in whole or in part, any tangible or intangible property that the Company and its Subsidiaries use, or the use of which is necessary or desirable, for the conduct of their respective businesses; (iii) has or had any claim whatsoever or has brought any action, suit or proceeding against, owes or owed any amount to, the Company and its Subsidiaries; or (iv) on behalf of the Company and its Subsidiaries, has made any payment in excess of $25,000.00 or commitment to pay any commission, fee or other amount to, or purchase or obtain or otherwise contract to purchase or obtain any goods or services from , any corporation or other Person of which any officer or director of the Company and its Subsidiaries, or an immediate family member of the foregoing, is partner or stockholder (excepting stock holdings less than one (1%) percent of the total issued and outstanding capital stock solely for investment purposes in securities of publicly held and traded companies). Section 3.11 of the Company Disclosure Letter also describes in reasonable detail the nature and extent of any products, services or benefits provided to the Company and/or any of its Subsidiaries by any such person or entity without a corresponding charge equal to the fair market value of any such products, services or benefits. The Company and its Subsidiaries are not party to any transaction with any Related Party other than on arm’s-length terms.

Section 3.12    Employee Plans.

(a)           Company Employee Plans.  Section 3.12(a) of the Company Disclosure Letter contains an accurate and complete list, as of the date hereof, of each plan, program, policy, agreement, collective bargaining agreement or other arrangement providing for compensation, severance, deferred compensation, performance awards, stock or stock-related awards, fringe, retirement, death, disability or medical benefits or other employee benefits or remuneration of any kind, including each employment (excluding offer letters), severance, retention, change in control or consulting plan, program arrangement or agreement, in each case whether written or unwritten or otherwise, funded or unfunded, including each "employee benefit plan," within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA, which is or has been maintained, contributed to, or required to be contributed to, by the Company and/or its Subsidiaries and/or Company ERISA Affiliates for the benefit of any current or former employee, officer, director or consultant of the Company or any of its Subsidiaries (each, a "Company Employee"), or with respect to which the Company or any of its Subsidiaries has or may have any material liability (collectively, the "Company Employee Plans").

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(b)           Documents.  The Company has made available to Parent correct and complete copies of all Company Employee Agreements with the executive officers of the Company and its Subsidiaries and all material Company Employee Plan documents, if any, in each case that are in effect as of the date hereof, and, to the extent applicable, (i) all related trust agreements, funding arrangements and insurance contracts, (ii) the most recent determination letter received regarding the tax-qualified status of each Company Employee Plan, (iii) the most recent financial statements for each Company Employee Plan, (iv) the Form 5500 Annual Returns/Reports for the most recent plan year for each Company Employee Plan, and (v) the current summary plan description for each Company Employee Plan.

(c)           Employee Plan Compliance. (i) Each Company Employee Plan in the United States has been established and maintained in accordance with its terms and in material compliance with applicable Laws, including but not limited to, ERISA and the Code, and each Company Employee Plan outside of the United States has been established and maintained in all material respects in accordance with its terms and in material compliance with applicable Laws; (ii) all of the Company Employee Plans that are intended to be qualified under Section 401(a) of the Code have received timely determination letters from the IRS and, as of the date hereof, no such determination letter has been revoked nor, to the Knowledge of the Company, has any such revocation been threatened; (iii) to the Knowledge of the Company, the Company and its Subsidiaries and Company ERISA Affiliates, where applicable, have timely made all contributions and other material payments required by and due under the terms of each Company Employee Plan; (iv) except to the extent limited by applicable Law, each Company Employee Plan (other than a Company Employee Plan constituting a Contract between the Company or a Subsidiary thereof and a Company Employee) can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to Parent, the Company or any of its Subsidiaries (other than ordinary administration expenses and in respect of accrued benefits thereunder); (v) as of the date hereof, there are no audits, inquiries or Legal Actions pending or, to the Knowledge of the Company, threatened by the IRS or the Department of Labor, or any similar Governmental Entity with respect to any Company Employee Plan; (vi) as of the date hereof, there are no Legal Actions pending, or, to the Knowledge of the Company, threatened (other than routine claims for benefits) against any Company Employee Plan. and (vii) no “prohibited transaction,” within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred or is expected to occur with respect to the Company Employee Plan or its related trust (and the consummation of the transactions contemplated by this Agreement will not directly or indirectly result in such a “prohibited transaction”).

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(ii)           None of the Company, any Company ERISA Affiliate, or any of their respective predecessors has ever, whether directly or indirectly, participated in, contributed to or been required to contribute to, or otherwise been in any way, liable with respect to any plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including, without limitation, any multiemployer plan (within the meaning of Sections 3(37)of ERISA) or single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is subject to Section 4063, 4064 or 4069 of ERISA.

(d)           No Post-Employment Obligations. No Company Employee Plan currently provides for any liability of the Company or any of its Subsidiaries to provide post-termination or retiree welfare benefits to any person for any reason, except as may be required by COBRA or other applicable Law, and neither the Company nor any Company ERISA Affiliate has any liability to provide post-termination or retiree welfare benefits to any person or ever represented, promised or contracted to any Company Employee (either individually or to Company Employees as a group) or any other person that such Company Employee(s) or other person would be provided with post-termination or retiree welfare benefits, except to the extent required by COBRA or other applicable Law.

(e)           No Actions.  There is no pending or, to the Company's Knowledge, threatened action relating to a Company Employee Plan, and no Company Employee Plan has within the three years prior to the date hereof, been the subject of an examination or audit by a Governmental Entity or is the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Entity.

(f)            Health Care Compliance. Each of the Company and its Subsidiaries and Company ERISA Affiliates complies in all material respects with the applicable requirements of COBRA or any similar state statute with respect to each Company Employee Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code or such state statute.

(g)           Effect of Transaction.  Section 3.12(g) of the Company Disclosure Letter sets forth, as of the date hereof, a true and complete list of: (i) each material payment (including any bonus, severance, unemployment compensation, deferred compensation, golden parachute payment or "parachute payment" within the meaning of Section 280G(b)(2) of the Code) that is reasonably likely to become due to any current or former employee of the Company or any of its Subsidiaries under any Company Employee Plan as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby; (ii) any increase in any material respect of any material benefit otherwise payable under any Company Employee Plan that would become effective pursuant to the terms thereof because of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby; or (iii) any acceleration of the time of payment or vesting of any such material benefits under any Company Employee Plan that would become effective pursuant to the terms thereof as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. The execution of this Agreement and the consummation of the transactions contemplated hereby will not, directly or indirectly, constitute an event under any Company Employee Plan or Company Employee Agreement with respect to any Company Employee that will or is reasonably likely to result in the payment or provision of any benefit in an amount which will or is reasonably likely to be characterized or deemed as a "parachute payment," within the meaning of Section 280G(b)(2) of the Code.

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Section 3.13    Employee Matters.

(a)           Company Employees.  Section 3.13(a) of the Company Disclosure Letter contains a list of the names of all employees (including without limitation part-time employees and temporary employees), leased employees, independent contractors and consultants of the Company and its Subsidiaries, together with their respective salaries or wages, bonus or other compensation, dates of employment and position, personal time off pay (current or accrued) and severance pay (if any).

None of the officers of the Company and its Subsidiaries, nor to Knowledge the Company, none of the employees, contractors or consultants of the Company and its Subsidiaries, has indicated an intention to resign, retire or discontinue his or her relationship with the Company and its Subsidiaries as a result of the Merger and other transactions contemplated by this Agreement or otherwise within nine (9) months following the Effective Time.

Except as set forth in Section 3.13(a) of the Company Disclosure Letter, the Company and its Subsidiaries are not a party to any employment Contract with any of its officers or employees with respect to such Person’s employment and the employment of each employee and the engagement of each independent contractor of the Company and its Subsidiaries, and each of such officers and/or employees of the Company and its Subsidiaries constitute “at will” employees. To the Knowledge of the Company, no employee or independent contractor of the Company and its Subsidiaries is in material violation of any term of any employment Contract, confidentiality or other proprietary information disclosure Contract or any other Contract relating to the right of any such employee to be employed by the Company and its Subsidiaries.  The Employment Agreement, dated as of March 17, 2008, between the Company and Stephen Paul remains in full force and effect.

(b)           TDK Obligations. TDK Holdings Ltd., a Wisconsin corporation (“TDK”), presently employs six (6) persons on a full time basis, including the Company Stockholder (the “TDK Employees”), and furnishes the services of such TDK Employees to the Company.  The Surviving Corporation may elect to offer employment to certain TDK Employees solely and exclusively in respect of the period following the Effective Time.   The Company Stockholder is also the sole shareholder of TDK.

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Notwithstanding anything to the contrary contained in this Agreement, in the event that any of the TDK Employees accepts employment with the Surviving Corporation solely in respect of the period following the Effective Time, then neither the Surviving Corporation nor Parent or any of their respective Affiliates shall assume or be responsible in any manner for any liabilities and obligations relating to the TDK Employees prior to the Effective Time or at any other time whatsoever and/or any other matter whatsoever relating to such employment of the TDK Employees.  The Company Stockholder shall indemnify Parent and/or the Surviving Corporation from any liabilities or obligations whatsoever suffered or incurred at any time relating to such TDK Employees pursuant to Article VII hereof.

(c)           Employment Law Matters.  The Company and each of its Subsidiaries: (i) is in material compliance with all applicable Laws and agreements respecting hiring, employment, termination of employment, plant closing and mass layoff (including the WARN Act and any similar state Laws), employment discrimination, harassment, retaliation and reasonable accommodation, leaves of absence, terms and conditions of employment, wages and hours of work, employee health and safety, leasing and supply of temporary and contingent staff, engagement of independent contractors, including proper classification of same, payroll taxes, and immigration with respect to Company Employees; and (ii) is in material compliance with all applicable Laws relating to the relations between it and any labor organization, trade union, work council or other body representing Company Employees. The Company and its Subsidiaries are not liable for any arrears in respect of any wages, payroll or other taxes or any penalty for failure to comply with the same.

The plant closure of the Company’s plant facility located in Brownsville, TX on or about June, 2009 was in full compliance with all applicable Laws and agreements relating to employment, termination of employment and plant closing and mass layoff (including the WARN Act and any similar state Laws). The Company and its Subsidiaries have no obligations or liabilities of any kind or nature whatsoever arising out or relating to employment, termination of employment and plant closing and mass layoff of the Brownsville, TX facility.  Furthermore, the Company has not engaged in a “plant closing” or “mass layoff” as defined by the WARN Act or any similar state Laws in the past six (6) months, nor has any employee suffered an “employment loss” as defined by the WARN Act or any similar state laws in the past three (3) months. 

(d)           Labor Matters. Except as set forth in Section 3.13(c) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is party to, or subject to, any collective bargaining agreement or other agreement with any labor organization, work council or trade union with respect to any of its or their operations. No work stoppage, slowdown or labor strike against the Company or any of its Subsidiaries with respect to employees who are employed within the United States is pending, threatened or has occurred in the past two (2) years, and no work stoppage, slowdown or labor strike against the Company or any of its Subsidiaries with respect to employees who are employed outside the United States is pending, threatened or has occurred in the past two (2) years. Except as set forth in Section 3.13(c) of the Company Disclosure Letter, none of the Company Employees are represented by a labor organization, work council or trade union and, to the Knowledge of the Company, there is no organizing activity, Legal Action, election petition, union card signing or other union activity or union corporate campaigns of or by any labor organization, trade union or work council directed at the Company or any of its Subsidiaries, or any Company Employees. As of the date hereof, there are no Legal Actions, government investigations, or labor grievances pending, or, to the Knowledge of the Company, threatened relating to any employment related matter involving any Company Employee or applicant, including, but not limited to, charges of unlawful discrimination, retaliation or harassment, failure to provide reasonable accommodation, denial of a leave of absence, failure to provide compensation or benefits, unfair labor practices, or other alleged violations of Law.

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Section 3.14    Leased Property.

The Company and its Subsidiaries do not own any real property and, except as set forth in Section 3.14 of the Company Disclosure Letter, the Company and its Subsidiaries do not possess any option or right to purchase any real property.  Section 3.14 of the Company Disclosure Letter sets forth each lease, sublease or any other arrangement under which real property (the “Leased Property”) is leased, sublet, licensed or otherwise occupied by the Company and any of its Subsidiaries (collectively, the “Company Property Leases”). The Company has delivered or otherwise made available to Parent true, correct and complete copies of all Company Property Leases (including all material modifications, amendments, supplements and waivers thereto) pursuant to which the Company or any of its Subsidiaries thereof leases or licenses any Leased Property.

Each such Company Property Lease is legal, binding, valid and in full force and effect, and the Company and its Subsidiaries have not assigned, mortgaged, transferred or otherwise encumbered any right, title or interest in any Company Property Leases and/or any Leased Property, and, except as set forth in Section 3.14 of the Company Disclosure Letter, any such interest is not subject or subordinate to any Lien or mortgage.  The Company and its Subsidiaries enjoy peaceful and quiet possession of each Leased Property.  Except as set forth in Section 3.14 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, no landlord has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Company Property Lease.  To the Knowledge of the Company, all uses of any such Leased Property by the Company and its Subsidiaries conform in all material respects to all applicable Laws relating to building and zoning regulations and to the provisions of the applicable Company Property Leases.

Section 3.15    Personal Property.  Section 3.15 of the Company Disclosure Letter sets forth a list of all  furniture, fixtures, machinery, equipment and other tangible personal property (collectively, the “Personal Property”) used by the Company and its Subsidiaries in connection with their respective businesses. All such Personal Property is in good operating condition and working order, and adequate for the present uses thereof.  The Company and each of its Subsidiaries has good title to, or a valid and binding leasehold interest in, all such material Personal Property, free and clear of all Liens other than any Permitted Liens.

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Section 3.16    Completeness of Assets.   All tangible assets and properties used by the Company and its Subsidiaries in connection with the respective businesses of the Company and its Subsidiaries, including without limitation, those reflected in the Financial Statements of the Company and its Subsidiaries as of the Year-End Date, constitute all of the tangible assets and properties which are presently used by the Company and its Subsidiaries to conduct their respective businesses and will enable the Surviving Corporation to conduct its business in the manner that such business is presently conducted by the Company and its Subsidiaries.

Section 3.17     Title to Properties; Absence of Liens.

The Company and its Subsidiaries have good, valid and marketable title to or, in the case of leases and licenses, valid and subsisting leasehold interests or licenses in, all of its properties and assets of whatever kind (whether real or personal, tangible or intangible), including, without limitation, all properties and assets that are shown on the Financial Statements and all properties and assets that are set forth in the Company Disclosure Letter, in each case, free and clear of any and all Liens except for any Permitted Liens and except as otherwise provided in Section 3.17 of the Company Disclosure Letter. All of the assets, properties and rights relating to the businesses of the Company and its Subsidiaries are held by, and all agreements, obligations and transactions relating to such businesses of the Company and its Subsidiaries, have been entered into, incurred and conducted by or through, the Company and its Subsidiaries rather than any of their Affiliates, except as otherwise provided in Section 3.17 of the Company Disclosure Letter.

Section 3.18     Accounts Receivable.

Section 3.18 of the Company Disclosure Letter is an aged list of the accounts receivable of the Company and its Subsidiaries setting forth, as of April 23, 2010, the amounts owed, name of each account debtor and any security granted to the Company and its Subsidiaries for payment thereof.  Except as set forth on Section 3.18 of the Company Disclosure Letter, the accounts receivable of the Company and its Subsidiaries arose in bona fide transactions in the Ordinary Course for goods or services delivered or rendered, constitute only valid and undisputed claims, are not subject to any defenses, counterclaims or setoffs and have been or will be collected at their aggregate recorded amounts (less the amount of the applicable reserve for doubtful accounts maintained in accordance with GAAP) in the Ordinary Course without resort to litigation.

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Section 3.19    Inventory.

Section 3.19 of the Company Disclosure Letter sets forth a true and correct list of all inventory of the Company and its Subsidiaries as of April 23, 2010.  Except as set forth on Section 3.19 of the Company Disclosure Letter, the inventory of the Company and its Subsidiaries is in useable and saleable condition in the ordinary course of their respective businesses.  All such inventory is owned by the Company and its Subsidiaries and is valued at an amount determined in accordance with GAAP consistently applied, and has been priced at the lower of cost or market at standard cost as determined as of the Year-End Date.  Such inventory does not include any items in excess of $100,000.00 in the aggregate of below standard quality, damaged or spoiled, obsolete or of a quality or quantity not useable or saleable in the ordinary course of business of the Company and its Subsidiaries as presently conducted within the normal inventory "turn" experience, the value of which has not been written down or with respect to which adequate reserves have not been provided.  The Company and its Subsidiaries have the proper amount of inventory in order to conduct their respective businesses consistent with past practices.  The Company and its Subsidiaries are not under any liability or obligation in respect of the return of any item of inventory in the possession of wholesalers, retailers or other customers.  Section 3.19 of the Company Disclosure Letter also sets forth, as of April 23, 2010,allunfilled ordersreceived by the Company and its Subsidiaries, which unfilled orders havebeen accepted by theCompany and its Subsidiaries in the ordinary course and upon terms and conditions consistent with its past practices.

Section 3.19 of the Company Disclosure Letter also sets forth all locations where any inventory of the Company and its Subsidiaries is stored or otherwise located.  Except as set forth in Section 3.19 of the Company Disclosure Letter, no inventory of the Company and its Subsidiaries is subject to any consignment, bill and hold or other similar arrangements with any sales representatives, warehousemen, distributors and/or other third parties.

Section 3.20    Environmental Matters. Except as set forth in Section 3.20 of the Company Disclosure Letter:

(a)           The Company and its Subsidiaries have obtained all Permits required to be obtained under any applicable Environmental Laws for the operation of the respective businesses of the Company and its Subsidiaries (the “Environmental Permits”), and is compliance with the terms and conditions of such Environmental Permits.  The Company and its Subsidiaries are, and during the past five (5) years, have been, in compliance with all Environmental Laws in connection with operation of the respective businesses of the Company and its Subsidiaries.

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(b)           Neither the Company nor any of its Subsidiaries has (i) produced, processed, manufactured, generated, transported, treated, handled, used, stored, disposed of or released any Hazardous Substances, except in compliance with Environmental Laws, in, at or under any Real Property, or (ii) exposed any employee and/or third party to any Hazardous Substances under circumstances reasonably expected to give rise to any material liability or obligation under any Environmental Law.  For purposes hereof, the “Real Property” shall mean any real property presently or formerly owned, used, leased, occupied, managed or operated by the Company and/or its Subsidiaries.

(c)           Neither the Company nor any of its Subsidiaries has received any oral or written notice of, and there is no Legal Action and/or civil, criminal or administrative demand, claim, hearing, notice or demand letter, notice of violation or proceeding pending, or to the Knowledge of the Company, threatened, against the Company or any of its Subsidiaries, alleging any Liability or responsibility under or non-compliance with any Environmental Law which remains outstanding and unresolved, or seeking to impose any financial responsibility for any investigation, cleanup, removal, containment or any other remediation or compliance under any Environmental Law.  Neither the Company nor any of its Subsidiaries is subject to any Order or any code, plan, schedule, timetable, notice or demand letter issued, entered or approved thereunder, or written agreement by or with any Governmental Entity or third party imposing any liability or obligation with respect to any of the foregoing.

(d)           No Hazardous Substances have been discharged, released, spilled, leaked, disposed of, emitted or injected at any Real Property during the period of the Company’s and/or its Subsidiaries’ ownership or leasehold interest in a manner which violates or violated any applicable Environmental Law.  Except as set forth on Schedule 3.20(d) of the Company Disclosure Letter, no polychlorinated biphenyls, regulated radioactive material, incinerator, surface impoundment, lagoon, landfill, septic system or aboveground or underground storage tanks are now or have been located on any Real Property.

(e)           To the Knowledge of the Company, the Company and its Subsidiaries have not disposed of or arranged for the disposal of Hazardous Substances at any third-party property or off-site location in a manner which violates or violated any applicable Environmental Law or which, to the Knowledge of the Company, has resulted in a material liability to their respective businesses of the Company and its Subsidiaries. Schedule 3.20 of the Company Disclosure Letter also lists all pollution control, waste management, transportation, landfill or other environmental service providers used by the Company and its Subsidiaries.

(f)            The Company and its Subsidiaries have provided to Parent all environmental reports, assessments, audits, studies, investigations, data, Environmental Permits and other material written environmental information in its custody, possession or control relating to any Real Property or respective businesses of the Company and its Subsidiaries.

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(g)           None of the matters disclosed in this Section 3.20 of the Company Disclosure Letter, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect.

Section 3.21     Company Listed Contracts.

(a)           Company Listed Contracts.  Except as set forth on Section 3.21(a) to the Company Disclosure Letter, the Company and its Subsidiaries are not a party to any Contract, as of April 23, 2010, which involves aggregate payments or receipts in excess of $25,000.00 (except that, in respect of any purchase and sale orders, in excess of $2,000.00), including without limitation, the following (collectively, the "Company Listed Contracts"): (i) any Contract for the purchase or sale of any materials, products or supplies (including any purchase and sale orders) and any requirements or other similar Contract; (ii) any Contract of employment with any officer or employee or member of the Company Board or any consulting Contract; (iii) any marketing, distribution, franchise, consignment, sales representative, advertising, warehousing, distributorship, management, advisory, agency or service Contract; (iv) any Contract relating to any real property, including for the service and/or maintenance thereof, or any lease for any Real Property and/or Personal Property; (v) any technical assistance or license or royalty Contract relating to any Intellectual Property or otherwise; (vi) any Contract relating to indebtedness for borrowed money or the lending of money, including any mortgage, indentures, guarantees, loan or credit agreement, security agreement or other Contract; (vii) any certificate of deposit, letter of credit, guaranty or performance bond; (viii) any Contract providing for indemnification or guarantee by the Company and/or its Subsidiaries; (ix) any union Contract or other collective bargaining agreement; (x) joint venture, partnership or other similar Contract; (xi) any Contract including covenants limiting the freedom of Company and its Subsidiaries to engage or compete in any business and/or product line with any Person in any geographical area; (xii) any Contract or option relating to the acquisition and/or sale of any business or option for the purchase of any real or personal asset; or (xiii) any other Contract which in any manner whatsoever significantly affects the business operations of Company and its Subsidiaries.

(b)           Schedule of Company Listed Contracts. Section 3.21(a) of the Company Disclosure Letter sets forth a complete and accurate list as of the date hereof of all Company Listed Contracts and identifies each subsection of Section 3.21 that lists such Company Listed Contract. The Company has previously furnished to Parent true, correct and complete copies of all Company Listed Contracts (other than purchase and sale orders), including any amendments thereto.

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(c)           No Breach.  Except as set forth in that Section 3.21(c) of the Company Disclosure Letter: (i) the Company and its Subsidiaries, and to the Knowledge of the Company, each of the other parties thereto, have complied in all material respects with all such Company Listed Contracts, all of which are valid and enforceable (except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar Laws relating to or affecting creditors' rights generally and by general equitable principles); and (ii) all such Company Listed Contracts are in full force and effect and there exists no event or condition which with or without notice or lapse of time would be a material default thereunder, give rise to a right to accelerate or terminate any provision thereof or give rise to any material Lien, claim, encumbrance or restriction on any of the assets or properties of the Company and its Subsidiaries.

Section 3.22    Insurance.  Section 3.22 of the Company Disclosure Letter sets forth a true and correct list of all insurance coverage maintained by or for the benefit of the Company and its Subsidiaries in connection with their respective business operations setting forth: (i) the name of the carrier; (ii) the nature and type of insurance coverage and dollar limits of such coverage; (iii) the policy number and scheduled expiration date; (iv) the premium rate and date through which paid; and (v) the named insureds thereunder.  Except as set forth in Section 3.22 of the Company Disclosure Letter, all such insurance policies are in full force and effect, no written notice of default or termination has been given thereunder, and, to the Knowledge of the Company, no effect, occurrence, or matter has occurred which, with notice or lapse of time or both, could result in the early termination thereof.

Section 3.23    Products Liability.  Except as set forth in Schedule 3.23 to the Company Disclosure Letter: (a) there is no Legal Action, claim, inquiry or investigation by or before any Governmental Entity pending, or to the Knowledge of the Company, after reasonable inquiry, threatened, against or involving the Company and its Subsidiaries  in connection with any product manufactured, shipped or sold by the Company and its Subsidiaries in connection with their respective businesses (the “Products”) and alleged to have a defect in manufacture or design, including without limitation, any failure to warn of the defect; (b) to the Knowledge of the Company, there has not been any Occurrence (as defined below); (c) there has not been any product recall, rework or retrofit relating to any Product; and (d) to the Knowledge of the Company, there are no design defects resulting in hazardous conditions, including without limitation, any failure to warn of any design defects, involving any Product.  For purposes hereof, an "Occurrence" shall mean any accident, happening or event caused or allegedly caused by any hazard or defect or alleged hazard or alleged defect in the manufacture, design, materials or workmanship, including without limitation, any failure or alleged failure to warn of the hazard, defect or alleged hazard or alleged defect, of any Product (including any parts or components thereof) which results or is alleged to have resulted in injury or death to any person or damage to or destruction of the Product itself (or any parts or components thereof) or other consequential damages.

Section 3.24    Warranty Policies.  Section 3.24 of the Company Disclosure Letter sets forth all of the warranty policies of the Company and its Subsidiaries presently in effect, and/or which have been in effect during the past five (5) years, for any Products manufactured and sold by the Company and its Subsidiaries (the "Warranty Policies").  Except as set forth in Section 3.24 of the Company Disclosure Letter, since January 1, 2007: (i) neither the Company nor any of its Subsidiaries makes any warranties of any kind or nature whatsoever, whether express or implied, with respect to any Product that is presently, or previously has been, manufactured or sold by the Company and its Subsidiaries, except for the special policies and/or circumstances set forth on Section 3.24 of the Company Disclosure Letter; (ii) as of April 23, 2010, the Company and its Subsidiaries have not received any written notice of any claim based on any Product warranty for an amount in excess of $1,000.00; and (iii) the Company does not know of any claim, actual or threatened, based on any Product warranty for an amount in excess of $1,000.00.  Section 3.24 of the Company Disclosure Letter also sets forth the reserve amounts presently maintained by the Company in respect of any such Product warranty claims.

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Section 3.25    Underwriters Laboratories Certificates. All of the Products manufactured or sold by the Company and its Subsidiaries since January 1, 2005 which require or carry the label, certification or approval of Underwriters Laboratories ("UL") or any other similar organization, have been properly and validly certified or approved.    Except as set forth in Section 3.25 of the Company Disclosure Letter, all Products manufactured, shipped or sold by the Company and its Subsidiaries since January 1, 2005 which require or carry the label, certification or approval of UL (or other substantially similar organization in the United States or any other applicable foreign jurisdiction) have been properly and validly certified or approved. Except as set forth in Section 3.25 of the Company Disclosure Letter, all manufacturing standards applied, testing procedures used and product specifications disclosed and utilized by the Company and its Subsidiaries have, in each case, materially complied with all applicable requirements established by UL (or other substantially similar organization in the United States or any other applicable foreign jurisdiction).

Section 3.26    Customers and Suppliers.

(a)           Schedule of Customers and Suppliers. Section 3.26(a) of the Company Disclosure Letter sets forth a list of: (a) the twenty-five (25) largest customers of the Company and its Subsidiaries in terms of sales during the twelve-month period ended December 31, 2009, showing the approximate total sales (expressed in dollar amounts) by the Company and its Subsidiaries to each such customer during such period; and (b) the ten (10) largest suppliers to the Company and its Subsidiaries during such fiscal year, measured by dollar volume of purchases by the Company and its Subsidiaries during such period.

(b)           Continuation of Customer Relationships.   Except as set forth in Section 3.26(b) of the Company Disclosure Letter, the Company has not received any notice nor has any reason to believe that any customer of the Company and its Subsidiaries set forth on Section 3.26(a) of the Company Disclosure Letter:  (i) has ceased, or will cease, to use the products, goods or services of the Company and its Subsidiaries; (ii) has substantially reduced or will substantially reduce, the use of products, goods or services of the Company and its Subsidiaries; or (iii) has sought, or is seeking, to reduce the price it will pay for products, goods or services of the Company and its Subsidiaries, including in each case, following the consummation of the transactions contemplated under this Agreement.  No customer set forth on Section 3.26(a) of the Company Disclosure Letter has otherwise threatened to take any action set forth in the immediately preceding sentence as a result of the consummation of the Merger or any other transactions contemplated by this Agreement.

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(c)           Continuation of Supplier Relationships. Except as set forth in Section 3.26(c) of the Company Disclosure Letter, the Company has received no notice and have no reason to believe that any supplier of the Company and its Subsidiaries set forth in Section 3.26(a) of the Company Disclosure Letter will not sell raw materials, supplies, merchandise and other goods to Seller at any time following the Closing Date on terms and conditions similar to those used in its current sales to Seller, subject to general and customary price increases. No supplier set forth on Section 3.26(a) of the Company Disclosure Letter has otherwise threatened to take any action set forth in the immediate­ly preceding sentence as a result of the consummation of the Merger or any other transactions contemplated by this Agreement.

(d)           Other Relationships.  No creditor, employee, consultant or other Person having a material business relationship with the Company and its Subsidiaries has informed the Company and its Subsidiaries that such Person currently intends to change the relationship because of this Agreement or as a result of the Merger or any other transactions contemplated hereby, nor, to the Knowledge of the Company, is there any such intent.

Section 3.27    Restrictions on Business Activities. There is no Contract, judgment, Order or other instrument binding upon the Company and/or its Subsidiaries and/or the Company Stockholder that has or could reasonably be expected to have the effect of prohibiting or materially impairing any current or future business practice of the Company and/or its Subsidiaries, any acquisition of property by the Company and/or its Subsidiaries or conduct of business by the Company and/or its Subsidiaries as presently conducted or as proposed to be conducted by the Company and/or its Subsidiaries.

Section 3.28    Fairness of Merger Consideration.  The Merger Consideration has been negotiated by the Company at arm’s length, and the Company is not under any compulsion to enter into this Agreement, and based thereon and upon the representations and warranties of the parties to this Agreement, the Company in good faith believes that the Merger Consideration to be tendered by Parent for the Shares of the Company Common Stock will be approximately equal to the aggregate fair market value of such Shares of the Company Common Stock.

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Section 3.29   Full Disclosure.No representation, warranty or statement set forth in this Article III or in the Company Disclosure Letter hereto or in any certificate delivered pursuant to the requirements of this Agreement by or on behalf of the Company and/or Company Stockholder, and no agreement, document or written statement furnished to Parent and/or Merger Sub pursuant to this Agreement or in connection with the Merger and other transactions contemplated hereby, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.

Section 3.30    Matters Relating to Company Stockholder.

(a)           Title to Shares.  The Company Stockholder is the sole record and beneficial owner of 2,295 Shares of Company Common Stock, constituting all of the issued and outstanding Shares of Company Common Stock, free and clear of all manner of Liens, stockholder agreements, voting trusts and/or other similar agreements.  Each Company Stockholder has good, valid and marketable title to the Shares of Company Common Stock and the absolute and unqualified right to sell, exchange, transfer and deliver such Company Common Stock to Parent as contemplated hereby.

The Company and Company Stockholder hereby acknowledge that, prior to the Effective Time, the Shares of Company Common Stock are not, and have not been, subject to any Liens of any kind or nature whatsoever, including any Permitted Liens.  Pursuant to the Bank Loan Amendment, following the Effective Time, all of the Parent Common Stock issued to the Company Stockholder as Merger Consideration hereunder shall be subject to certain Permitted Liens granted to the Bank as set forth therein.

(b)           Acquisition of Parent Common Stock for Investment.  The Company Stockholder acknowledges that the shares of Parent Common Stock constituting Merger Consideration hereunder may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of by him without registration under the Securities Act, except pursuant to an exemption from such registration under the Securities Act, and in compliance with applicable “blue sky” Laws.  The Company Stockholder represents that he has no current plan or intention to dispose of any such Parent Common Stock following the Merger.

(c)           Accredited Investor.

The Company Stockholder is an "accredited investor" as that term is defined in Rule 501 promulgated under the Securities Act.

(d)           Disclosure of Information.

The Company and the Company Stockholder hereby acknowledge, in respect of the Company Stockholder, that:

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(i)            he has had an opportunity to ask questions of and to receive answers from the representatives of Parent and Merger Sub with respect to the business, results of operations, financial conditions and prospects of Parent and/or Merger Sub;

(ii)           he has made his own independent examination, investigation, analysis and evaluation of Parent and Merger Sub, including but not limited to, an evaluation of the value of the Merger Consideration to be received by such Company Stockholder;

(iii)           he has not, in connection with this Agreement and the transactions contemplated hereby, relied in any respect on any information, analyses or materials (except for the representations and warranties set forth in this Agreement) provided to him by Parent and/or Merger Sub or any Affiliate thereof or any officer or representative thereof;

(iv)           he recognizes that the transactions contemplated by this Agreement involve a high degree of risk; and

(v)           he has such knowledge and experience in financial and business matters to enable him to utilize the information made available to such Company Stockholder in connection with this transaction and the shares of Parent Common Stock and to evaluate the merits and risks thereof.  The Company Stockholder has substantial experience in investing in securities and he has made investments in securities other than those involved in this transaction.

 (e)           Authority; No Conflict; Required Filings and Consents.

The Company and the Company Stockholder hereby acknowledge and agree, in respect of the Company Stockholder, that:

(i)           The execution and delivery of this Agreement by any Company Stockholder does not, and neither the performance of this Agreement by such Company Stockholder nor the Merger and/or other transactions contemplated hereby, will: (i) conflict with or violate in any material respect any Law or Order applicable to such Company Stockholder or by which any of his respective properties are bound or affected or (ii) result in any material breach of or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration, or cancellation of, or give to others any other rights pursuant to, or result in the creation of a Lien (other than Permitted Liens) on any of his properties or assets pursuant to, any Contract to which such Company Stockholder is a party or by which he or any of his properties is bound or affected.

(ii)           The execution, delivery and performance of this Agreement by the Company Stockholder does not require such Company Stockholder to obtain any Consent of, or to make any filing with or notification to, any Governmental Authority, domestic or foreign, and/or to obtain any material consents or approvals from any third parties.

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(iii)           The Company Stockholder has the power and authority to enter into, execute and deliver this Agreement and to carry out his obligations hereunder.

(iv)           This Agreement has been duly executed and delivered by each of the Company Stockholder and, assuming due execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company Stockholder, enforceable against such Company Stockholder in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors rights generally and by general principles of equity.

3.31        Brownsville Premises.  The Company, as Tenant, and the Estate of Theodore R. Paul, as Landlord, entered into a Lease Agreement, dated as of September 1, 2008 (the “Brownsville Lease”), in respect of the Premises located at 3525 International Boulevard. Brownsville, TX (the “Brownsville Premises”).  Pursuant to the Brownsville Lease, the term thereof will expire on September 30, 2013.

The Company, as Tenant, vacated the Brownsville Premises on or about June 1, 2009.  The Company entered into a sublease agreement (the “Brownsville Sublease”) on or about June 1, 2009 with National Electric Coil Co., as Subtenant.  Pursuant to the Brownsville Sublease, Subtenant will sublet and occupy the entire Brownsville Premises and pay a monthly rental amount of $12,267.00 per month, i.e., the monthly rental amount payable under the Brownsville Lease.

Prior to the Effective Time, the Company shall assign and transfer all of its right, title and interest under the Brownsville Lease and/or Brownsville Sublease to the Company Stockholder (the “Brownsville Lease Transfer”).  The Company and its Subsidiaries have no obligations or liabilities of any kind or nature whatsoever arising out of or relating to the prior business operations of the Brownsville, TX facility and/or otherwise at any time under the Brownsville Lease and/or Brownsville Sublease as a result of Subtenant’s actions or otherwise, including without limitation, under any Environmental Laws.

Following the Effective Time, the Company Stockholder shall obtain a general release from Landlord under the Brownsville Lease in favor of the Company Stockholder and the Company, as the prior tenant, in respect of any liabilities or obligations incurred at any time under the Brownsville Lease and/or Brownsville Sublease (the “Brownsville Release”).  The Company Stockholder shall utilize his best efforts to obtain such Brownsville Release on or prior to June 15, 2010 and that such Brownsville Release shall be effective as of June 1, 2009.  In addition, following the Effective Time, the Subtenant shall enter into a direct lease with Landlord in respect of the entire Brownsville Premises, effective as of June 1, 2009.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company as follows:

Section 4.01     Organization; Standing and Power.

(a)           Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of its jurisdiction of organization, and has the requisite corporate power and authority to own, lease and operate its assets and to carry on its business as now conducted.  Each of Parent and Merger Sub is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize the concept of good standing) in each jurisdiction where the character of the assets and properties owned, leased or operated by it or the nature of its business makes such qualification or license necessary, except where the failure to be so qualified or licensed or to be in good standing, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)           Charter Documents. Parent has delivered or made available to the Company a true and correct copy of the Charter Documents of each of the Company and Merger Sub. Neither the Company nor Merger Sub is in violation of any of the provisions of its Charter Documents.

Section 4.02     Authority; Non-Contravention; Governmental Consents.

(a)           Authority.  Each of Parent and Merger Sub has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the filing of the Certificate of Merger pursuant to the DGCL.  This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due execution and delivery by the Company, constitutes the valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors rights generally and by general principles of equity.

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(b)           Non-Contravention. The execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated by this Agreement, do not: (i) contravene or conflict with, or result in any violation or breach of, the certificate of incorporation or by-laws of Parent or Merger Sub; (ii) subject to compliance with the requirements set forth in clauses (i)-(iii) of Section 4.02(c), conflict with or violate any Law applicable to Parent or Merger Sub or any of their respective properties or assets; (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a default) under, or give to others any material rights of termination, amendment, acceleration or cancellation, or require any material Consent under any Contract to which Parent or its Subsidiaries, including Merger Sub, are a party or otherwise bound; or (iv) result in the creation of any Lien (other than Permitted Liens) on any of the properties or assets of Parent or Merger Sub.

(c)           Governmental Consents. No Consent of any Governmental Entity is required to be obtained or made by Parent or Merger Sub in connection with the execution, delivery and performance by Parent and Merger Sub of this Agreement or the consummation by Parent and Merger Sub of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company and/or Parent are qualified to do business; and (ii) such Consents as may be required under applicable state securities or "blue sky" laws and the securities Laws of any foreign country.

(d)           Board Approval.  The Board of Directors of each of Parent and Merger Sub has duly approved the execution and delivery of this Agreement and the consummation of the Merger and other transactions contemplated hereby.

Section 4.03     Capitalization.  

(a)           Merger Sub Capitalization.  The authorized capital stock of Merger Sub consists of 5,000 shares of Common Stock, par value $0.001 per share ("Merger Sub Common Stock").  As of the date hereof, 500 shares of Merger Sub Common Stock are issued and outstanding.  There are no securities convertible into capital stock or other ownership interests or equity equivalents, options, warrants, or other rights, agreements, arrangements, or commitments of any character relating to the issued or unissued capital stock, or ownership or equity equivalent of Merger Sub or obligating Merger Sub to issue or sell any shares of capital stock of, or other ownership interests or equity equivalents in, Merger Sub or any agreement to issue any such convertible securities, options, warrants, rights, agreements, arrangements, or commitments.  All issued and outstanding shares of Merger Sub Common Stock are duly authorized, validly issued, fully paid and non-assessable.  There are no voting trusts or other agreements or understandings to which Merger Sub is a party with respect to the voting of the capital stock of Merger Sub.

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(b)           Parent Capitalization. The authorized capital stock of Parent consists of 75,000,000 shares of Common Stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which (a) 29,000,000 shares of Parent Common Stock are issued and outstanding (as of April 29, 2010 and before giving effect to the issuances to be made at the Effective Time) (b) no shares of preferred stock are outstanding, and (c) no shares of Parent Common Stock or preferred stock are held by Parent in its treasury.  No other shares of capital stock or other voting securities of Parent are issued, reserved for issuance or outstanding.All outstanding shares of the capital stock of the Parent are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly issued, fully paid and non-assessable and, except as set forth in the Parent SEC Documents, not subject to any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Charter Documents of Parent or any Contract to which Parent is a party or otherwise bound.  

As of the date hereof, there are no bonds, debentures, notes or other indebtedness of the Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of the Parent Stock may vote (“Voting Parent Debt”).  Except as set forth in the Parent SEC Documents, as of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Parent is a party or by which it is bound (a) obligating Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Parent or any Voting Parent Debt, (b) obligating Parent to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of Parent.  Except as set forth in the Parent SEC Documents, there are no outstanding contractual obligations of Parent to repurchase, redeem or otherwise acquire any shares of capital stock of Parent. Except as set forth in the Parent SEC Documents, Parent is not a party to any agreement granting any security holder of Parent the right to cause Parent to register shares of the capital stock or other securities of Parent held by such security holder under the Securities Act. 

Section 4.04.   Parent SEC Documents.

(a)           Parent has filed all reports, schedules, forms, statements and other documents required to be filed by the Parent with the SEC since December 2, 2009, pursuant to Sections 13 and 15 of the Exchange Act, as applicable (the “Parent SEC Documents”).

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(b)           As of its respective filing date (since December 2, 2009), each Parent SEC Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Except to the extent that information contained in any Parent SEC Document has been revised or superseded by a later filed Parent SEC Document, none of the Parent SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The consolidated financial statements of Parent included in the Parent SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Parent as of the dates thereof and the results of operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).  Notwithstanding anything to the contrary herein contained, this Section 4.04 shall not apply in any manner whatsoever to any documentation filed by Parent (or any predecessor entity) with the SEC at any time prior to December 2, 2009.

ARTICLE V

COVENANTS

[Section 5.01 – Intentionally Omitted]

Section 5.02   Public Announcements.  The initial press release with respect to this Agreement and the transactions contemplated hereby shall be a release mutually agreed to by the Company and Parent. Thereafter, each of the Company and Parent agrees that no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior written consent of the Company and Parent (which consent shall not be unreasonably withheld or delayed), except as such release or announcement may be required by applicable Law or the rules or regulations of any applicable Governmental Entity to which the relevant party is subject, wherever situated, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to comment on such release or announcement in advance of such issuance.

Section 5.03    Further Assurances.  At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and matters in order to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

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Section 5.04     Tax Matters.

(a)           The parties agree and acknowledge that the Merger is intended to qualify as reorganization under Section 368(a) of the Code.  No party has taken, or shall take or fail to take any action if such action or failure to act would cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.

(b)           If, in connection with a tax examination of Parent, Merger Sub or the Company (a "Tax Examination") or otherwise, a revenue agent or other representative of the IRS or any other taxing authority raises any question as to the status for tax purposes of the Merger as a tax-free reorganization and such question is reasonably expected to lead to an adverse determination by the taxing authority as to the status of the Merger as such, the party that is the subject of the Tax Examination or inquiry (the "Examined Party") shall promptly notify the other parties to this Agreement (the "Other Parties") in writing of the fact of the raising of such questions and describe with particularity the nature of any questions raised with regard to the Merger.  The Examined Party shall promptly notify, in writing, the Other Parties of all developments relating to the Tax Examination or inquiry insofar as such Tax Examination or inquiry relates to the Merger, and shall afford such Other Parties in advance of engaging in any oral or written communications with representatives of any taxing authority, the opportunity to fully participate in every aspect of the conduct and resolution of the portion of such Tax Examination or inquiry that relates to the Merger including, without limitation, the preparation of any response, brief, or memorandum to the taxing authority.

(c)           The parties hereby acknowledge that the Company has previously elected to be treated as a Subchapter S corporation for income tax purposes. At the Effective Time, the Company’s status as such Subchapter S corporation for income tax purposes shall be automatically terminated without any further action by the Company or any other Person.

(d)           The Company Stockholder shall be solely responsible at any time following the Effective Time for:  (i) the timely filing of all of the Company's Tax Returns with respect to any  period prior to the Effective Time and to be filed following the Effective Time; (ii) the payment of all Taxes due and owing by the Company and/or its Subsidiaries relating to any period prior to the Effective Time; and (iii) the payment of all accounting and/or other expenses relating to the preparation and filing of any such Tax Returns.  The Company Stockholder shall be solely and exclusively responsible for the filing of the Company’s Tax Returns as an S corporation, and payment of all Taxes of the Company and/or its Subsidiaries relating thereto, in respect of the interim period from January 1, 2010 to the Effective Time.  The provisions of this Section 5.04(d) shall survive the Closing and the Effective Time.

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Section 5.05    Director Designation.  During the Director Designation Period (as defined below), Parent shall cause the Company Stockholder, to be nominated for election as a Director of Parent.  On or prior to the Closing Date, the Company Stockholder and Provident Pioneer Partners, L.P. (“Provident Pioneer”) shall enter into an agreement pursuant to which, subject to the provisions thereof, Provident Pioneer will agree to vote for the Company Stockholder as a Director of Parent during such Director Designation Period (the “Voting Agreement”). For purposes hereof, the “Director Designation Period” shall mean the three (3) year term of the Klink Employment Agreement; provided, however, that: (i) the Company Stockholder shall not be in material default at any time under the terms of such Klink Employment Agreement and/or any other obligations of the Company Stockholder to each of Parent and/or the Surviving Corporation; (ii) the Company Stockholder continues to beneficially own not less than 364,706 shares of Parent Common Stock received as Merger Consideration hereunder (i.e., 75% of the aggregate shares of Parent Common Stock received by the Company Stockholder as Merger Consideration hereunder); and (iii) the Company Stockholder shall not have resigned or been terminated or removed as a Director of Parent.

Section 5.06    Bank Loan Advance. At the Effective Time, Parent shall cause the sum of $3,000,000.00 to be advanced to the Surviving Corporation (the “Bank Loan Advance”) to be utilized for the following purposes: (i) $700,000.00 of such Bank Loan Advance shall be used to pay the principal amount of the revolving credit facility of the Bank Loan; (ii) $200,000.00 of such Bank Loan Advance shall be used to pay the principal amount of the term loan facility of the Bank Loan; and (iii) the balance of such Bank Loan Advance ($2,100,000.00) shall be used to pay and satisfy the trade accounts payable of the Surviving Corporation and/or for working capital purposes and/or to otherwise pay an additional principal amount of the revolving credit facility, all in a manner satisfactory to Parent.  A portion of the balance of such Bank Loan Advance shall be utilized to pay the Designated Legal Fees pursuant to Section 8.13 hereof.  The Bank Loan Advance shall constitute a loan made by Parent and/or its designee to the Surviving Corporation, which loan shall be subordinated to the Bank Loan pursuant to the terms of the Bank Loan Amendment.

Notwithstanding anything to the contrary contained in this Agreement, the sole and exclusive obligation of Parent in respect of the Bank Loan and/or Bank Loan Agreement and/or any other arrangements between the Bank and the Company shall be to cause the payment or advance of such Bank Loan Advance as set forth above.  In no event shall Parent and/or any of its Affiliates (other than the Surviving Corporation) be deemed to be responsible for, or be guarantor of, or otherwise assume, any debts, liabilities or obligations of Borrower and/or Surviving Corporation and/or any other party under the Bank Loan and/or Bank Loan Agreement and/or Bank Loan Amendment in any manner whatsoever. Accordingly, following the Effective Time, the Surviving Corporation shall be and remain solely and exclusively responsible for all liabilities and obligations of Borrower under the Bank Loan and/or Bank Loan Agreement and/or Bank Loan Amendment.

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Prior to the Effective Time, Johnson Bank (the “Bank”), as Lender, and the Company (i.e., the Surviving Corporation as of the Effective Time), as Borrower, shall have entered into an amendment to the Bank Loan Agreement (the “Bank Loan Amendment”) in form acceptable to Parent setting forth a loan restructuring of the credit facilities provided in the Bank Loan Agreement.  Pursuant to the Bank Loan Amendment, all prior defaults by the Company under the Bank Loan Agreement, and any claims or rights relating thereto, shall be irrevocably waived and released by the Bank for all purposes and any forbearance and/or other related agreements between such parties constituting amendments to the Bank Loan Agreement or otherwise shall be terminated in all respects.  The Bank Loan Amendment shall also include the consent and approval of the Bank to the Merger and other transactions contemplated by this Agreement, including the use of the proceeds of the Bank Loan Advance to pay the Designated Legal Fees pursuant to Section 8.13 hereof (the “Bank Consent”).  Following the Effective Time, the Company Stockholder, as President of the Surviving Corporation pursuant to the Klink Employment Agreement, shall utilize his best efforts to ensure that the Surviving Corporation shall comply with all of the terms and provisions of the Bank Loan Amendment, including without limitation, the financial covenants set forth therein.

For purposes hereof: (i) the “Bank Loan Agreement” shall mean the Loan and Security Agreement, dated as of January 2, 2008, as amended, between the Bank, as Lender, and the Company, as Borrower; and (ii) the “Bank Loan” shall mean the all of the loan arrangements set forth in the Bank Loan Agreement, including the revolving credit and term loan facilities.

5.07        Non-Competition.

(a)           As a material inducement to Parent and Merger Sub to enter into this Agreement and consummate the transactions hereunder, the Company Stockholder and/or his Affiliates, shall not, directly or indirectly, during the period commencing on the date hereof and ending three and one-half (3½) years (i.e., 42 months) from and after the expiration or any termination of the Klink Employment Agreement (the “Non-Competition Period”), engage for the benefit of the Company Stockholder and/or his Affiliates and/or any other Person, whether as a stockholder, member, partner, officer, lender, consultant or agent or in any other capacity, in any business anywhere in the world which is competitive with the business which at such time during the Non-Competition Period is then being conducted by the Surviving Corporation and/or its Subsidiaries and/or Affiliates (the “Competitive Business”). In addition, during the Non-Competition Period, the Company Stockholder and/or his Affiliates shall not: (i) solicit or divert the business of any customer and/or potential customer and/or vendor of any such Competitive Business and/or any Person with whom the Surviving Corporation and/or its Subsidiaries and/or Affiliates has or may have an agreement to sell, distribute, license, franchise and/or purchase any products, and/or perform services in respect of such Competitive Business; or (ii) solicit any officer or employee of the Surviving Corporation and/or its Subsidiaries and/or Affiliates to terminate or leave the employ of Surviving Corporation and/or its Subsidiaries and/or Affiliates.

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(b)           The restrictions set forth in Section 5.07(a) above shall apply on a worldwide basis (the “Territory”).  The Company Stockholder hereby acknowledges that he is deriving substantial benefits from the Merger and other transactions contemplated hereby. The Company Stockholder agrees that, in connection with the Merger and other transactions contemplated hereby, the time and geographic restrictions set forth above are fair and reasonable.

(c)           The Company Stockholder also agrees that the remedy at law for any breach by the Company Stockholder and/or his Affiliates of any of the provisions of this Section 5.07 will be inadequate, and that Parent and/or the Surviving  Corporation shall be entitled to temporary or permanent injunctive relief (including any preliminary injunctions) to enforce any of the provisions of this Section 5.07 and to recover reasonable attorneys’ fees in connection therewith, which relief may be granted without the necessity of proving actual damages or the inadequacy of money damages or posting bond.  In addition, Parent and/or the Surviving Corporation shall have the right to require that the Company Stockholder account for and pay over to Parent and/or the Surviving Corporation all benefits derived and/or received by such Company Stockholder as a result of any such breach of the terms and provisions of this Section 5.07.

(d)           The parties intend that the unenforceability or invalidity of any term or provision of this Section 5.07 shall not render any other term or provision contained herein unenforceable or invalid.  In the event that the activities described in Section 5.07 or the period of time or the geographical area covered by this Section 5.07 should be deemed too extensive, then the parties intend that this Section 5.07 be construed to cover the maximum scope of business activities, period of time and geographical area (not exceeding those specifically set forth herein) as may be permissible under applicable Laws.

(e)            The terms and provisions of this Section 5.07 shall survive the Closing and Effective Time.

5.08.       Buckna Release. Following the Effective Time, the Company Stockholder shall utilize his best efforts to obtain as promptly as possible thereafter the Buckna Release from Buckna in favor of Parent and the Surviving Corporation as set forth in Section 3.02(e) hereof.

5.09.       Brownsville Release. Following the Effective Time, the Company Stockholder shall obtain the Brownsville Release from the Landlord in respect of the Brownsville Leased Property (and use his best efforts to obtain such Brownsville Release on or prior to June 15, 2010 and that such Brownsville Release will be effective as of June 1, 2009) as set forth in Section 3.31 hereof.  In addition, on or prior to June 15, 2010, the Subtenant shall enter into the direct lease with Landlord in respect of the entire Brownsville Premises.

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ARTICLE VI

CONDITIONS

Section 6.01    Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to this Agreement to consummate and effect the Merger and other transactions contemplated hereby is subject to the satisfaction or waiver on or prior to the Effective Time of each of the following conditions:

(a)           No Injunctions, Restraints or Illegality. No Governmental Entity having jurisdiction over any party hereto shall have enacted, issued, promulgated, enforced or entered any Laws or Orders, whether temporary, preliminary or permanent, that make illegal, enjoin or otherwise prohibit consummation of the Merger or the other transactions contemplated by this Agreement.

Section 6.02    Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate and effect the Merger and other transactions contemplated hereby shall be subject to the satisfaction or waiver by Parent and Merger Sub on or prior to the Effective Time of each of the following conditions:

(a)            Representations and Warranties.  The representations and warranties of the Company and the Company Stockholder set forth in Article III of this Agreement shall be true and correct in all respects (without giving effect to any limitation indicated by the words "Company Material Adverse Effect", "in all material respects", "in any material respect", "material" or "materially") as of immediately prior to the Effective Time (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date).

(b)           Performance of Obligations. The Company and the Company Stockholder shall have performed in all material respects all obligations required to be performed by or complied with by the Company and the Company Stockholder hereunder prior to the Effective Time.

(c)           Officer Certificate. Parent will have received a certificate, signed by the chief executive officer and chief financial officer of the Company, certifying that the conditions set forth in Section 6.02(a) and (b) hereof, respectively, have been satisfied.

(d)           Company Material Adverse Effect.  Since the Year-End Date, there shall not have been any Company Material Adverse Effect or any event, change or effect that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

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(e)           Third Party Consents.  All material consents and approvals of the third parties required to be obtained by the Company and/or Company Stockholder in connection with the Merger and other transactions contemplated by this Agreement and any other material third party consents or approvals set forth in Schedule B, including without limitation, the Bank Consent, shall have been obtained and shall be in full force and effect.

(f)            No Governmental Action.  There shall been no Legal Action taken, or any Law or Order enacted, promulgated, or issued or deemed applicable to the Merger by any Governmental Authority, which would (i) prohibit ownership or operation by the Surviving Corporation of all or a portion of the respective businesses or assets of the Company and its Subsidiaries, or compel the Surviving Corporation or Parent to dispose of or hold separate all or a portion of the businesses or assets of the Company and its Subsidiaries, as a result of the Merger; (ii) render Parent unable to consummate the Merger; (iii) make such consummation illegal; or (iv) impose or confirm material limitations on the ability of Parent effectively to exercise full rights of ownership of shares of the capital stock of the Surviving Corporation, including without limitation, the right to vote any such shares on all matters properly presented to the stockholders of the Surviving Corporation; and no such action shall have been taken or any such Law or Order enacted, promulgated, issued, or deemed applicable to the Merger which, in the reasonable judgment of Parent, will produce such result.

(g)           Governmental Consents.  Parent shall have received evidence, in form and substance reasonably satisfactory to Parent, that all licenses, permits, Consents and/or Orders of any Governmental Entity, as are required in connection with the consummation of the Merger and other transactions contemplated hereby or necessary to conduct the business of the Company and its Subsidiaries as presently conducted, including without limitation, those Consents set forth in Schedule C, have been obtained and are in full force and effect.

(h)           Due Diligence Investigations. All due diligence investigations and examinations undertaken by Parent and/or Merger Sub and their respective attorneys, accountants and other representatives in respect of the Company and the operations, financial or other condition or future prospects thereof, shall have been completed to the satisfaction of Purchaser.

(i)            Klink Employment Agreement.  The Company Stockholder and the Surviving Corporation shall have entered into the Employment Agreement in the form annexed hereto as Schedule D (the “Klink Employment Agreement”).

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(j)            Voting Agreement.  Provident Pioneer and the Company Stockholder shall have entered into the Voting Agreement (as set forth in Section 5.05 hereof) in the form annexed hereto as Schedule E.

(k)           Lock-Up Agreement.  Parent and the Surviving Corporation and the Company Stockholder shall have entered into the Lock-Up Agreement in the form annexed hereto as Schedule F (the “Lock-Up Agreement”).

(l)            Non-Competition and Confidentiality Agreement. The Surviving Corporation and the Company Stockholder shall have entered into the Non-Competition and Confidentiality Agreement in the form annexed hereto as Schedule G.

(m)          Bank Loan Amendment.  The Company and the Bank shall have entered into the Bank Loan Amendment, and the Company shall have obtained the Bank Consent, all as set forth in Section 5.06 hereof, in form and substance acceptable to Parent.

(n)           Maximum Debt Amount.  At the Effective Time, the aggregate amount of the Company’s indebtedness for borrowed money to Johnson Bank and others then outstanding shall not exceed $7,800,000.00 in the aggregate (the “Maximum Debt Amount”).

(o)           JEM Purchase Agreement. Parent and its designee, as purchaser, and the Company Stockholder, as seller, shall have entered into the JEM Purchase Agreement in the form annexed hereto as Schedule H.

(p)           Company Conversion.  The Company Conversion shall have been effected in accordance with the respective laws of Delaware and Wisconsin, and certificates of conversion shall have been duly filed and recorded in accordance with such respective laws of Delaware and Wisconsin.

(r)            No Dissenting Shares.  The Company Stockholder has voted in favor of adoption of this Agreement and the Merger and has not otherwise exercised any appraisal and/or other rights in respect of any Shares of Company Common Stock as dissenting shares under applicable Law.

(s)           Opinion.  Counsel to the Company shall have delivered to Parent and Merger Sub an opinion of counsel in the form annexed hereto as Schedule I.

(t)            Corporate Approval.  The Company shall have delivered to Parent and Merger Sub certified resolutions of its Board of Directors and all of the Company Stockholder evidencing approval of this Agreement and the Merger and other transactions contemplated hereby.

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(u)           Brownsville Lease Transfer.  The Company shall have delivered to Parent and Merger Sub the Brownsville Lease Transfer as set forth in Section 3.31 hereof in the form annexed hereto as Schedule J.

(v)           Finder Release.  The Company shall have delivered to Parent and Merger Sub the Finder Release as set forth in Section 3.10 hereof in the form annexed hereto as Schedule K.

(w)          Payables List.  The Company shall have delivered to Parent and Merger Sub a list of all accounts payable and accrued expenses of the Company and its Subsidiaries as of April 23, 2010, as duly certified by the Company Stockholder.

(x)           Certificate of Merger.  The Company shall have delivered the Certificate of Merger as duly executed by an authorized officer of the Company.

(y)           Officer’s Certificate - Company Stock.  The Company shall have delivered an officer’s certificate regarding certain stock certificates in the form of Schedule L as set forth in Section 3.02(a).

(z)           Good Standing Certificates.  The Company and Company Stockholder Affiliates shall deliver certificates from appropriate authorities as to the good standing of the Company and each of its Subsidiaries in each applicable jurisdiction as of a recent date prior to the Closing.

(aa)         Approved Actions.  All actions, proceedings, instruments and documents required to carry out the transactions contemplated hereby or incidental hereto and all other related legal matters shall have been reasonably satisfactory to and approved by counsel for Parent, and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested.

Section 6.03    Conditions to Obligation of the Company. The obligations of the Company to consummate and effect the Merger and other transactions contemplated hereby shall also be subject to the satisfaction or waiver by the Company on or prior to the Effective Time of each of the following conditions:

(a)           Representations and Warranties.  The representations and warranties of Parent and Merger Sub set forth in Article IV of this Agreement shall be true and correct in all respects (without giving effect to any limitation indicated by the words "in all material respects", "in any material respect", "material" or "materially") as of immediately prior to the Effective Time (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date).

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(b)           Performance of Obligations. Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by or complied with by Parent and Merger Sub hereunder prior to the Effective Time.

(c)           Officer Certificate.  The Company will have received a certificate, signed by the chief executive officer of Parent, certifying that the conditions set forth in Sections 6.03(a) and (b) hereof, respectively have been satisfied.

(d)           Klink Employment Agreement.  The Company Stockholder and the Surviving Corporation shall have entered into the Employment Agreement in the form annexed hereto as Schedule D.

(e)           Voting Agreement.  Provident Pioneer and the Company Stockholder shall have entered into the Voting Agreement (as set forth in Section 5.05 hereof) in the form annexed hereto as Schedule E.

(f)            Lock-Up Agreement.  Parent and the Surviving Corporation and the Company Stockholder shall have entered into the Lock-Up Agreement in the form annexed hereto as Schedule F.

(g)           Bank Loan Amendment.  The Company and the Bank shall have entered into the Bank Loan Amendment, and the Company shall have obtained the Bank Consent, all as set forth in Section 5.06 hereof, in form and substance acceptable to Parent.

(h)           JEM Purchase Agreement.  Parent and its designee, as purchaser, and the Company Stockholder, as seller, shall have entered into the JEM Purchase Agreement in the form annexed hereto as Schedule H.

(i)            Company Conversion.  The Company Conversion shall have been effected in accordance with the respective laws of Delaware and Wisconsin, and certificates of conversion shall have been duly filed and recorded in accordance with such respective laws of Delaware and Wisconsin.

(j)            Corporate Approval. Each of Parent and Merger Sub shall have delivered to the Company certified resolutions of its Board of Directors evidencing approval of this Agreement and the Merger and other transactions contemplated hereby.

(k)           Certificate of Merger.  Each of Parent and Merger Sub shall have delivered the Certificate of Merger as duly executed by a duly authorized officer.

(l)            Good Standing Certificates. Parent and Merger Sub shall deliver certificates from appropriate authorities as to the good standing of Parent and Merger Sub in each applicable jurisdiction as of a recent date prior to the Closing.

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(m)          Approved Actions.  All actions, proceedings, instruments and documents required to carry out the transactions contemplated hereby or incidental hereto and all other related legal matters shall have been reasonably satisfactory to and approved by counsel for the Company, and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested.

ARTICLE VII

INDEMNIFICATION PROVISIONS

Section 7.01     Indemnification Obligations of the Company Stockholder.

The Company Stockholder shall indemnify, defend and hold harmless Parent and the Surviving Corporation and their respective Affiliates (other than the Company Stockholder) and their respective directors, officers, stockholders, partners, representatives, agents and employees and their heirs, successors and assigns (any party entitled to be indemnified under this Article VII, an "Indemnified Party", and any party obligated to provide indemnification under this Article VII, the "Indemnifying Party"), from, against and in respect of any damages, claims, losses, charges, actions, suits, proceedings, deficiencies, Taxes, interest, penalties, and costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements and expenses of investigation) (each, a "Liability" and collectively, "Liabilities") (including any claim by a third party which, without regard to the merits of the claim, would result in Liability if such third party's allegations were true) at any time imposed on, sustained, incurred or suffered by or asserted against any Indemnified Party, directly or indirectly, in connection with, relating to or arising out of or based upon: (a) any breach of any representation or warranty of the Company and/or the Company Stockholder set forth in this Agreement and/or the Schedules and Exhibits hereto and/or in any document or instrument delivered in connection herewith; (b) any breach of any covenant or other agreement of the Company and/or the Company Stockholder set forth in this Agreement; or (c) any transaction, action or event commencing or occurring on or prior to the Closing Date which is not fully disclosed or provided for in this Agreement, the Financial Statements or the several Schedules and Exhibits hereto, whether absolute or contingent, matured or unmatured or known or unknown.

Section 7.02     Indemnification Obligation of Parent.

Parent shall indemnify, defend and hold harmless the Company Stockholder and his heirs, successors, assigns, representatives and agents from, against and in respect of any Liabilities (including any claim by a third party which, without regard to the merits of the claim, would result in Liability if such third party’s allegations were true) at any time imposed on, sustained, incurred or suffered by or asserted against any Indemnified Party, directly or indirectly, in connection with, relating to, arising out of or based upon: (a) any breach of any representation or warranty of Parent set forth in this Agreement; or (b) any breach of any covenant or other agreement of Parent set forth in this Agreement.

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Section 7.03     Procedures for Indemnification for Third Party Claims.

The obligations and liabilities of the parties under this Agreement with respect to, relating to, caused (in whole or in part) by or arising out of claims of third parties (individually, a “Third Party Claim” and collectively, the “Third Party Claims”) shall be subject to the following terms and conditions:

(a)           The Indemnified Party shall furnish the Indemnifying Party with prompt written notice of any Third Party Claim.  Any such notice of a Third Party Claim shall identify with reasonable specificity the basis for the Third Party Claim, the facts giving rise to the Third Party Claim, and the amount of the Third Party Claim (or, if such amount is not yet known, a reasonable estimate of the amount of the Third Party Claim).   Failure of an Indemnified Party to give such prompt notice shall not relieve the Indemnifying Party of its obligation to indemnify hereunder.

(b)           If a Third Party Claim is made against an Indemnified Party, then the Indemnifying Party shall be entitled to assume the defense of such Third Party Claim upon written notice to the effect thereof furnished to the Indemnified Party, in which event the Indemnifying Party will so assume the defense thereof with counsel selected solely and exclusively by such Indemnifying Party.  In the event that the Indemnifying Party assumes such defense, then the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at the Indemnified Party’s sole cost and expense, separate from the counsel employed by the Indemnifying Party. The Indemnified Party shall also make available to the Indemnifying Party copies of all relevant documents and records in its possession and shall otherwise reasonably assist the Indemnifying Party in such defense if requested by the Indemnifying Party.

(c)           In the event that the Indemnifying Party, within twenty (20) days after notice of any such Third Party Claim (or such lesser time as is reasonable), fails to assume the defense pursuant to Section 7.03(b) hereof, then the Indemnified Party shall (upon notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of the Third Party Claim, subject to the right of the Indemnifying Party to thereafter assume the defense of such Third Party Claim at any time prior to settlement, compromise or final determination thereof.

(d)           Notwithstanding anything to the contrary contained in this Section 7.03, the Indemnifying Party shall not, without the written consent of the Indemnified Party, settle or compromise any Third Party Claim or consent to the entry of judgment which does not include as an unconditional term thereof the giving by the claimant and/or plaintiff to or in favor of the Indemnified Party of an unconditional release from all liability in respect of the Third Party Claim.

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Section 7.04     Indemnification Limitations.

(a)           Deductibles.  No claim for indemnification under Section 7.01 or 7.02 may be made unless such claim, together with all other claims under such Sections 7.01 or 7.02, as the case may be, in the aggregate, exceeds $50,000.00; provided, however, that, in the event that such claims under Section 7.01 or 7.02 exceed $50,000.00 in the aggregate, then the Indemnifying Party shall be required to indemnify the Indemnified Parties from and against the entire amount of such claims from the first dollar thereof. Such deductible amount will be determined separately for claims under each of Section 7.01 and 7.02.

(b)           Time Limits on Indemnification.  No claim on account of breach of representation, warranty, covenant or other agreement shall be made after the survival periods referred to in Section 7.05 of this Agreement.

(d)           Net Recovery.  The amount which an Indemnified Party shall be entitled to receive from an Indemnifying Party under this Article VII with respect to a Liability shall be net of all amounts actually recovered or received under insurance policies relating to any such Liabilities.

(e)           Non-Exclusive Remedy.  The indemnification in Sections 7.01 and 7.02, as the case may be, shall be without prejudice to any other rights or remedies that such parties may have by reason of this Agreement or as otherwise provided at law or in equity.

Section 7.05     Survival of Representations.

(a)           The representations and warranties made by the parties under this Agreement shall survive the Closing for a period of two (2) years following the Closing Date; provided, however, that the representations and warranties set forth in Sections 3.06 (Taxes); 3.20 (environmental matters); and 3.23 (products liability) shall survive until six (6) months after the expiration of the statute of limitations applicable thereto; and except that the representations and warranties set forth in Sections 3.01 (organization), 3.02 (capital structure), 3.03 (authority) and 3.17 (title to properties) hereof, and matters relating to the Company Stockholder as set forth in Section 3.30 hereof, shall survive indefinitely, in each case, notwithstanding any investigation by any party.

(b)           Notwithstanding any provision in this Agreement to the contrary, the liability of an Indemnifying Party for fraud, willful misrepresentation and/or willful breach of this Agreement shall not be subject to any of the limitations set forth in this Article VII (including the time limits set forth in this Section 7.05).

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ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.01    Definitions. For purposes of this Agreement, the following terms will have the following meanings when used herein with initial capital letters:

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, "control" (including, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by Contract or otherwise.

"Agreement" has the meaning set forth in the Preamble.

“Audited Statements” has the meaning set forth in Section 3.04(a).

“Bank” has the meaning set forth in Section 5.06.

“Bank Consent” has the meaning set forth in Section 5.06.

“Bank Loan Advance” has the meaning set forth in Section 5.06.

“Bank Loan Agreement” has the meaning set forth in Section 5.06.

“Bank Loan Amendment” has the meaning set forth in Section 5.06.

 “Brownsville Lease” has the meaning set forth in Section 3.31.

“Brownsville Lease Transfer” has the meaning set forth in Section 3.31.

“Brownsville Premises” has the meaning set forth in Section 3.31.

“Brownsville Release” has the meaning set forth in Section 3.31.

“Brownsville Sublease” has the meaning set forth in Section 3.31.

“Buckna” has the meaning set forth in Section 3.02(e)

“Buckna Redemption Agreement” has the meaning set forth in Section 3.02(e).

“Buckna Release” has the meaning set forth in Section 3.02(e).

"Business Day" means any day, other than Saturday, Sunday or any day on which banking institutions located in New York, NY are authorized or required by Law or other governmental action to close.

"Certificate" has the meaning set forth in Section 2.01(c).

"Certificate of Merger" has the meaning set forth in Section 1.03.

"Charter Documents" has the meaning set forth in Section 3.01(b).

"Closing" has the meaning set forth in Section 1.02.

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"Closing Date" has the meaning set forth in Section 1.02.

"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Section 4980B of the Code and Section 601 et. seq. of ERISA.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company" has the meaning set forth in the Preamble.

"Company Board" has the meaning set forth in the Recitals.

"Company Common Stock" has the meaning set forth in Section 2.01(a).

"Company Continuing Employees" has the meaning set forth in Section 5.01.

“Company Conversion” has the meaning set forth in the Recitals.

"Company Disclosure Letter" has the meaning set forth in the introductory language to Article III.

"Company Employee" has the meaning set forth in Section 3.12(a).

"Company Employee Agreement" means any Contract between the Company or any of its Subsidiaries and a Company Employee.

"Company Employee Plans" has the meaning set forth in Section 3.12.

"Company ERISA Affiliate" means, with respect to any Person, any other Person that, together with such first Person, would be treated as a single employer within the meaning of Section 414(b), (c) or (m) of the Code.

"Company IP" means all Intellectual Property that is owned solely or jointly, used, held for use or exploited by Company or any of its Subsidiaries in connection with the current conduct of their businesses.

"Company IP Agreements" has the meaning set forth in Section 3.07.

"Company Listed Contract" has the meaning set forth in Section 3.21.

"Company Material Adverse Effect" means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, materially adverse to: (i) the business, assets, properties, results of operations, condition (financial or otherwise) or future prospects of the Company and its Subsidiaries, taken as a whole; or (ii) the ability of the Company to consummate the Merger and other transactions contemplated by this Agreement on a timely basis.

"Company Property Lease" shall mean all leases, subleases and other agreements under which the Company or any of its Subsidiaries leases, uses or occupies, or has the right to use or occupy, any real property.

"Company Securities" has the meaning set forth in Section 3.02(b).

 “Company Stockholder” has the meaning set forth in the Preamble.

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"Company Subsidiary Securities" has the meaning set forth in Section 3.02(d).

“Competitive Business” has the meaning set forth in Section 5.07.

"Confidentiality Agreement" shall mean the Confidentiality Agreement, dated as of January 27, 2010, as executed by Parent and the Company.

"Consent" has the meaning set forth in Section 3.03(c).

"Contracts" means any contracts, agreements, licenses, notes, bonds, mortgages, indentures, leases or other binding instruments or binding commitments, whether written or oral.

“Designated Legal Fees” has the meaning set forth in Section 8.13.

"DGCL" has the meaning set forth in Section 1.01.

“Director Designation Period” has the meaning set forth in Section 5.05.

"Dissenting Shares" has the meaning set forth in Section 2.03.

"Effective Time" has the meaning set forth in Section 1.03.

"Environmental Laws" means any applicable Law, and any Order or binding agreement with any Governmental Entity: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term "Environmental Law" includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

“Environmental Permits” has the meaning set forth in Section 3.20.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

“Examined Party” has the meaning set forth in Section 5.04(b).

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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

“Exclusivity Letter Agreement” has the meaning set forth in Section 8.08.

“Financial Statements” has the meaning set forth in Section 3.04(a).

“Finder” has the meaning set forth in Section 3.10.

“Finder Release” has the meaning set forth in Section 3.10.

"GAAP" has the meaning set forth in Section 3.04(a).

"Governmental Entity" has the meaning set forth in Section 3.03(c).

"Hazardous Substance" shall mean (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws, and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

"Indemnified Parties" has the meaning set forth in Section 7.01.

"Indemnifying Parties" has the meaning set forth in Section 7.01.

"Intellectual Property" means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including such rights in and to: (a) patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration and like rights ("Patents"); inventions, invention disclosures, discoveries and improvements, whether or not patentable; (b) copyrights and all other similar rights throughout the world ("Copyrights"); (c) design rights; (d) trade names, logos, trademarks and service marks, trade dress, certification marks and the goodwill associated with the foregoing ("Trademarks"); (e) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act or under similar foreign statutory and common law), business, technical and know-how information, databases, data collections and other confidential and proprietary information and all rights therein ("Trade Secrets"); (f) software, including data files, source code, object code, application programming interfaces, architecture, documentation, files, records, schematics, computerized databases and other software-related specifications and documentation (collectively, "Software"); (g) Internet domain names; and in each case of (a) to (g) above, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Entity in any jurisdiction.

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"IRS" means the United States Internal Revenue Service.

“JEM Holdings” has the meaning set forth in Section 3.01(d).

“JEM Purchase Agreement” has the meaning set forth in Section 3.01(d).

“Klink Employment Agreement” has the meaning set forth in Section 6.02(i).

"Knowledge" means, when used with respect to the Company and each of its Subsidiaries, the constructive knowledge of the Company Stockholder, after reasonable inquiry and due investigation.

"Laws" means any domestic or foreign laws, common law, statutes, ordinances, rules, regulations, codes, Orders or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered or applied by any Governmental Entity.

"Leased Property" shall mean all real property that the Company or any of its Subsidiaries leases, subleases or otherwise uses or occupies, or has the right to use or occupy, pursuant to a Company Property Lease.

"Legal Action" has the meaning set forth in Section 3.09.

"Liability" has the meaning set forth in Section 7.01.

"Licensed Company IP" means all Company IP that is not owned solely or jointly by the Company or any of its Subsidiaries, and that the Company or any of its Subsidiaries has a right to use or exploit by virtue of any Contract entered into with the sole owner, or one or more joint owner(s), of such Company IP.

"Liens" means, with respect to any property or asset, all pledges, liens, mortgages, charges, encumbrances, hypothecations, options, rights of first refusal, rights of first offer and security interests of any kind or nature whatsoever.

“Lock-Up Agreement” has the meaning set forth in Section 6.02(k).

“Maximum Debt Amount” has the meaning set forth in Section 6.02(n).

"Merger" has the meaning set forth in Section 1.01.

"Merger Sub" has the meaning set forth in the Preamble.

“Merger Sub Common Stock” has the meaning set forth in Section 4.03.

"Merger Consideration" has the meaning set forth in Section 2.01(a).

“Mexico Sub” means Nexus Magneticos de Mexico, S. de R.L. de C.V., a Mexican corporation and a Subsidiary of the Company with a production facility located in Reynosa, Tamaulipas, Mexico.

“Non-Competition Period” has the meaning set forth in Section 5.07.

“Occurrence” has the meaning set forth in Section 3.23.

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“Officer’s Certificate – Company Stock” has the meaning set forth in Section 6.02(y).

"Order" has the meaning set forth in Section 3.09.

“Ordinary Course” has the meaning set forth in Section 3.05(a).

“Other Parties” has the meaning set forth in Section 5.04(b).

"Owned Company IP" means all Company IP that is not Licensed Company IP.

"Parent" has the meaning set forth in the Preamble.

“Parent Common Stock” has the meaning set forth in Section 2.01(a).

"Permits" has the meaning set forth in Section 3.08(b).

"Permitted Liens" means: (a) Liens in respect of the Company’s assets and properties granted to the Bank pursuant to the Bank Loan Agreement and/or Bank Loan Amendment; (b) statutory Liens for current Taxes or other governmental charges not yet due and payable and the amount or validity of which is being contested in good faith (provided appropriate reserves required pursuant to GAAP have been made in respect thereof); and (c) mechanics', carriers', workers', repairers' and similar statutory Liens arising or incurred in the ordinary course of business for amounts which in all events do not exceed $2,000.00 in the aggregate at any time, and are not delinquent or which are being contested by appropriate proceedings (provided appropriate reserves required pursuant to GAAP have been made in respect thereof).

"Person" means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity and group.

“Personal Property” has the meaning set forth in Section 3.15.

“Products” has the meaning set forth in Section 3.23.

“Provident Pioneer” has the meaning set forth in Section 5.05.

"Real Property" has the meaning set forth in Section 3.20.

“Related Parties” has the meaning set forth in Section 3.11.

"SEC" shall mean the Securities and Exchange Commission.

"Securities Act" has the meaning set forth in Section 2.05.

"Shares" has the meaning set forth in Section 2.01(a).

"Subsidiary" means, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, a majority of the securities or other interests of which having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency)to elect a majority of the board of directors or other Persons performing similar functions with respect to such corporation or other organization, is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries.

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"Subsidiary Charter Documents" has the meaning set forth in Section 3.01(b).

"Surviving Corporation" has the meaning set forth in Section 1.01.

"Taxes" means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

“Tax Examination” has the meaning set forth in Section 5.04(b).

"Tax Returns" means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with or provided to any taxing authority in respect of Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“TDK” has the meaning set forth in Section 3.13(b).

“TDK Employees” has the meaning set forth in Section 3.13(b).

“Terminated Company Affiliates” has the meaning set forth in Section 3.01(d)(iv).

“Territory” has the meaning set forth in Section 5.07.

“Third Party Claim” has the meaning set forth in Section 7.03.

"Treasury Regulations" means the Treasury regulations promulgated under the Code.

“UL” has the meaning set forth in Section 3.25.

“Unaudited Balance Sheet” has the meaning set forth in Section 3.04(a).

“Unaudited Balance Sheet Date” has the meaning set forth in Section 3.04(a).

“Voting Agreement” has the meaning set forth in Section 5.05.

"Voting Debt" has the meaning set forth in Section 3.02(c).

“Voting Parent Debt” has the meaning set forth in Section 4.03(b).

“WARN Act” means the Worker Adjustment and Retraining Notification Act, as amended.

“Year-End Date” has the meaning set forth in Section 3.05(a).

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Section 8.02     Interpretation; Construction.

(a)           The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section, Exhibit or Schedule, such reference shall be to a Section of, Exhibit to or Schedule of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." A reference in this Agreement to $ or dollars is to U.S. dollars. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to "this Agreement" shall include the Company Disclosure Letter.

(b)           The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

Section 8.03   Confidentiality Agreement. The Confidentiality Agreement will (a) survive termination of this Agreement in accordance with its terms and (b) terminate as of the Effective Time.

Section 8.04    Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

Section 8.05    Submission to Jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party(ies) hereto or its successors or assigns shall be brought and determined exclusively in the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, any Federal or state court of the State of New York, U.S.A. located in New York County. Each of the parties hereto agrees that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 8.07 or in such other manner as may be permitted by applicable Laws, will be valid and sufficient service thereof. Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid New York courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (i) any claim that it is not personally subject to the jurisdiction of the above named New York courts for any reason other than the failure to serve process in accordance with this Section 8.05, and (ii) to the fullest extent permitted by the applicable Law, any claim that (x) the suit, action or proceeding in such court is brought in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper, or (z) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

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Section 8.06    Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.06.

Section 8.07    Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), or (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.07):

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If to Parent or Merger Sub, to:	Pioneer Power Solutions, Inc. One Parker Plaza 400 Kelby Street, 9th Floor Fort Lee, NJ 07024 Attention:  Nathan J. Mazurek, CEO
with a copy (which will not constitute notice to Parent or Merger Sub) to:	Shiboleth LLP One Penn Plaza, Suite 2527 New York, NY 10119 Attention: Joshua Glikman, Esq.
If to the Company, to:	Jefferson Electric, Inc. 9650 South Franklin Road Franklin, WI 53132 Attention: Thomas Klink, President
with a copy (which will not constitute notice to the Company) to:	Dean Delforge, Esq. 15850 West Bluemound Road Suite 200 Brookfield, WI 53005
If to the Company Stockholder, to:	Thomas Klink 2323 Ridgewood Road Grafton, WI 53024

or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above.

Section 8.08    Entire Agreement. This Agreement (including the Schedules and Exhibits to this Agreement), the Company Disclosure Letter, the Confidentiality Agreement and Exclusivity Letter Agreement constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all other prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. In the event of any conflict or inconsistency between the statements in the body of this Agreement and the Company Disclosure Letter, the Confidentiality Agreement and Exclusivity Letter Agreement, then the statements in the body of this Agreement will control.  For purposes hereof, the “Exclusivity Letter Agreement” shall mean the letter agreement, dated as of January 22, 2010, between the Company and Parent relating to exclusivity of negotiations, access to information and other matters.

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Section 8.09    No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 8.10    Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 8.11    Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

Section 8.12    Remedies. Except as otherwise expressly provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement will be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at Law or in equity. The exercise by a party to this Agreement of any one remedy will not preclude the exercise by it of any other remedy.

Section 8.13    Fees and Expenses.  All costs and expenses incurred in connection with this Agreement and the Merger and other transactions contemplated hereby shall be paid solely and exclusively by the party incurring such expenses.

Notwithstanding the foregoing, the Surviving Corporation shall pay or cause to be paid the reasonable current or accrued legal fees and expenses of the Bank and/or the Company and/or the Company Stockholder relating to this Agreement and the Bank Loan Amendment and the transactions contemplated hereby, and certain other accrued legal fees of the Company and/or Company Stockholder, only as set forth on Schedule M annexed hereto (the “Designated Legal Fees”).  Any such Designated Legal Fees shall be paid from the proceeds of the Bank Loan Advance made by Parent pursuant to Section 5.06 hereof.  Any legal fees and expenses of the Bank and/or the Company and/or Company Stockholder relating to this Agreement and the Bank Loan Amendment and the transactions contemplated hereby other than such Designated Legal Fees shall be paid by the Company from sources other than the Bank Loan Advance.

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Section 8.14    Counterparts; Effectiveness.  This Agreement may be executed in any number of counterparts, all of which will be one and the same agreement. This Agreement will become effective when each party to this Agreement will have received counterparts signed by all of the other parties hereto.  Notwithstanding anything to the contrary herein contained, this Agreement shall be of no force and effect unless and until each of Parent, Merger Sub, the Company and the Company Stockholder shall have duly executed this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

THE COMPANY: JEFFERSON ELECTRIC, INC.
By:	/s/ Thomas Klink
	Name:	Thomas Klink
	Title:	President

PARENT: PIONEER POWER SOLUTIONS, INC.
By:	/s/ Nathan J. Mazurek
	Name:	Nathan J. Mazurek
	Title:	Chief Executive Officer

MERGER SUB: JEI ACQUISITION CORP.
By:	/s/ Nathan J. Mazurek
	Name:	Nathan J. Mazurek
	Title:	President

COMPANY STOCKHOLDER:

/s/ Thomas Klink

Thomas Klink

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EX-4.1

EXHIBIT 4.1

WARRANT

PIONEER POWER SOLUTIONS, INC.
No. 4	1,000,000 Shares
Date of Issuance: April 30, 2010

WARRANT TO PURCHASE COMMON STOCK

VOID AFTER 5:30 P.M., EASTERN

TIME, ON THE EXPIRATION DATE

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

FOR VALUE RECEIVED, PIONEER POWER SOLUTIONS, INC., a Delaware corporation (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, but no later than 5:30 p.m., Eastern Time, on April 30, 2015 (the “Expiration Date”), to THOMAS KLINK, or his registered assigns (the “Holder”), under the terms as hereinafter set forth, up to 1,000,000 fully paid and non-assessable shares of Common Stock (as defined in Section 9) of the Company (the “Warrant Stock”), at a purchase price of $3.25 per share (the “Warrant Price”), pursuant to this warrant (this “Warrant”). The number of shares of Warrant Stock to be so issued and the Warrant Price are subject to adjustment in certain events as hereinafter set forth.

1.   Exercise of Warrant.

(a) The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the Notice of Exercise attached hereto duly executed) at the principal office of the Company, and by the payment to the Company of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable by certified or official bank check or by wire transfer to an account designated by the Company.

 (b) This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional shares of Warrant Stock.  If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which new Warrant shall be signed by the Chairman, Chief Executive Officer, President or any Vice President of the Company.  The term Warrant as used herein shall include any subsequent Warrant issued as provided herein.

(c) No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu of such fractional shares, the Company shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.

(d) In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within a reasonable time after such rights shall have been so exercised. The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate.  The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any issuance and delivery of shares of Warrant Stock to any Person (as defined in Section 9) other than the Holder or with respect to any income tax due by the Holder with respect to any shares of Warrant Stock.

2.   Disposition of Warrant Stock and Warrant.

(a) The Holder hereby acknowledges that this Warrant and any Warrant Stock purchased pursuant hereto are, as of the date hereof, not registered: (i) under the Securities Act on the ground that the issuance of this Warrant is exempt from registration under Section 4(2) of the Securities Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Warrant does not involve any public offering; and that the Company’s reliance on the Section 4(2) exemption of the Securities Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Warrant and will acquire the Warrant Stock for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same, subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control.

The Holder hereby agrees that it will not sell or transfer all or any part of this Warrant and/or Warrant Stock, except pursuant to an effective registration statement under the Securities Act, unless and until it shall first have given notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion of counsel reasonably satisfactory to the Company, to the effect that the proposed sale or transfer may be made without registration under the Securities Act and without registration or qualification under any state law, or (ii) an interpretative letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Securities Act.

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(b) If, at the time of issuance of any Warrant Stock, no registration statement is in effect with respect to such shares under applicable provisions of the Securities Act, the Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder’s investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant (in connection with an exercise) shall bear a legend reading substantially as follows:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.”

In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain appropriate “stop transfer” orders with respect to such certificates and the shares represented thereby on its books and records and with those to whom it may delegate registrar and transfer functions.

(c) As a material inducement to the Company to issue this Warrant and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Holder hereby agrees that during the period commencing as of the date of issuance hereof (April 30, 2010) and ending eighteen (18) months thereafter (i.e., on October 31, 2011) (the “Lock-Up Period”), Holder shall not, without the prior written consent of the Company: (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any of the Warrant and/or Warrant Stock, or any securities into or for which any such Warrant and/or Warrant Stock may be converted, exercised or exchanged, whether by operation of law or otherwise; or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any of the Warrant and/or Warrant Stock.

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The foregoing restriction shall preclude Holder from engaging in any hedging or other transaction which is designed to, or which reasonably could be expected to or result in a sale or disposition of the Warrant and/or Warrant Stock. Such prohibited hedging or other transactions would include, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Warrant and/or Warrant Stock, or with respect to any security that includes, relates to or derives any significant part of its value from such Warrant and/or Warrant Stock.

3.   Reservation of Shares.  The Company hereby agrees that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant. The Company further agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will be duly authorized and will, upon issuance and against payment of the Warrant Price therefor, be validly issued, fully paid and non assessable, free from all taxes, liens, charges and preemptive rights with respect to the issuance thereof, other than taxes, if any, in respect of any transfer occurring contemporaneously with such issuance and other than transfer restrictions imposed by federal and state securities laws.

4.   Exchange, Transfer or Assignment of Warrant.  In the event that this Warrant is transferred following expiration of the Lock-Up Period and otherwise in accordance with Section 2 and other provisions hereof, then this Warrant may be transferred on the books of the Company by the Holder hereof in person or by duly authorized attorney, upon surrender of this Warrant at the principal office of the Company, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. This Warrant is exchangeable at the principal office of the Company for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange.

5.   Capital Adjustments.  This Warrant is subject to the following further provisions:

(a) If any recapitalization of the Company or reclassification of its Common Stock or any merger or consolidation of the Company into or with a Person, or the sale or transfer of all or substantially all of the Company’s assets or of any successor corporation’s assets to any Person (any such Person being included within the meaning of the term “successor corporation”) shall be effected, at any time while this Warrant remains outstanding and unexpired, then, as a condition of such recapitalization, reclassification, merger, consolidation, sale or transfer, lawful and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the exercise hereof as provided in Section 1 and in lieu of the shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore issuable upon the exercise of this Warrant had such recapitalization, reclassification, merger, consolidation, sale or transfer not taken place, and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.

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(b) If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Warrant Price shall be proportionately adjusted.

(c) Whenever the number of shares of Warrant Stock purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be adjusted to that price determined by multiplying the Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and (ii) the denominator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately thereafter.

(d) The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.

(e) The Company shall not be required to make any adjustment pursuant to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment.  In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment.

(f) Following each computation or readjustment as provided in this Section 5, the new adjusted Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

6.   Loss, Theft, Destruction or Mutilation.  Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof.

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7.   Warrant Holder Not a Stockholder.  The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company. 

8.   Notices.  Any notice required or contemplated by this Warrant shall be deemed to have been duly given if transmitted by registered or certified mail, return receipt requested, postage prepaid, or nationally recognized overnight delivery service, to the Company at One Parker Plaza, 400 Kelby Street, 9th Floor, Fort Lee, NJ 07024, Attention: Chief Executive Officer, or to the Holder at the name and address set forth in the Warrant Register maintained by the Company.

9.   Definitions. For the purposes of this Warrant, the following terms have the following meanings:

“Common Stock” means the common stock of the Company, par value $.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

“Person” shall mean any natural person, corporation, division of a corporation, partnership, limited liability company, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

10.  Choice of Law. THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

11.  Jurisdiction and Venue.  The Company and the Holder, by its acceptance hereof, hereby agree that any dispute which may arise between them arising out of or in connection with this Warrant shall be adjudicated before a court located in New York, New York, and they hereby submit to the exclusive jurisdiction of the federal and state courts of the State of New York located in New York City with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Warrant or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party shall furnish in writing to the other.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by its duly authorized officer, as of this 30th day of April, 2010.

PIONEER POWER SOLUTIONS, INC.
By:	/s/ Nathan J. Mazurek
	Name:	Nathan J. Mazurek
	Title:	Chief Executive Officer

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NOTICE OF EXERCISE

WARRANT

PIONEER POWER SOLUTIONS, INC.

The undersigned ____________________, pursuant to the provisions of the within Warrant, hereby elects to purchase _______________ shares of Common Stock of Pioneer Power Solutions, Inc. covered by the within Warrant.

Dated:	Signature
	Address

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: ______________________

The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended.

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ASSIGNMENT

FOR VALUE RECEIVED, ____________________hereby sells, assigns and transfers unto ______________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint __________________________, attorney, to transfer the said Warrant on the books of the within named corporation.

Dated:	Signature
	Address

PARTIAL ASSIGNMENT

     FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto ___________________ the right to purchase _______________________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint _____________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation.

Dated:	Signature
	Address

FOR USE BY THE COMPANY ONLY:

This Warrant No. _______canceled (or transferred or exchanged) this _____ day of ________________, _____________ shares of Common Stock issued therefor in the name of _______________, Warrant No. ________ issued for ______________ shares of Common Stock in the name of ________________________.

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EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT, dated as of April 30, 2010, by and between JEFFERSON ELECTRIC, INC., a Delaware corporation with offices at 9650 South Franklin Drive, Franklin, WI 53132 (the "Company"), and THOMAS KLINK, an individual residing at 2323 Ridgewood Road, Grafton, WI 53024 (the "Executive").

W I T N E S S E T H:

WHEREAS, the Company and Pioneer Power Solutions, Inc., a Delaware corporation (the “Parent”), and JEI Acquisition Corp., a Delaware corporation (“Merger Sub”), and Executive, as the Company Stockholder, have entered into and consummated the transactions under the Agreement and Plan of Merger, dated as of April 30, 2010 (the "Merger Agreement"), pursuant to which Merger Sub has been merged with and into the Company, with the Company as the surviving corporation (the “Merger”); and

WHEREAS, the Company engages in the design, manufacture, sale, distribution of certain electrical transformers and related products (the “Business”); and

WHEREAS, prior to closing of the Merger, Executive was the President of the Company, and the Company considers the expertise of Executive to be valuable in the successful continuation by the Company of the Business; and

WHEREAS, prior to the closing of the Merger, the Company was converted from a Wisconsin corporation to a Delaware corporation; and

WHEREAS, the parties desire to provide for Executive’s employment by the Company in accordance with the terms and provisions set forth below;

NOW, THEREFORE, the parties hereto agree as follows:

1.           Employment; Term.  The Company shall employ Executive, and Executive shall work for the Company, for a term of three (3) years commencing on the date hereof (April 30, 2010) and ending on April 30, 2013, unless terminated earlier in accordance with Section 6 hereof (the "Employment Period").

2.           Duties.  During the Employment Period, Executive shall serve as the Company's President, and perform duties on behalf of the Company and/or its Affiliates (as hereinafter defined) of an executive nature consistent with Executive’s position as the President of the Company, including without limitation, those duties and responsibilities set forth on Schedule A annexed hereto and made a part hereof. In addition, during the Employment Period, Executive shall utilize his best efforts to ensure that the Company shall comply with all of the terms and provisions of the Bank Loan Amendment (as defined in the Merger Agreement), including without limitation, the financial covenants set forth therein.

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Executive’s employment under this Agreement shall in all respects be subject to the authority, direction and control of, and Executive shall report exclusively to, the Chief Executive Officerof the Company.  Executive shall in all events comply with all lawful policies and directives, and the by-laws, of the Company and/or Parent. In no event shall Executive incur any monetary obligations on behalf of the Company and/or its Affiliates in excess of $500,000.00 at any one time without the prior written approval of the Chief Executive Officer of the Company; provided, however, that Executive shall not cause the Company and/or its Affiliates to incur any amounts in respect of any capital  expenditures and/or cause the Company and/or its Affiliates to expend any proceeds of the Bank Loan Advance (as defined in the Merger Agreement), without the prior written approval of the Chief Executive Officer of the Company in each instance.

Executive hereby agrees to serve without additional compensation as an officer or Director of any of the Company’s subsidiaries or Affiliates, as the same may exist from time to time. The parties further acknowledge that the Company may at any time assign Executive to any of its subsidiaries and/or Affiliates for such payroll or other purposes.

Pursuant to the Merger Agreement, during the term of this Agreement and otherwise subject to the terms thereof, Parent shall also cause Executive to be nominated as a Director of Parent pursuant to Section 5.05 of the Merger Agreement.  Provident Pioneer Partners, L.P., a stockholder of Parent, and Executive have entered into a Voting Agreement, dated as of the date hereof, relating to the voting for the election of Executive as a Director of Parent.

The parties hereby acknowledge that, for a period of approximately six (6) months prior to the date hereof, Executive has been a full-time employee of TDK Holdings, Ltd., a Wisconsin corporation (“TDK”), and during this period, TDK furnished the services of Executive to the Company.  Executive is the sole stockholder of TDK.

Executive has accepted an offer of employment with the Company solely in respect of the period following the closing of the Merger pursuant to the terms of this Agreement.  Executive hereby acknowledge and agrees that the Company shall not assume or be responsible in any manner for any liabilities and obligations relating to the Executive as an employee of TDK prior to the date hereof and/or at any other time whatsoever and/or relating to the termination of Executive as an employee of TDK.  Executive hereby represents and warrants to the Company that the Company has no obligation or liability to TDK resulting from or arising from the Company and Executive entering into this Agreement, and that there are no other agreements entered into by Executive with TDK or any other party which conflicts with, or otherwise restricts, the employment arrangements set forth in this Agreement.

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Employee shall perform his duties under this Agreement at the Company’s principal office or other locations as may be required by the Company and/or its Affiliates.  The parties hereby acknowledge that Employee’s duties hereunder may require extensive travel and performance of such duties at remote locations.  Notwithstanding the foregoing, Executive shall not be required to relocate his principal residence for a geographic radius in excess of fifty (50) miles from Executive’s current principal residence in connection with the performance of his duties under this Agreement.  In the event, however, that the Company shall require Executive to relocate his  principal residence beyond such geographic radius (i.e., more than 50 miles from the current principal residence), then such required relocation shall be deemed to constitute a termination without cause by the Company hereunder.  Notwithstanding the foregoing, Executive may elect to accept any such relocation of his principal residence beyond such 50 mile radius, whereupon the Company shall pay or reimburse Executive for all reasonable costs in connection with such relocation.

3.           Devotion of Time. During the Employment Period, Executive shall: (a) expend substantially all of his working time for the Company on a full-time basis; (b) devote his best efforts, energy and skill to the services of the Company and the promotion of its interests; and (c) not take part in any activities detrimental to the best interests of the Company.

4.           Compensation.

4.1           In consideration for the services to be performed by Executive during the Employment Period hereunder, the Company shall pay to Executive a base salary at the rate of $312,000.00 per annum, payable in accordance with the Company's customary payroll practices for executive employees.

4.2           Executive shall be entitled to paid vacation of four (4) weeks per calendar year during the Employment Period.

4.3           Executive shall be entitled to participate in family medical insurance coverage as furnished by the Company at levels substantially similar to those presently provided to Executive as set forth on Schedule B annexed hereto, subject to applicable eligibility requirements.

4.4           Executive shall be entitled to participate in the additional employee benefits and/or fringe benefits annexed hereto as Schedule C (the “Additional Benefits”), but only if and to the extent such Additional Benefits are then generally made available by the Company to all of its employees, and subject to applicable eligibility requirements.  Executive hereby acknowledges that the Company has no obligation to make such Additional Benefits available to any of its employees, including Executive.

4.5           The Company shall pay directly, or reimburse Executive for, all reasonable and necessary out-of-pocket expenses and disbursements actually incurred by him in connection with the performance of his duties under this Agreement. For such purposes, Executive shall submit to the Company itemized reports of such expenses in accordance with the Company's policies in effect from time to time.

4.6           Executive shall not be entitled to participate in and/or otherwise receive any employee benefits and/or fringe benefits of the Company and/or its Affiliates of any kind or nature whatsoever, except as otherwise expressly provided in this Section 4.

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5.          Non-Competition Provisions and Confidentiality Agreement.  The parties hereby acknowledge that Section 5.07 of the Merger Agreement sets forth certain non-competition provisions involving Executive in respect of the business of the Company and/or its Affiliates (the “Non-Competition Provisions”).  The parties further acknowledge that the Company and Executive have entered into the Confidentiality and Non-Competition Agreement, dated as of the date hereof (the “Confidentiality Agreement”), relating to the confidential treatment of the “confidential information” (as defined therein) and other matters as set forth therein. The terms and provisions of the Confidentiality Agreement are hereby incorporated by reference as fully as if set forth herein in their entirety.

6.           Earlier Termination.

6.1           Executive’s employment with the Company and the Employment Period hereunder shall terminate upon the occurrence of any of the following events:

(a)           automatically on the date of  Executive’s death;

(b)           upon thirty (30) days’ prior written notice by the Company, in the event of the Executive's disability as set forth in Section 6.2 below;

(c)           upon sixty (60) days’ prior written notice by the Company, in the event that the Company terminates Executive's employment hereunder for Cause as set forth in Section 6.3 below; or

(d)           upon thirty (30) days’ prior written notice by the Company, in the event that the Company terminates Executive’s employment hereunder without cause (other than due to death or disability).

6.2           Executive shall be deemed disabled hereunder if he shall become unable to perform his material duties for the Company hereunder due to injury, illness, disease or bodily or mental infirmity, and such incapacity shall continue for any period of 180 days in the aggregate during any period of twelve (12) consecutive months.

6.3           For purposes hereof, "Cause" shall mean and include the following:

(a)           Executive’s failure to observe or perform in any material respect any of the terms or provisions of this Agreement;

(b)           Executive’s failure in any material respect to comply with the instructions or directives of the Chief Executive Officer of the Company;

(c)           Executive’s failure to observe or perform in any material respect any of the terms or provisions of the Merger Agreement, Non-Competition Agreement and/or any other contract, agreement or understanding between Executive and the Company and/or its Affiliates;

(d)           Executive’s fraud, embezzlement, defalcation, willful and material misrepresentation or willful misconduct relating to or affecting the Company and/or its Affiliates; provided, however, that no action shall constitute willful misconduct if taken or not taken, as the case may be, by Executive in good faith as not being adverse to the best interests of the Company;

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(e)           Executive’s chronic absenteeism, alcoholic, drug related or other self induced affliction interfering in any material respect with the performance of his duties hereunder; or

(f)           Executive’s conviction of, or pleading nolo contendere or guilty to, a felony (other than a traffic infraction) or any crime involving moral turpitude.  For purposes of this Section 6.3, the “Company” shall include all direct or indirect subsidiaries and/or Affiliates of the Company.

With respect to the termination events set forth in Sections 6.3(a), (b), (c) and (d) above, respectively, Executive shall be given the opportunity, within thirty (30) days following receipt of such notice, to have a meeting with the Board of Directors of the Company and an opportunity to be heard in respect of the actions set forth in such notice.

6.4          (a)           Upon any termination of this Agreement under this Section 6, Executive shall be entitled to receive only the base salary (as set forth in Section 4.1 hereof) accrued but unpaid through the effective date of termination.

(b)           Notwithstanding the foregoing, in the event that the Company shall terminate this Agreement without cause as set forth in Section 6.1(d) hereof, then and only upon the occurrence of such termination event, Executive shall be entitled to receive as severance pay an amount equal to the base salary as set forth herein for the balance of the Employment Period following the effective date of termination, payable in accordance with the Company’s customary payroll practices for executive employees.  Any such severance payments payable to Executive upon termination without cause shall be subject to, and conditioned upon, receipt by the Company of a release from Executive in form reasonably acceptable to counsel to the Company.

7.           Conflicts of Interest.

7.1           Executive agrees to promptly make full disclosure to the Chief Executive Officer of the Company of any actual, potential or perceived Conflict of Interest which may arise at any time during the Employment Period. For purposes of this Agreement, “Conflict of Interest” shall mean those circumstances that create a conflict with Executive’s duties (consistent with fiduciary duties of standard of care and loyalty) to provide employment services hereunder that are solely in the best interests of the Company and/or its Affiliates, including but not limited to, situations where the Executive or any personal or business relationship of Executive has a financial or other interest that is likely to reduce the objectivity of the Executive’s evaluation or advice which respect to such services hereunder.

7.2           Executive hereby represents and warrants to the Company that, as of the date hereof, he is not subject to any duties or restrictions under any prior agreement with any previous employer or other person or entity and that there are no rights or obligations which may conflict in any material respect with the interests of the Company and/or with the performance of Executive’s duties and obligations under this Agreement.

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7.3           The parties hereby acknowledge that Executive will engage in certain personal business activities and/or ventures set forth on Schedule D annexed hereto.  Notwithstanding anything to the contrary contained in this Agreement, no such personal business ventures engaged in by Executive as set forth in such Schedule D shall conflict with the full time devotion of time requirement as set forth in Section 3 hereof or otherwise conflict in any manner with the best interests of the Company.

8.           Company Property.

8.1           All records, files, memoranda, designs, data, reports, drawings, computer programs, software and other documents, equipment (including any computer, laptop, cell phone, Blackberry or other similar devices) and similar items relating to the business of the Company and/or its subsidiaries and Affiliates which Executive shall at any time prepare or receive from the Company and/or its subsidiaries and Affiliates (and all copies or reproductions of any such documents and/or other material then in Executive’s possession or control shall in all events and at all times be and remain the sole and exclusive property of the Company) (collectively, the “Company Property”). Executive also represents that he will not at any time, except in the ordinary course of business, copy or cause to be copied, print out or cause to be printed out, or disclose or publish, any software, documents or other material originating with, owned by or belonging to the Company.   Notwithstanding the foregoing, Executive’s Blackberry and phone number shall constitute personal assets which are billed to Executive and then reimbursed by the Company.  Upon any termination of this Agreement, such phone number shall thereafter remain as a personal asset of Executive.

8.2           Upon termination of this Agreement for any reason whatsoever, Executive shall promptly return to the Company all of the Company Property (including any copies or reproductions thereof) in his possession or control.  Executive further represents that, upon any such termination of this Agreement, he will not retain in his possession or control any such Company Property or any copies or reproductions thereof.

9.           Injunctive Relief.  Executive hereby acknowledges and agrees that, in the event he shall violate any provision of Sections 5 and 7 hereof, the Company shall be without an adequate remedy at law and, accordingly, shall be entitled to enforce such restriction by temporary or permanent injunctive or mandatory relief obtained in any action or proceeding instituted in any court of competent jurisdiction without the necessity of proving damages and without prejudice to any other remedies which the Company may have at law or in equity.

10.         No Assignment.  This Agreement, as it relates to the employment of Executive, is a personal contract and the right, title and interest of Executive hereunder shall not be sold, transferred, assigned, pledged or hypothecated in any manner whatsoever.

11.         Right to Payments.  Executive shall not in any event have any option or right to require payments hereunder except as expressly provided in this Agreement. All rights and benefits of Executive shall be for the sole personal benefit of Executive, and no other person shall acquire any right, title or interest hereunder by reason of any sale, assignment, transfer, claim or judgment or bankruptcy proceedings against Executive.

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12.         Notices.  Any notice or other communication required or which may be given hereunder shall be in writing and shall be deemed given: (i) upon receipt, if delivered personally, or if sent via facsimile transmission or e-mail (subject to confirmation of transmission thereof) or via nationally recognized overnight courier; or (ii) five (5) days after the date of mailing, if mailed by certified mail, return receipt requested, in each case, to the following addresses of the parties:

If to Executive, to:

Thomas Klink

2323 Ridgewood Road

Grafton, WI 53024

with a copy to:

Dean Delforge, Esq.

15850 West Bluemound Road

Suite 200

Brookfield, WI 53005

If to the Company, to:

Jefferson Electric, Inc.

9650 South Franklin Drive

Franklin, WI 53132

Attention: Nathan J. Mazurek, CEO

with a copy to:

Shiboleth LLP

One Penn Plaza, Suite 2527

New York, NY  10019

Attention:  Joshua Glikman, Esq.

The parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice of any such change as set forth herein; provided, however, that any such notice of change of address shall be effective only upon receipt thereof.

13.           Governing Law; Jurisdiction.  This Agreement shall in all respects be governed by, and construed in accordance with, the applicable laws of the State of Delaware, U.S.A., without giving effect to principles of conflicts of law.  Each party hereto irrevocably and unconditionally consents to submit the exclusive jurisdiction of the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, in connection with any action, suit or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby,and agrees that service of process may be made in any manner acceptable for use in such New York courts.Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement and/or the transactions contemplated hereby, in the above New York courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  The parties hereby expressly waive the right to any jury trial in any action or proceeding involving this Agreement.

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14.           Tax Withholding.  The Company may withhold from any benefits payable under this Agreement all Federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling.

15.           Indemnification.  The Company hereby agrees to indemnify Executive and hold him harmless to the fullest extent permitted by law, subject to the bylaws of the Company then in effect, against and in respect to all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorney's fees), losses and damages resulting from Executive's good faith performance of his duties and obligations with the Company.

16.           Waiver. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and not in any way affect or render invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if such invalid or unenforceable provision were not embodied therein.

17.           Entire Agreement. This Agreement constitutes the entire agreement between the parties and there are no representations, warranties or commitments except as set forth herein. This Agreement merges and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussion, whether written or oral, of the parties hereto relating to the transactions contemplated by this Agreement. This Agreement may be amended only by a writing executed by the parties hereto.

18.           Construction.  The parties hereto are sophisticated and have been represented by attorneys throughout the transactions contemplated by this Agreement, and the provisions hereof have been carefully negotiated. Accordingly, this Agreement shall be construed without regard to any presumption or rule requiring construction of an agreement against the party causing it to be drafted.

19.           Affiliates.  For purposes hereof, an “Affiliate” means, with respect to any person or entity, any other person or entity that directly or indirectly controls, is controlled by or is under common control with, such first person or entity.

[Balance of page is intentionally left blank. Please continue to signature page.]

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

THE COMPANY: JEFFERSON ELECTRIC, INC.
By:	/s/ Nathan J. Mazurek
	Nathan J. Mazurek, Chief Executive Officer
EXECUTIVE:
/s/ Thomas Klink
Thomas Klink

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SCHEDULE A

EXECUTIVE DUTIES

a) As a general matter, to oversee the day-to-day activities of the Company.

b) Supervision of the office and administrative personnel of the Company.

c) Supervision of the strategic planning and business operations of the Company.

d) Supervision of financial reporting and marketing, sales, advertising and other promotional activities.

e) Supervision of all relationship with customers, vendors, governmental authorities and other parties.

f) Communication with representatives of Johnson Bank and supervision of all matters relating to the loan arrangements between the Company and the Bank.

g) Preparation and review of all reporting requirements regarding the Company’s business operations to the Board of Directors and/or Chief Executive Officer of the Company and/or any other third parties.

h) To review the Company's objectives on a regular basis and allocate personal and staff resources in order to insure that such goals are accomplished in a timely and efficient manner.

i) Creation of a culture based on the Company's mission and values.

j) To manage a work environment that is healthy, productive and growth orientated, enabling each individual to achieve his or her maximum potential.

k) To perform such other duties as shall from time to time be designated by the Chief Executive Officer of the Company.

All of the foregoing shall be subject to the direction and control of the Chief Executive Officer of the Company.

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SCHEDULE B

MEDICAL INSURANCE

Medical Insurance Company is United Health Care

Deductible
One Person	$3,500
More than One Person	$7,000
Co-insurance	100%
Prescription CO-pay
Generic	$10
Preferred Name Brand	$35
Non-preferred Name Brand	$60
Wellness – preventative Card	100%

Combine in network out of pocket maximum with prescription medicines – one person at $5,500; two or more people at $11,000

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SCHEDULE C

ADDITIONAL BENEFITS

Holidays

The Executive will be paid for the following ten (10) holidays:

New Year's

Good Friday

Memorial Day

Independence Day

Labor Day

Thanksgiving Day

Day after Thanksgiving

Christmas Eve

Christmas

New Year's Eve

A calendar will be issued annually to indicate the specific days on which these holidays will be observed.

Short-Term Disability

The Executive will receive a weekly benefit of 60 per cent of their base pay for up to 13 weeks in the event of a non-industrial injury or illness.  The Company pays the cost of this benefit for you and may choose to insure this benefit with a third party.

Long-Term Disability

In an instance of a long term disability, the Executive will receive long-term disability benefit at a level of 60% of your monthly base pay, up to a monthly benefit of $6,000.  Monthly benefits begin after 90 days of continuous disability, provided you provide ongoing proof of disability from a physician.  These benefits are offset by any Social Security, Worker's Compensation or disability retirement benefits.  The Company pays the cost of this benefit for you. And may choose to insure this benefit with a third party.

Insurance Premium Account

The Executive may participate in a program to pay medical, dental and vision insurance premiums on a pre-tax basis.

401(k) Plan Savings Account

The Executive is allowed to participate in the Jefferson Electric, Inc Retirement Savings Plan.  The Executive may contribute from 1% to 100% of their salary, up to the annual IRS Dollar Limit.   The Company will match the Executive’s contribution at the rate of $1.00 of Company match per $1.00 of Executives contribution, up to a 3% contribution of Executives’ compensation and $.50 of Company match per $1.00 from 3% to 5% of Executives compensation that the Executive contributes to the plan.  The Executive has the option to choose if his contributions are pre-tax or after-tax.  Pre-tax contributions are deducted from associate’s salary before Federal and State taxes are withheld.  After tax contributions are a Roth 401(k).  The Company match will apply to either pre-tax or after-tax contributions.  The Executive will be eligible to change the level of his contribution, or the type of contribution, as of the following dates each calendar year:  January 1, April 1, July 1 or October 1.  The Executive may discontinue contributions before any pay period, provided that the Executive may not begin to contribute again until one of the dates listed above.

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These additional benefits shall be made available to Executive only if and to the extent that such additional benefits are then generally made available by the Company to all of its employees, and subject to applicable eligibility requirements.  The Company has no obligation to make any such Additional Benefits available to Executive and/or any employees.

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SCHEDULE D

PERSONAL BUSINESS VENTURES

Minority partner in multiple LLC’s used to purchase, manage, sell and retrofit residential properties in the state of Wisconsin.  Properties are then rented and sold.  Activities limited to review of properties and some accounting work.

Minimal amount of tax preparation and accounting work for friends and family resulting in revenues that exceed minimum reporting rules of the Internal Revenue Service, but less than $5,000 of gross income in total.

Treasurer of Boy Scout Troop 875 in Port Washington, WI.

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EX-10.2

EXHIBIT 10.2

VOTING AGREEMENT

                THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of April 30, 2010, by and between PROVIDENT PIONEER PARTNERS, L.P., a Delaware limited partnership (the "Stockholder"), and THOMAS KLINK (“Klink”).

W I T N E S S E T H:

                WHEREAS, concurrently with the execution of this Agreement, Pioneer Power Solutions, Inc., a Delaware corporation (the “Parent”) JEI Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), Jefferson Electric, Inc., a Delaware corporation (the “Company”) and Klink have entered into an Agreement and Plan of Merger (the "Merger Agreement"), which provides for, among other things, the merger of Merger Sub with and into the Company (the "Merger"); and

WHEREAS, pursuant to the Merger Agreement, all of the issued and outstanding shares of Company Common Stock (as defined in the Merger Agreement) will be exchanged and converted into the right to receive shares of Parent Common Stock (as defined in the Merger Agreement) constituting the Merger Consideration (as defined in the Merger Agreement), all upon the terms and subject to the conditions set forth in the Merger Agreement; and

WHEREAS, as of the date of this Agreement, Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the number of shares of the outstanding common stock of Parent as set forth on the signature page of this Agreement; and

WHEREAS, the Company and Klink have entered into an Employment Agreement, dated as of the date hereof (the “Klink Employment Agreement”); and

WHEREAS, pursuant to the Merger Agreement, during the Director Designation Period (as defined in the Merger Agreement), Parent shall cause Klink to be nominated for election as a Director of Parent; and

WHEREAS, Stockholder desires to vote the Stockholder Shares (as defined below) in favor of the election of Klink as a Director of Parent, subject to the terms and provisions of this Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.            Agreement to Vote Shares. Until the Expiration Date (as hereinafter defined), at every annual or special meeting of stockholders of Parent called for purposes of the election of Directors of Parent, and at every adjournment or postponement thereof, and on every action or approval by written consent of stockholders of Parent with respect thereto (each such annual, special, adjourned or postponed meeting and written consent, each, a "Stockholder Vote"), Stockholder shall vote and/or cause to be voted, in person or by proxy, all shares of common stock of Parent as to which Stockholder holds beneficial ownership at the time of such Stockholder Vote (collectively, the "Stockholder Shares") in favor of the election of Klink as a Director of Parent.

                2.            Expiration Date; No Successor.  As used herein, "Expiration Date" shall mean the earliest to occur of the following: (i) the termination of the Klink Employment Agreement for any reason whatsoever (including expiration of the three (3) year term thereof); (ii) Klink shall beneficially own less than 364,706 shares of Parent Common Stock received as Merger Consideration pursuant to the Merger Agreement (i.e., 75% of the aggregate shares of Parent Common Stock received by Klink as Merger Consideration); (iii) the termination, removal and/or resignation of Klink as a Director of Parent for any reason whatsoever; or (iv) Klink shall be in material default under the terms and provisions of the Klink Employment Agreement and/or any other obligation of Klink to Parent and/or the Company.

Notwithstanding anything to the contrary herein contained, upon the termination, removal and/or resignation of Klink as a Director of Parent for any reason whatsoever pursuant to the Certificate of Incorporation and/or By-laws and/or other documents of Parent and/or otherwise pursuant to applicable law, then this Agreement shall be automatically terminated and without further force or effect, and Klink shall have no right of any kind or nature whatsoever to nominate or designate any person as a successor Director.

3.            No Inconsistent Agreement.  Stockholder hereby covenants and agrees not to enter into any agreement that would materially restrict or interfere with, or otherwise circumvent, the performance of Stockholder's obligations under this Agreement.  Nothing contained in this Agreement shall in any manner whatsoever be deemed to limit or restrict the ability of Stockholder to at any time sell, transfer or assign in any manner any Stockholder Shares and/or any other capital stock of Parent held by the Stockholder, including without limitation, the distribution of any such shares to its partners.  Notwithstanding the foregoing, the terms and provisions of this Agreement shall remain in full force and effect upon any assignment or transfer by Stockholder of any Stockholder Shares to any of its Affiliates (as defined in the Merger Agreement).

4.            Representations of Stockholder. As of the date hereof, Stockholder represents and warrants to Parent and the Company as follows:

(i)  Stockholder is the beneficial owner of the shares of Parent common stock set forth on the signature page hereto (the "Currently Owned Shares"), with full power to vote or direct the voting of the Currently Owned Shares.

(ii)  The Currently Owned Shares are free and clear of any rights of first refusal, security interests, liens, pledges, claims, options, charges or other encumbrances of any kind or nature, in each case that would materially impair the right of the Stockholder to vote such shares.

(iii)  Stockholder has all necessary power, authority and legal capacity to make, enter into and carry out the terms of this Agreement and no other proceedings or actions on the part of Stockholder are necessary to authorize the execution, delivery or performance of this Agreement.

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                5.            Termination. The term of this Agreement shall commence on the date hereof and shall terminate immediately, and shall have no further force or effect, as of the Expiration Date.

6.            No Survival of Representations and Warranties. The representations and warranties of the parties contained herein shall expire, and shall be terminated and extinguished, for all purposes upon the Expiration Date.  Nothing contained herein shall be deemed to limit or restrict the rights of Klink to assert any claims based upon any representations or warranties of Stockholder set forth herein, provided that such claims have been made in a timely manner hereunder prior to the Expiration Date.

7.            Miscellaneous.

(a)  Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons, entities or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such illegal, void or unenforceable provision of this Agreement with a legal, valid and enforceable provision that will achieve, to the greatest extent possible, the economic, business and other purposes of such illegal, void or unenforceable provision.

(b) No Assignment. This Agreement relating to the voting by Stockholder of the Stockholder Shares is a personal contract and the right, title and interest of Klink hereunder shall not be sold, transferred, assigned, pledged or hypothecated by Klink in any manner whatsoever.

(c)  Amendments and Modification. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by each of the parties hereto.  No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing.

(d)  Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) of transmission by facsimile, or (iii) on the date of confirmation of receipt (or, the first business day following such receipt if the date is not a business day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

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if to the Stockholder, to:

c/o Pioneer Power Solutions, Inc.

One Parker Plaza

400 Kelby Street, 9th Floor

Fort Lee, New Jersey 07024

with copies to:

Joshua Glikman, Esq.

Shiboleth LLP

One Penn Plaza, Suite 2527

New York, NY 10119

if to Klink, to:

Mr. Thomas Klink

2323 Ridgewood Road

Grafton, Wisconsin 53024

Facsimile: 262.377.

Tklink@Jeffersonelectric.com

with copies to:

Dean P. Delforge, Esq.

Law Office of Dean P. Delforge, S.C.

15850 W. Bluemound Road, Suite 200

Brookfield, Wisconsin 53005

Facsimile: 262.787.0606

dpdelforge@tds.net

(e)  Governing Law; Jurisdiction.  This Agreement shall in all respects be governed by, and construed in accordance with, the applicable laws of the State of Delaware, U.S.A., without giving effect to principles of conflicts of law.  Each party hereto irrevocably and unconditionally consents to submit the exclusive jurisdiction of the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, in connection with any action, suit or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby,and agrees that service of process may be made in any manner acceptable for use in such New York courts.Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement and/or the transactions contemplated hereby, in the above New York courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  The parties hereby expressly waive the right to any jury trial in any action or proceeding involving this Agreement.

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(f)  Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersede all prior negotiations and understandings between the parties with respect to such subject matter.

(g)  Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

(h)  No Ownership Interest.  Nothing contained in this Agreement shall be deemed, upon execution, to vest in any person or entity any direct or indirect ownership or incidence of ownership of or with respect to the Currently Owned Shares and/or Stockholder Shares, as applicable, except only to the extent otherwise expressly provided herein. All rights, ownership and economic benefits of any kind or nature whatsoever relating to the Currently Owned Shares and/or Stockholder Shares, as applicable, including any voting rights, shall at all times remain vested in and belong solely and exclusively to Stockholder for all purposes whatsoever.

[Remainder of Page Intentionally Left Blank]

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                IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.

STOCKHOLDER: PROVIDENT PIONEER PARTNERS, L.P.
By: Provident Canada Corp., General Partner
By:	/s/ Nathan J. Mazurek
Name:	Nathan J. Mazurek
Title:	President
Currently Owned Shares: Common Stock: 23,800,000 Parent Options: 1,000,000
/s/ Thomas Klink
Thomas Klink

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EX-10.3

EXHIBIT 10.3

LOCK-UP AGREEMENT

April 30, 2010

Gentlemen:

Reference is hereby made to the Agreement and Plan of Merger, dated as of April 30, 2010 (the “Merger Agreement”), by and among Pioneer Power Solutions, Inc., a Delaware corporation (the “Parent”), and JEI Acquisition Corp., a Delaware corporation (“Merger Sub”), Jefferson Electric, Inc., a Delaware corporation (the “Company”), and Thomas Klink, as the Company Stockholder, pursuant to which Merger Sub has been merged with and into the Company with the Company as the surviving corporation (the “Merger”).  All of the terms used, but not otherwise defined, in this agreement shall have the same respective meanings as utilized in the Merger Agreement.

The undersigned, Thomas Klink (the “Company Stockholder”), was, prior to the Effective Time, the sole stockholder and owner of all of the Shares of the Company Common Stock. At the Effective Time, all of such Shares of Company Common Stock have been cancelled, and in exchange therefor, the Company Stockholder is entitled to receive 486,275 shares of Parent Common Stock constituting the Merger Consideration.  The Company Stockholder will benefit directly and indirectly from the consummation of the Merger under the Merger Agreement.  As a condition to the obligations of Parent and Merger Sub under the Merger Agreement, the Company Stockholder is required to execute this letter agreement regarding the lock-up of all of the shares of Parent Common Stock received by the Company Stockholder as Merger Consideration pursuant to the Merger Agreement.

1.          As a material inducement to Parent and Merger Sub to enter into the Merger Agreement, and as a condition to the obligations of Parent and Merger Sub under the Merger Agreement, and in recognition of the benefit that the Merger will confer upon the Company Stockholder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company Stockholder hereby agrees, for the benefit of Parent, that during the period commencing as of the Effective Time and ending eighteen (18) months thereafter (i.e., on October 31, 2011) (the “Lock-UpPeriod”), the Company Stockholder shall not, without the prior written consent of Parent: (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any of the shares of Parent Common Stock received by the Company Stockholder as Merger Consideration (the “Merger Consideration Shares”), or any securities into or for which any of the Merger Consideration Shares may be converted, exercised or exchanged, whether by operation of law or otherwise; or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any of the Merger Consideration Shares (whether any such swap or other transaction described in clause (i) or (ii) above is to be settled by delivery of any of the Merger Consideration Shares).

The parties further acknowledge and agree that the foregoing restriction shall preclude the Company Stockholder from engaging in any hedging or other transaction which is designed to, or which reasonably could be expected to or result in a sale or disposition of the Merger Consideration Shares, even if such Merger Consideration Shares would be disposed of by any party other than the Company Stockholder.  Such prohibited hedging or other transactions would include, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Merger Consideration Shares, or with respect to any security that includes, relates to or derives any significant part of its value from such Merger Consideration Shares.

2.           Notwithstanding the foregoing, the Company Stockholder may transfer any of the Merger Consideration Shares: (i) as a bona fide gift, provided that, prior to such transfer, the donee thereof agrees in writing to be bound by the restrictions set forth in this agreement; (ii) to any trust, partnership, corporation or other entity formed for the direct or indirect benefit of the Company Stockholder or his immediate family (as defined below), provided that, prior to such transfer, a duly authorized officer, representative or trustee of such transferee agrees in writing to be bound by the restrictions set forth in this agreement, and provided further that any such transfer shall not involve a disposition for value; or (iii) if such transfer occurs by operation of law, such as rules of descent and distribution, statutes governing the effects of a merger or a qualified domestic order; provided that, prior to such transfer, the transferee agrees in writing that such transferee is receiving and holding any of the Merger Consideration Shares subject to the provisions of this agreement. For purposes hereof, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.

In order to enable the aforesaid covenants to be enforced, the Company Stockholder hereby consents to the placing of legends and/or entry of stop transfer instructions or orders with Parent’s transfer agent in respect of any Merger Consideration Shares.

3.           Following the Effective Time and for the duration of the Lock-Up Period, the Company Stockholder shall at all times maintain good and marketable title to all of the Merger Consideration Shares, free and clear of all liens, encumbrances and claims whatsoever.

4.           The parties hereby acknowledge and agree that, pursuant to the Bank Loan Amendment, following the Effective Time, all of the Parent Common Stock issued to the Company Stockholder as Merger Consideration shall be subject to certain Permitted Liens granted to the Bank as set forth therein (the “Permitted Bank Lien”).  Notwithstanding anything to the contrary contained in this agreement, the grant of such Permitted Bank Lien in respect of the Parent Common Stock following the Effective Time and during the Lock-Up Period hereunder shall not in any manner whatsoever constitute a violation of any of the provisions of this agreement relating to a pledge of the shares of such Parent Common Stock or otherwise.

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5.          This agreement shall in all respects be governed by, and construed in accordance with, the applicable laws of the State of Delaware, U.S.A., without giving effect to principles of conflicts of law.  Each party hereto irrevocably and unconditionally consents to submit the exclusive jurisdiction of the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, in connection with any action, suit or proceeding arising out of or relating to this agreement and the transactions contemplated hereby,and agrees that service of process may be made in any manner acceptable for use in such New York courts. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this agreement and/or the transactions contemplated hereby, in the above New York courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  The parties hereby expressly waive the right to any jury trial in any action or proceeding involving this Agreement.

6.           The parties hereby acknowledge and agree that this agreement is irrevocable and shall be binding upon the Company Stockholder and his heirs, legal representatives, successors and permitted assigns.  This Agreement and/or any right, title or interest hereunder shall not be assigned by the Company Stockholder without the prior written consent of Parent and/or the Company.

7.           This agreement may be amended or modified only by a written agreement executed by all of the parties hereto.

8.           This agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  The facsimile signature of any party to this agreement shall have the same effect as a manual signature.

9.           This agreement will become a binding agreement among the parties as of the date hereof and will terminate on the expiration date of the Lock-Up Period (i.e., on October 31, 2011).

[Balance of page is intentionally left blank. Please continue to signature page.]

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Very truly yours,

/s/ Thomas Klink

Thomas Klink

Address:

2323 Ridgewood Road

Grafton, Wisconsin 53024

ACCEPTED AND AGREED:

PIONEER POWER SOLUTIONS, INC.

By:  /s/ Nathan J. Mazurek

JEFFERSON ELECTRIC, INC.

By:  /s/ Thomas Klink

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EX-10.4

EXHIBIT 10.4

PURCHASE AGREEMENT

AGREEMENT, dated as of April 30, 2010, by and between THOMAS KLINK (the "Seller") and JE MEXICAN HOLDINGS, INC., a Delaware corporation (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, Seller is the owner of the entire (100%) membership interest in Jefferson Electric Mexico Holdings LLC, a Wisconsin limited liability company (the “Company”); and

WHEREAS, Seller desires to sell and transfer, and Purchaser desires to purchase, all of Seller’s right, title and interest in and to the Purchased Interest, i.e., the entire (100%) membership interest in the Company, subject to the terms and conditions set forth below;

NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF PURCHASED INTEREST

1.1           Sale and Transfer of Purchased Interest.   Upon the terms and subject to the conditions hereinafter set forth, at the Closing (as hereinafter defined), Seller shall sell, assign, transfer and deliver to Purchaser, and Purchaser shall acquire from Seller, all of Seller’s right, title and interest in and to the Purchased Interest (as hereinafter defined), free and clear of all liens, pledges, security interests, encumbrances, charges and claims of any kind or nature whatsoever other than the Bank Lien (as defined below).  For purposes hereof, the “Purchased Interest” shall mean the entire (100%) membership interest in the Company owned beneficially and of record by Seller.

The Purchased Interest is being sold and purchased hereunder in connection with the closing of the transactions contemplated by the Agreement and Plan of Merger, dated as of April 30, 2010 (the “Merger Agreement”), among Pioneer Power Solutions, Inc. (“Parent”), JEI Acquisition Corp. (“Merger Sub”), Jefferson Electric, Inc. (“Jefferson”) and Seller, as the Company Stockholder, i.e., the sole stockholder of Jefferson.

This Agreement constitutes the “JEM Purchase Agreement” under the Merger Agreement.  Pursuant to the Merger Agreement, the Purchased Interest is being sold and purchased hereunder for a nominal purchase price.  This Agreement, as the JEM Purchase Agreement, constitutes a condition to closing of, and is a material inducement to Parent entering into, such Merger Agreement.  As set forth below, the Company is the holder of a minority equity interest in Mexico Sub (as hereinafter defined), which is the principal manufacturing subsidiary and/or affiliate of Jefferson located in Reynosa, Mexico.

Pursuant to a certain loan agreement between Johnson Bank, as Lender (the “Bank”), and Jefferson Electric Inc., an affiliate of the Company, as Borrower, as additional collateral security for the loans made by the Bank pursuant thereto, Seller has previously furnished a to Lender a pledge and security interest in the Purchased Interest, i.e., the entire (100%) membership interest in the Company (the “Bank Lien”).  Purchaser hereby consents to the continuation of such Bank Lien in respect of the Purchased Interest.

1.2           Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Shiboleth LLP, One Penn Plaza, Suite 2527, New York, NY 10119, at 10:00 a.m., local time, on April 30, 2010 (the “Closing Date”), or such other date, time and place as shall be mutually agreed to among the parties.  The parties hereto may also mutually agree to effect the Closing hereunder by mail or via facsimile.

1.3           Closing Deliveries.

(a)           At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following documents and instruments: (i) all such assignments, instruments and other documents evidencing the sale, transfer and assignment of the Purchased Interest hereunder as, in the opinion of Purchaser and its counsel, shall be necessary to effect the transfer of, and to vest title in and to, the Purchased Interest, free and clear of all manner of liens, pledges, security interests, encumbrances, charges and claims thereon; (ii) evidence of ownership of each of the Purchased Interest by Seller (as hereinafter defined); and (iii) such other instruments of transfer and other documents as Purchaser and/or its counsel may reasonably request.

(b)           At the Closing, Purchaser shall deliver or cause to be delivered to Seller the following documents and instruments: (i) payment of the Purchase Price (as hereinafter defined); and (ii) such other instruments and documents as Seller and or its counsel may reasonably request.

ARTICLE II

PURCHASE PRICE

2.1           Purchase Price.  The purchase price to be paid by Purchaser to Seller for the Purchased Interest hereunder shall be ONE HUNDRED DOLLARS ($100.00) in the aggregate (the “Purchase Price”). The Purchase Price shall be payable in its entirety by Purchaser to Seller at the Closing by wire transfer to a bank account (or accounts) designated by Seller, or in immediately available funds.

Seller hereby acknowledges and agrees that the Purchase Price has been negotiated by Seller at arm’s length, and that Seller in good faith believes that such Purchase Price constitutes fair and adequate consideration, and that the transactions contemplated under this Agreement constitute a material inducement to Parent and Merger Sub to enter into the Merger Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby makes the following representations and warranties to Purchaser:

3.1           Valid Corporate Existence.  The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Wisconsin, and has the limited liability company power to carry on its business as now being conducted and to own its assets.

3.2           Company Interests.   Seller is the sole record and beneficial owner of the Purchased Interest, i.e., the entire (100%) membership interest in the Company. The Purchased Interest is duly authorized and validly issued and outstanding, fully paid and non-assessable.  There are no equity securities of the Company authorized, issued or outstanding other than the Purchased Interest. In addition, there are no subscriptions, options, warrants, rights, calls or other commitments or agreements of any kind or nature to which the Company and/or Seller and/or any other person or entity is a party, or by which any of such persons or entities is bound, in respect of the purchase of any equity interests or other securities of the Company, or calling for the issuance, transfer, sale or other disposition of any equity interests or other securities of the Company or securities convertible into, or exchangeable for, any such equity interests.

3.3           No Consents.  There are no consents and approvals of governmental and other regulatory agencies, foreign or domestic, and of other third parties which are required to be obtained by or on behalf of the Company and/or Seller in order to enable each such party to enter into and carry out this Agreement in all material respects, except for any consent which may be required to be obtained from the Bank in respect of the Bank Lien.

3.4           Authority and Binding Effect.  Seller has the full power and authority to enter into, execute and deliver this Agreement and to carry out Seller's obligations hereunder.  This Agreement constitutes the valid and binding obligation of Seller, and is enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium or similar laws relating to the enforcement of creditors' rights generally and the application of general principles of equity.

3.5           Title to Purchased Interest.  Seller is, and at the Closing shall be, the sole record and beneficial owner of all of the Purchased Interest, i.e., the entire (100%) membership interest of the Company, free and clear of all manner of liens, charges, pledges, encumbrances, security interests, restrictions on transfer or claims of any kind or nature whatsoever, except for the Bank Lien.  Seller has, and at the Closing shall have, good, valid and marketable title to the Purchased Interest, and the absolute and unqualified right to sell, transfer and deliver the Purchased Interest to Purchaser as contemplated hereby. The delivery of the Purchased Interest to Purchaser at the Closing pursuant to the provisions of this Agreement shall transfer good and valid title thereto, free and clear of all manner of liens, charges, pledges, encumbrances, security interests, restrictions on transfer or claims of any kind or nature whatsoever.

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3.6           No Agreements.  As of the date hereof, there is no (and since inception, there has not been any) operating and/or limited liability company and/or similar agreement relating to the Company and/or the Purchased Interest.

3.7           No Litigation.  There are no actions, suits, proceedings or governmental investigations, at law or in equity, relating to or involving Seller, the Company and/or their respective assets, properties or businesses by or before any court, arbitrator or governmental or other regulatory agency or commission either pending or, to the knowledge of Seller, after reasonable inquiry, threatened, or any outstanding order, injunction, judgment, writ, award or decree against Seller, the Company and/or their respective assets, properties or businesses.

3.8           No Breach.  Neither the execution and delivery of this Agreement nor compliance by Seller and/or the Company with any of the provisions hereof nor consummation of the transactions contemplated hereby, will:

(a)           violate or conflict with any provision of the organizational documents of the Company;

(b)           violate or, alone or with notice or the passage of time, result in the material breach or termination of, or otherwise give any contracting party the right to terminate, or declare a default under, the terms of any agreement, lease, note, mortgage, instrument or other document or undertaking, oral or written, to which the Company and/or Seller is a party or by which any of them may be bound (except for such violations, conflicts, breaches or defaults as to which required waivers or consents by other parties have been, or will, prior to the Closing, be obtained);

(c)           result in the creation of any lien, security interest, charge or encumbrance upon any of the assets, properties or businesses of the Company;

(d)           violate any judgment, order, injunction, decree or award against, or binding upon the Company and/or Seller and/or any of their respective assets, properties or businesses; and/or

(e)           violate in any material respect any law or regulation of any jurisdiction relating to the Company and/or Seller and/or any of their respective assets, properties, businesses or securities.

3.9           No Brokers.  All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on directly with Purchaser by Seller without the intervention of any broker, finder, investment banker or other third party.  Seller has not engaged, consented to, or authorized any broker, finder, investment banker or other third party to act on his or its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement.  Seller hereby agrees to indemnify Purchaser, and to hold Purchaser harmless, from and against any claim for brokerage or similar fees, commissions or other compensation which may be made against Purchaser by any third party in connection with any of the transactions contemplated hereby, which claim shall be based upon any action by or on behalf of Seller.

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3.10           No Operations.  As of the date hereof, and since inception (in April 2008), the Company does not conduct, and has not conducted, any business operations of any kind or nature whatsoever.  The sole asset of the Company is the ownership of one (1) share of common stock of Nexus Magneticos de Mexico, S. de R.L. de C.V. (“Mexico Sub”), constituting 0.03% of the total issued and outstanding shares of common stock of Mexico Sub.  As set forth above, Mexico Sub is the principal manufacturing subsidiary and/or affiliate of Jefferson located in Reynosa, Mexico.

ARTICLE IV

INDEMNIFICATION

4.1           Survival.   The parties hereby agree that their respective representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing for a period of three (3) years.

4.2           Indemnification.   Seller hereby agrees to save, defend, indemnify and hold harmless Purchaser and its shareholders, directors, officers, agents and/or affiliates (collectively, the "Indemnified Parties") from and against any and all demands, claims, losses, damages, liabilities, obligations, costs and expenses of every kind, nature and description (including, without limitation, reasonable attorneys' fees and expenses in connection with any action, claim or proceeding relating to such liabilities) (collectively, the "Liabilities"), suffered, sustained, incurred or required to be paid at any time by any of the Indemnified Parties resulting from, arising out of or relating to: (a) the untruth, inaccuracy or breach of any representation, warranty, covenant or agreement of Seller contained in or made pursuant to this Agreement or in any document, instrument or certificate delivered by or on behalf of Seller pursuant hereto; or (b) any transaction, action or event commencing or occurring on or prior to the Closing Date involving the Company and/or its business operations and/or its financial or other condition, whether absolute or contingent, matured or unmatured or known or unknown.

No claim for indemnification under this Section 4.2 may be made unless such claim, together with all other claims under this Section 4.2 in the aggregate, exceeds $50,000.00. For purposes hereof, the determination of the deductible amount ($50,000.00) hereunder shall be consolidated with such deductible amount under Sections 7.01 and 7.04(a), respectively, under the Merger Agreement.

4.3           Defense of Claims.

(a)           Purchaser hereby agrees to notify Seller with reasonable promptness of any claim asserted against any of the Indemnified Parties by any third party (a "Claim") which Seller may be obligated to indemnify under this Agreement, which notification shall be accompanied by a written statement setting forth the basis of the Claim in reasonable detail, and, if possible, the manner of calculation thereof.

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(b)           Seller shall have the right to assume the defense of any Claim asserted against Seller and/or Purchaser, whereupon Seller shall defend such Claim at Seller's own expense and with counsel of his choice, which counsel shall be reasonably satisfactory to Purchaser, and Seller shall not be liable to Purchaser for any fees of other counsel, unless, in the reasonable judgment of Purchaser, the representation of both Purchaser and Seller by the same counsel would be inappropriate due to an actual or potential conflict of interest between such parties.  Seller shall not in any event settle or compromise any such Claim without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, Purchaser may, at its sole option, employ counsel to represent it in connection with such action, at Purchaser's sole expense, and in such event, counsel selected by Seller shall cooperate with Purchaser's counsel in the defense, compromise or settlement of such Claim.  If, however, in the reasonable opinion of Purchaser, any such Claim shall involve a matter which could have a material adverse effect upon the Company, then Purchaser shall have the right to assume the defense of such Claim.  In the event that Seller fails or elects not to exercise their his right to defend such Claim or Purchaser otherwise assumes the defense of any such Claim hereunder, then Purchaser may take whatever action it deems appropriate, and any final action with respect to such Claim shall be binding and conclusive upon Seller as to the amount of and the liability for such Claim; provided, however, that Purchaser will not settle such action or Claim without the prior consent of Seller, which consent shall not be unreasonably withheld or delayed.  The parties hereby agree to cooperate to the fullest extent possible in connection with any Claim for which indemnification is or may be sought hereunder.

4.4           Rights without Prejudice.  The rights of Purchaser under this Article V are without prejudice to any other right or remedies that they may have by reason of this Agreement or as otherwise provided at law or in equity.

ARTICLE V

MISCELLANEOUS PROVISIONS

5.1           Expenses.  Each of the parties hereto shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby.

5.2           Modification, Termination or Waiver.  This Agreement may be amended, modified, superseded or terminated, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, but only by a written instrument executed by the party waiving compliance.  The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same.

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5.3           Publicity.  The parties hereby agree that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued by either party without the advance approval of both the form and substance of the same by the other party and its counsel, which approval, in the case of any publicity, release or other public announcement required by applicable law, shall not be unreasonably withheld or delayed.

5.4           Notices.  Any notice or other communication required or which may be given hereunder shall be in writing and shall be deemed given:  (i) upon receipt, if delivered personally, or if sent via facsimile transmission (subject to confirmation of transmission thereof) or via nationally recognized overnight courier; or (ii) five (5) days after the date of mailing, if mailed by certified mail, return receipt requested, in each case, to the following addresses of the parties:

if to Seller, to:

Thomas Klink

2323 Ridgewood Road

Grafton, WI 53024

if to Purchaser, to:

JE Mexican Holdings, Inc.

One Parker Plaza

400 Kelby Street, 9th Floor

Fort Lee, NJ 07024

The parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice of any such change as set forth herein; provided, however, that any such notice of change of address shall be effective only upon receipt thereof.

5.5           Binding Effect and Assignment.  This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and the heirs, executors, personal representatives, successors and assigns of Seller, and the successors and assigns of Purchaser.  No assignment of any rights or delegation of any obligations provided for herein may be made by any party hereto without the express written consent of the other party; provided, however, that Purchaser may at any time assign all or any portion of its right, title and interest under this Agreement to any of its affiliates without the consent or approval of Seller, and/or any other party.

5.6           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof, and merges and supersedes all prior agreements and understandings, written or oral, with respect thereto.

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5.7           Governing Law.This Agreement shall in all respects be governed by, and construed in accordance with, the applicable laws of the State of Delaware, U.S.A., without giving effect to principles of conflicts of law.  Each party hereto irrevocably and unconditionally consents to submit the exclusive jurisdiction of the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, in connection with any action, suit or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby,and agrees that service of process may be made in any manner acceptable for use in such New York courts. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement and/or the transactions contemplated hereby, in the above New York courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  The parties hereby expressly waive the right to any jury trial in any action or proceeding involving this Agreement.

5.8           Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument.

[Balance of page intentionally left blank.]

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

SELLER:

/s/ Thomas Klink 

Thomas Klink

PURCHASER:
JE MEXICAN HOLDINGS, INC.
By:	/s Nathan J. Mazurek
	Nathan J. Mazurek, President

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EX-10.5

EXHIBIT 10.5

WARRANT PURCHASE AGREEMENT

April 30, 2010

Pioneer Power Solutions, Inc.

One Parker Plaza

400 Kelby Street, 9th Floor

Fort Lee, NJ 07024

Gentlemen:

This Warrant Purchase Agreement (the “Agreement”) is made as of April 30, 2010 (the “Closing Date”) by and between PIONEER POWER SOLUTIONS, INC., a Delaware corporation with offices at One Parker Plaza, 400 Kelby Street, 9th Floor, Fort Lee, NJ 07024 (the “Company”), and THOMAS KLINK, an individual residing at 2323 Ridgewood Road, Grafton, WI 53024 (“Purchaser”).

1.        Authorization and Purchase of the Warrant.

(A) Authorization of the Warrant. The Company’s Board of Directors has authorized the issuance by the Company, and the sale to Purchaser, of a Warrant to Purchase Common Stock (the “Warrant”) in respect of One Million (1,000,000) shares of the Company’s Common Stock, par value $0.001 per share, at an exercise price of $3.25 per share, all as more fully described and subject to the conditions set forth below and in the form of Warrant annexed hereto as Schedule A. The Company’s common stock issuable upon exercise of the Warrant is herein referred to as the “Warrant Stock,” and the Warrant and the Warrant Stock are hereinafter sometimes collectively referred to as the “Securities.”

(B) Purchase of Warrant. Subject to the terms and conditions set forth below and in the Warrant, the Company shall issue to Purchaser the Warrant in consideration of the payment of $10,000.00 (the “Warrant Purchase Price”).  The parties hereby acknowledge and agree that this Warrant Purchase Price constitutes fair and adequate consideration for the Warrant.

2.        The Closing. The closing of the purchase and sale of the Warrant to Purchaser (the “Closing”) shall be held at the offices of the Company, or at such other location as may be mutually agreed upon by the parties hereto. On the Closing Date, the Company shall deliver to Purchaser the Warrant registered in the name of Purchaser as against payment by Purchaser to the Company of the entire Warrant Purchase Price in immediately available funds.

3.        Representations and Warranties of the Company. The Company represents and warrants to the Purchaser that:

(A) Corporate Power; Authorization. The Company has all requisite corporate power and has taken all requisite corporate action to execute and deliver each of this Agreement and the Warrant, to sell and issue the Securities and to carry out and perform all of its obligations hereunder and thereunder.  Each of this Agreement and the Warrant has been duly authorized, executed and delivered on behalf of the Company and constitutes the valid and binding agreement of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by equitable principles generally.

(B) Validity of Securities. The Warrant, when sold against the consideration therefor as provided therein, will be validly authorized, issued and fully paid. The issuance and delivery of the Warrant is not subject to preemptive or any similar rights of the stockholders of the Company (which have not been duly waived) or any liens or encumbrances, except for restrictions on transfer provided for herein or under applicable federal and state securities laws; and when the Warrant Stock is issued upon exercise and in accordance with the terms of the Warrant, such Securities will be, at each such issuance, validly issued and outstanding, fully paid and non-assessable and free of any liens or encumbrances except for restrictions on transfer provided for herein or therein or otherwise under applicable Federal and state securities laws.

(C) No Conflict. The execution and delivery of this Agreement and the Warrant do not, and the consummation of the transactions contemplated hereby and thereby will not, materially conflict with, or result in any material violation of, or material default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit, under, any provision of its current Certificate of Incorporation or Bylaws, as amended, or any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company, its properties or assets, the effect of which would have a material adverse effect on the Company or materially impair or restrict its power to perform its obligations as contemplated hereby or thereby.

(D) Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority or other person or entity is required on the part of the Company in connection with the execution, delivery and performance of this Agreement and the Warrant or the offer, issuance, sale and delivery of the Warrant and the Warrant Stock, and except any notices of sale required to be filed with the Securities and Exchange Commission under Regulation D of the Securities Act or such post-closing filings as may be required under applicable state securities laws, all of which will be filed within applicable periods therefor.

4.        Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to the Company as follows:

(A) Investment Experience. Purchaser is an “accredited investor” within the meaning of Rule 501 under the Securities Act.  Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Purchaser has such business and financial experience as is required to give him the capacity to protect his own interests in connection with the purchase of the Securities. Purchaser has had the opportunity to ask questions of the Company concerning the Company’s business prospects and financial condition.

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(B) Investment Intent. Purchaser is purchasing the Warrant for investment for his own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act. Purchaser understands that the Warrant has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other matters, the bona fide nature of Purchaser’s investment intent as expressed herein.

(C) Authorization. Purchaser has all requisite power and has taken all requisite action to execute and deliver each of this Agreement and to carry out and perform all of his obligations hereunder. This Agreement has been duly executed and delivered on behalf of Purchaser and constitutes the valid and binding agreement of Purchaser, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by equitable principles generally.

Restrictions on Transfer of Securities; Lock-Up Period. The Warrant sets forth certain restrictions on transfer of the Securities.  The Warrant will also provide for a “Lock-Up Period” for a period of eighteen (18) months following the date of issuance thereof in respect of the Securities.

Pursuant to a certain loan agreement between Johnson Bank, as Lender, and Jefferson Electric Inc., as Borrower, Purchaser has furnished a personal guaranty to Lender.  As collateral security for such personal guaranty, Purchaser shall furnish to the Bank a pledge and security interest in the Warrant.  The parties hereby acknowledge and agree that the grant of such pledge and security interest granted by Purchaser to Lender under such loan agreement and during the Lock-Up Period hereunder shall not in any manner whatsoever constitute a violation of any of the provisions of this Agreement and/or the Warrant relating to a pledge of such Securities or otherwise.

6.        Miscellaneous.

(A) Waivers and Amendments. This Agreement and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

(B) Governing Law; Jurisdiction. This agreement shall in all respects be governed by, and construed in accordance with, the applicable laws of the State of New York, U.S.A., without giving effect to principles of conflicts of law. Each party hereto irrevocably and unconditionally consents to submit the exclusive jurisdiction of the United States District Court for the Southern District of New York, or if jurisdiction in such court is lacking, any court of the State of New York of competent jurisdiction sitting in New York City, in connection with any action, suit or proceeding arising out of or relating to this agreement and the transactions contemplated hereby,and agrees that service of process may be made in any manner acceptable for use in such New York courts. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this agreement and/or the transactions contemplated hereby, in the above New York courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  The parties hereby expressly waive the right to any jury trial in any action or proceeding involving this Agreement.

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(C) Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto.

(D) Entire Agreement; Construction. This Agreement and the Warrant constitute the full and entire understanding and agreement between the parties with regard to the subject hereof. In the event of any conflict between the terms of this Agreement and the terms of the Warrant, the terms of the Warrant shall prevail. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement or the Warrant.

(E) Notices, etc. Any notice or other communication given under this Agreement shall be sufficient if in writing and sent by personal service, facsimile, courier service promising overnight delivery or registered or certified mail, return receipt requested, postage prepaid, to a party at its address set forth below (or at such other address as shall be designated for such purpose by such party in a written notice to the other party hereto):

if to the Company, to:

Pioneer Power Solutions, Inc.

One Parker Plaza

400 Kelby Street, 9th Floor

Fort Lee, NJ 07024

with copies to:

Joshua Glikman, Esq.

Shiboleth LLP

One Penn Plaza, Suite 2527

New York, NY 10119

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if to Purchaser, to:

Mr. Thomas Klink

2323 Ridgewood Road

Grafton, Wisconsin 53024

Facsimile: 262.377.

Tklink@Jeffersonelectric.com

with copies to:

Dean P. Delforge, Esq.

Law Office of Dean P. Delforge, S.C.

15850 W. Bluemound Road, Suite 200

Brookfield, Wisconsin 53005

Facsimile: 262.787.0606

dpdelforge@tds.net

or in any case at such other address as Purchaser or the Company shall have furnished to the other in writing.

(F) Severability of this Agreement. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(G) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

[Execution Page to Follow]

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Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

/s/ Thomas Klink

Thomas Klink

AGREED AND ACCEPTED,

as of the date first above written:

PIONEER POWER SOLUTIONS, INC.

By:	/s/ Nathan J. Mazurek
Its:	Chief Executive Officer

Dated: April 30, 2010

[Signature Page to Warrant Purchase Agreement]

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EX-10.6

EXHIBIT 10.6

LOAN AND SECURITY AGREEMENT

Dated January 2, 2008

Johnson Bank (the “Bank”), 333 E. Wisconsin Ave., Milwaukee, WI  53202, and Jefferson Electric, Inc. (the “Borrower”), whose principal place of business is located at 9650 S. Franklin Dr., Franklin, WI  53132, agree as follows:

1.  DEFINITIONS

All terms defined in Articles 1 through 9 of the applicable Uniform Commercial Code, as it may be amended, reenacted or otherwise in effect from time to time, shall have the meanings specified therein unless otherwise defined herein or unless the context requires otherwise.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP, except as otherwise stated herein.

“Affiliate” shall mean (a) a person or entity which directly or indirectly owns, controls or holds with power to vote, 5% or more of the outstanding voting securities of Borrower; (b) a corporation 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by Borrower, or by a person or entity which is an Affiliate within the meaning of subclause (a) above; (c) a person or entity which manages, operates or leases all or a material part of Borrower’s business; (d) any director, officer or controlling person of Borrower; (e) any partnership in which Borrower is a general or limited partner; or (f) any limited liability company in which Borrower is a member.

“Affiliated Company” shall mean any of the following:  (1) any company which is a member of a controlled group of corporations (determined under Section 1563(a) of the Internal Revenue Code without regard to Section 1563(a)(4) and (e)(3)(C)) which also includes Borrower as a member, (2) any trade or business under common control (as defined in Section 414(c) of the Internal Revenue Code) with Borrower, (3) a member of an affiliated service group (as defined in Section 414(m) of the Internal Revenue Code) which includes Borrower, and (4) any other entity required to be aggregated with Borrower under Section 414(o) of the Internal Revenue Code.

“Authorized Security Interest” shall mean the liens and security interests permitted pursuant to Section 6.2 hereof.

“Code” or “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time and any corresponding or succeeding law, together with any regulations, interpretations, announcements or decisions thereunder.

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“Collateral” shall mean and include all property and assets of the Borrower, including but not limited to all of the following, whether now owned or existing or hereafter created or acquired, wheresoever located, together with all additions and accessions and all proceeds and products of the following, including without limitation cash, deposit accounts, negotiable instruments and other instruments for the payment of money, chattel paper, rights to payment of money, security agreements or other documents, and all proceeds of credit or other forms of insurance coverage on any of the following, and all books and records pertaining to any of the following:

(1)           all of Borrower’s Receivables, and all rights, title or interest in any other real or personal property represented by or securing the same, and all of Borrower’s rights as an unpaid vendor or lienor, including stoppage in transit, replevin or reclamation and any other items of real or personal property in which Borrower has granted or may in the future grant a lien or security interest to Bank hereunder or in any supplement hereto or otherwise;

(2)           all guarantees, mortgages on real or personal property, leases or other agreements or property securing or relating to any of the items referred to in Section (1) of this definition of “Collateral” or acquired for the purpose of securing and enforcing any of such items;

(3)           all of Borrower’s Inventory;

(4)           all of Borrower’s General Intangibles;

(5)           all of Borrower’s instruments, including promissory notes, and all of Borrower’s documents;

(6)           all of Borrower’s Investment Property;

(7)           all of Borrower’s deposit accounts;

(8)           all of Borrower’s machinery, equipment, motor vehicles of any nature and description, furniture and fixtures and all assets which are classified by Borrower as fixed assets for accounting purposes or which should be classified as fixed assets in accordance with GAAP;

(9)           all of Borrower’s leases, rents, issues and profits;

(10)         all of Borrower’s life insurance policies and their cash surrender values;

(11)         all supporting obligations, including all guaranties and letter of credit rights;

(12)         all of Borrower’s rights in, and all of Borrower’s rights in connection with, post office boxes;

(13)         all computer and other data processing hardware, all software programs, whether owned, licensed or leased, and all documentation for such hardware and software; and

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(14)           all of Borrower’s real estate;

(15)           all of Borrower’s books and records pertaining to any of the foregoing, however produced, reproduced or recorded, including but not limited to books and records stored or maintained on any type of computer and/or data processing system or equipment (including but not limited to all related discs, tapes, printouts and media).

“Collateral Shortfall” means the difference between the Loan Amount and the Discounted Collateral Value, but not less than $0.00.

“Company Guarantor” means Jefferson Electric Leasing, LLC.

“Discounted Collateral Amount” means the sum of (i) 80% of Borrower’s Qualified Accounts, plus (ii) 50% of Borrower’s Qualified Inventory, plus (iii) 80% of the purchase price of Borrower’s equipment purchased within one year prior to the date of determination, plus (iv) 80% of the appraised value of Borrower’s other equipment, which appraised value has been established within one year prior to the date of determination by appraisals satisfactory to Bank, and for such other equipment that has not been so appraised, 80% of Borrower’ net book value.

“EBITDA” shall mean, for any period, the sum of amounts for such period of (a) Pre-Tax Net Income, and (b) to the extent deducted in determining net income, interest expense, depreciation and amortization, all determined in accordance with GAAP.

“Environmental Laws” shall mean all federal, state and local laws including statutes, regulations, ordinances, codes, rules and other governmental restrictions and requirements relating to the discharge of air pollutants, water pollutants or process waste water, hazardous waste or otherwise relating to the environment or hazardous substances including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Federal Occupational Safety and Health Act, regulations of the Environmental Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations of any state department of natural resources or state environmental protection agency now or at any time hereafter in effect.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any corresponding or succeeding law, together with any regulations, interpretations, announcements or decisions thereunder.

“Excess Cash Flow” means, for any fiscal year of Borrower, EBITDA, less the sum of (a) amounts that have been or will be distributed for income taxes for such year, (b) interest expense paid in cash, (c) scheduled principal payments on the Term Note, (d) scheduled principal payments on obligations other than the Term Note, and (e) capital expenditures paid in cash or paid from the proceeds of the Revolving Credit Facility.

“GAAP” means generally accepted accounting principles consistently applied.

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“General Intangibles” shall mean, without limitation, all general intangibles; all payment intangibles; all goodwill; patents; know-how; trademarks; trade names; copyrights; patent, trademark, trade name and copyright registrations and applications; trade secrets; customer lists; franchises; license agreements related to any of the foregoing (and income derived therefrom); all of Borrower’s interests in and rights to domain names and web sites and all rights and interests related thereto; tax refund claims and all other contract rights and choses in action.

“Guarantors” means Thomas Klink and Jefferson Electric Leasing, LLC.

“Included Location” means a location identified on part I(A) of Schedule 4.3 hereto, or a location that after the date hereof meets the following criteria:  (a) Borrower has delivered to Bank a Consent of Lessor or Warehouseman Letter for such location which Consent of Lessor or Warehouseman Letter, as applicable, is approved by Bank, and (b) Bank has approved such location in a writing addressed to Borrower or in an email correspondence to Borrower.

“Inventory” shall mean and include all inventory of Borrower, all personal property of Borrower held for sale, lease or demonstration, or to be furnished under contracts for service, goods leased to others, trade-ins and repossessions, raw materials, work in process, materials and supplies used or consumed in Borrower’s business, and all additions and accessions to any of the foregoing, including documents evidencing such property, and all such property which may be returned to Borrower by its customers or repossessed by Borrower.

“Investment Property” means all of Borrower’s investment property, and all other stock and other interest of Borrower in any corporation, limited liability company or other entity;

“Letter of Credit Liabilities” shall mean the total of (1) the sum of the face amounts of all outstanding letters of credit issued by Bank for the account of Borrower, plus (2) the aggregate liability of Borrower for amounts owing as a result of advances pursuant to letters of credit and all interest, collection costs, fees, expenses and other amounts owing in connection with letters of credit.

“Loan Amount” means the sum of $3,000,000 plus the outstanding balance of the Term Note.

“Loan Documents” means all documents evidencing, securing or relating to the Obligations.

“Net Cash Flow” for any fiscal period of Borrower, means EBITDA, less  the sum of (a) distributions for income taxes paid in cash, and (b) capital expenditures paid in cash or paid from the proceeds of the Revolving Credit Facility.

“Net Income” shall mean, for any fiscal period of Borrower, net income determined in accordance with GAAP, including extraordinary losses but excluding extraordinary gains.

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“Notes” shall mean the Revolving Note and the Term Note.

“Obligations” shall mean all of Borrower’s debts, notes (specifically including but not limited to the Notes), obligations and liabilities (specifically including but not limited to liabilities under leases, Letter of Credit Liabilities, corporate credit card liabilities and interest rate agreement liabilities) of whatever nature or amount (and any extensions, renewals, or modifications thereof) to Bank arising out of this Agreement or other credit or financial accommodations of whatever nature (contingent or otherwise) previously granted, contemporaneously granted or granted in the future by Bank to Borrower, to Borrower and another, or to another guaranteed or endorsed by Borrower, and the performance of all covenants, conditions and agreements contained in this Agreement, the Notes, or any other Loan Document, and, to the extent not prohibited by law, costs and expenses of collection or enforcement of the Obligations, including but not limited to actual attorneys’ fees.

“Pension Plan” shall mean an employee pension benefit plan, within the meaning of Section 3(2) of ERISA, which is maintained or sponsored by Borrower or any Affiliated Company, or to which Borrower or any Affiliated Company is required to contribute.  The term “Pension Plan” also means any multiemployer plan within the meaning of Section 3(37) of ERISA, which is contributed to by Borrower or any Affiliated Company.

“Plan” shall mean either a Pension Plan or a Welfare Benefit Plan.

“Pre-Tax Net Income” shall mean, for any fiscal period of Borrower, net income prior to provision for income taxes, determined in accordance with GAAP, including extraordinary losses but excluding extraordinary gains.

“Qualified Account” shall mean an account owing to Borrower, less any amount reserved for discounts, which meets all of the following specifications:

(1)           Sale of Goods or Services Rendered.  It arose from the performance of services by Borrower, or from a bona fide sale or lease of goods, which have been delivered or shipped to the customer and for which Borrower has genuine invoices, shipping documents or receipts, which sale is not a consignment sale, a “sale on approval” or a “sale or return.”

(2)           Age and Due Date.  It is not more than 90 days past the date of invoice.  An invoice may not be dated prior to performance of the service or delivery of the goods represented on that invoice.

(3)           Past Due Accounts of Customer.  Not more than 25% (in dollar amount) of the amount owing by the customer to Borrower for accounts is more than 90 days past the date of invoice.

(4)           Ownership.  It is owned by Borrower free of all liens and encumbrances and security interests (except Bank’s security interest and subordinated Authorized Security Interests).

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(5)           Acceptance by Customer.  It is enforceable against the customer and for the amount shown as owing in the statements furnished by Borrower to Bank.  No return, rejection or repossession has occurred.  It and the transaction out of which it arose comply with all applicable laws and regulations.  The merchandise or services have been fully accepted by the customer without dispute and are not subject to any setoff, credit allowance or adjustment, nor is it subject to any defenses or counterclaims.  Any account otherwise includable in Qualified Accounts shall be reduced by any amount claimed to be owing by Borrower to the customer and only the reduced amount shall be included in Qualified Accounts.

(6)           Not a Foreign Receivable.  The customer has its principal place of business in the United States, or the account is secured by a Letter of Credit in form and substance satisfactory to Bank issued by a United States bank approved by Bank.

(7)           Affiliates.  It is not due from an Affiliate.

(8)           Government as Customer.  It is not due from the United States Government or any of its departments, agencies or instrumentalities.

(9)           Satisfaction of Bank as to Financial Condition of Customer.  Bank is, and continues to be satisfied with the creditworthiness of the customer in relation to the amount of credit extended and has not notified Borrower, orally or in writing, that the account or customer is unsatisfactory.

(10)         Satisfaction of Bank.  Bank has not notified Borrower, orally or in writing, that the account or customer is unsatisfactory in any respect.

“Qualified Inventory” shall mean Inventory, excluding office supplies, which meets these specifications:

(1)           Ownership.  It is owned by Borrower free of all tax liens and other liens, encumbrances and security interests (except Bank’s security interest and subordinated Authorized Security Interests) and it is located at one of the locations listed in part I(A) of Schedule 4.3 hereto or at a location that becomes an Included Location after the date hereof.

(2)           Other Financing.  No financing statement (other than Bank’s and those relating to subordinated Authorized Security Interests) is on file covering it or its products or proceeds.

(3)           Documents.  If it is represented or covered by documents of title, Borrower is the owner of the documents free of all tax liens and other liens, encumbrances and security interests (other than Bank’s security interest and subordinated Authorized Security Interests).

(4)           Condition.  It is in good condition and, in the case of goods held for sale, it is new and unused (except as Bank may otherwise consent in writing).

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(5)           Contra Accounts.  Its value is calculated in accordance with GAAP net of any royalties and commissions (other than sales commissions) owing on the Inventory or the sale thereof, any balance sheet reserves for obsolete inventory and any inventory valuation reserves.

(6)           Satisfaction of Bank.  Bank has not notified Borrower, orally or in writing, that any of the Inventory is unsatisfactory.

“Receivables” shall mean and include all of Borrower’s accounts, receivables, including health-care-insurance receivables, contract rights, instruments, drafts, documents, notes, acceptances, and chattel paper.

“Release Date” means the first December 31 on or after December 31, 2010 as of which all of the following conditions are met (a) as of such date, the ratio of Borrower’s total liabilities to Tangible Net Worth is less than or equal to 2.0 to 1.0, (b) for the fiscal year ending on such date, the ratio of (1) Borrower’s Net Cash Flow, to (2) the sum of Borrower’s required principal payments plus interest expense is at least 1.25 to 1.0, (c) as of such date, the ratio of the Discounted Collateral Amount to the Loan Amount equals at least 1.2 to 1.0, and (d) as of such date, the Collateral Shortfall is $0.00.

“Revolving Note” shall mean Borrower’s promissory note, substantially in the form attached hereto as Exhibit A.

“Tangible Net Worth” shall mean (1) the total of all of Borrower’s assets, excluding any noncompetition agreements, capitalized acquisition costs, prepaid expenses, goodwill and other intangibles, minus (2) the aggregate of all Borrower’s liabilities and reserves of every kind and character, all determined in accordance with GAAP.

“Term Note” shall mean Borrower’s promissory note, substantially in the form attached hereto as Exhibit B.

“Welfare Benefit Plan” shall mean an employee welfare benefit plan, within the meaning of Section 3(1) of ERISA, which is maintained or sponsored by Borrower or any Affiliated Company, or to which Borrower or any Affiliated Company is required to contribute.

2.  CREDIT FACILITIES

2.1 Revolving Credit Facility.

2.1.1           Revolving Loans; Advances.  Subject to the terms, conditions and limitations hereof, and provided that no Event of Default has occurred hereunder, Bank agrees to lend (and upon repayment relend) money to Borrower in such amounts as Borrower from time to time requests, up to the maximum amount of Three Million Dollars ($3,000,000.00), provided that the amount available to be borrowed under the Revolving Credit Facility shall be reduced by the amount of any Letter of Credit Liabilities.  Advances by Bank hereunder shall be made by deposits or transfers to Borrower’s commercial demand account number 1001368991, maintained with Bank.  Loans so made shall be evidenced by Borrower’s Revolving Note, and, in addition, Bank shall maintain a loan account ledger for Borrower, the debit balance of which shall reflect the amount of Borrower’s indebtedness to the Bank from time to time by reason of any loans, advances or financial accommodations made in conformance with this Revolving Credit Facility.  Each month the Bank shall render to Borrower a statement of account, which statement shall be considered correct and accepted by Borrower and conclusively binding upon Borrower unless Borrower notifies the Bank to the contrary within thirty (30) days from the date of mailing of said statement.  Borrower promises to pay to Bank the outstanding principal and accrued and unpaid interest under the Revolving Note as follows:  (1) monthly payments of accrued interest, commencing on February 1, 2008 and on the first day of each month thereafter, and (2) a final payment of all outstanding principal and accrued but unpaid interest on January 1, 2009.

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2.1.2            Conditions to Each Extension of Credit.  Bank shall not be obligated to lend money to Borrower unless all of the following are met:  (a) no Event of Default has occurred and is continuing or will exist upon the lending of the amount requested, and (b) the representations and warranties contained in Section 4 hereof shall be true and correct with the same force and effect as if made on the date of the request for an advance.

2.2          Term Credit Facility.  Subject to the terms, conditions and limitations hereof, and provided that no Event of Default has occurred hereunder, Bank agrees to lend money to Borrower up to the maximum amount of Four Million Four Hundred Fifty Two Thousand Eight Hundred Eighty Six Dollars ($4,452,886.00).  The loan so made shall be evidenced by Borrower’s Term Note.  Borrower promises to pay to Bank the outstanding principal and accrued and unpaid interest under the Term Note as follows:  (1) monthly payments of interest commencing on February 1, 2008 and on the first day of each month thereafter through and including July 1, 2008, (2) monthly payments of principal and interest in the amount of Seventy Two Thousand Twenty Three and 90/100 Dollars ($72,023.90) each, commencing on August 1, 2008 and on the first day of each month thereafter, and (2) a final payment of all outstanding principal and accrued but unpaid interest on January 1, 2013.

2.3          Interest Rate.

2.3.1           Interest Rate on the Revolving Note.  The interest rate hereunder on the Revolving Note shall be equal to the LIBOR Rate plus three percentage points (3.0%) per annum.  “LIBOR Rate” means the 30 Day London Interbank Offer Rate as published in the Wall Street Journal on the first business day of each calendar month and effective on the same day (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current Index rate upon Borrower's request.  Borrower understands that Lender may make loans based on other rates as well.

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2.3.2           Interest Rate on the Term Note.  The interest rate hereunder on the Term Note shall be Seven and 27/100 percentage points (7.27%) per annum.

2.3.3           Calculation of Interest.  Interest shall be computed daily based upon a 360-day year and the LIBOR Rate and the outstanding loan balances as they exist at the end of each day.

2.4            Limitation on Interest.  In no contingency or event whatsoever shall the interest rate charged hereunder exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event such a court determines that Bank has received interest hereunder in excess of the highest rate permissible under law, Bank shall promptly refund such excess to Borrower without penalty or damages of any kind.

2.5           Default Interest.  The unpaid balances on the Notes shall bear interest after default or maturity at five percentage points (5.0%) per annum in excess of the rate that would apply in the absence of a default.

2.6           Collateral-Obligation Ratio.  Borrower shall not at any time permit the sum of the aggregate amount of those Obligations reflected by the loan account ledger for the Revolving Credit Facility plus all Letter of Credit Liabilities to exceed the lesser of (a)  $3,000,000, or (b)  the total sum of:

2.6.1           Eighty percent (80%) of the amount owing on Qualified Accounts (after deducting payments on Qualified Accounts which are in the process of collection by the Bank); plus

2.6.2           Fifty percent (50%) of Qualified Inventory at cost (determined in accordance with GAAP) or wholesale market value, whichever is lower; less

2.6.3           such reserves as Bank, in its sole discretion, deems necessary or appropriate, taking into account the Borrowers’ and Borrowers’ customers’ financial condition and prospects, the nature and condition of the Collateral, applicable contingencies and any other factor deemed material by Bank.

In addition to other required payments, Borrower shall pay Bank, in reduction of the Obligations owing to Bank at any time, such sums as may be necessary from time to time to maintain the foregoing ratios and to comply with the foregoing advance limits.  Such ratio is stated only for the purpose of advances under this Agreement and not for valuation of the Collateral.

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2.7           Application of Payments.   Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to any unpaid collection costs, late charges and other charges, then to accrued, unpaid interest, and then to principal, provided, however, after an Event of Default which is continuing Bank may apply payments among principal, interest, late charges, collection costs and other charges at its discretion.  All prepayments of principal on the Term Note shall be applied to the principal amounts owing under the Term Note in the inverse order of their maturity.

2.8           Excess Cash Flow Payments.  On or before April 30, 2009, and on before March 31 of each year thereafter, Borrower shall prepay the Obligations in an amount equal to seventy-five percent (75%) of the Excess Cash Flow of Borrower for the prior fiscal year of Borrower.  Such payment shall be applied to principal outstanding under the Term Note in the inverse order in which such principal becomes due, provided that no such payment shall be required at any time that the Collateral Shortfall equals $0.00.

2.9           Prepayment Premium.  In the event Borrower desires to prepay any principal owing under the Term Note, in whole or in part, including prepayment following an Event of Default but excluding payments required under Section 2.8 hereof, with proceeds of financing from a party other than Bank, Borrower shall pay to Lender a prepayment fee of one percentage point (1.0%) of the amount prepaid.

2.10         Facility Fee.  In addition to all other amount payable hereunder, Borrower shall pay a facility fee on the date hereof equal to $1,000, which fee shall be deemed fully earned and non-refundable upon execution of this Agreement by Bank.

3.  SECURITY INTEREST AND PLEDGE

To secure the payment and performance of all of the Obligations, howsoever arising, of whatever nature, contingent or otherwise, and whether arising out of existing or future credit granted by Bank to Borrower, to Borrower and another or to another guaranteed or endorsed by Borrower, and as a contemporaneous exchange for value, Borrower grants and assigns to Bank a security interest in and lien on the Collateral.  Borrower also grants Bank a security interest in and lien on any credit balance or other money now or hereafter owed Borrower by Bank and, in addition, Borrower agrees that Bank may at any time after the occurrence of an Event of Default, and without notice or demand, setoff against any such credit balance or other money any amount unpaid on the Obligations.

4.  BORROWER’S WARRANTIES

Borrower warrants that while any of the Obligations are unpaid or unsatisfied:

4.1           Accuracy of Information.  All information, certificates or statements given to Bank pursuant to this Agreement shall be true and complete when given.

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4.2           Accuracy of Financial Statements.  As of the date hereof, no material or adverse change has occurred or is about to occur which would affect Borrower’s December 31, 2006 year-end financial statements, or the Borrower’s October 31, 2007 interim financial statements.  Borrower agrees to immediately advise Bank of any adverse changes to said financial statements.

4.3           Names; Addresses.  The address appearing on page 1 hereof is Borrower’s principal place of business and the address of the office where Borrower keeps its records concerning accounts and contract rights.  Such location shall not be changed without the prior written consent of Bank.  Schedule 4.3 hereto lists all of the locations at which Borrower keeps any Collateral or records.  Borrower’s corporate name is Jefferson Electric, Inc.  Schedule 4.3 hereto lists all prior corporate names and all trade names by which Borrower is now known or was previously known within the past seven years.

4.4           Organization.  Borrower is a duly organized, validly existing corporation and in good standing under the laws of the State of Wisconsin and is duly qualified to do business and is in good standing in every jurisdiction in which Borrower is required under the laws of such jurisdiction to qualify to do business or otherwise register.  Borrower has filed all reports required to be filed by Borrower with the Secretary of State of the State of Wisconsin in order to maintain its charter and no proceeding is pending to revoke Borrower’s charter or dissolve Borrower.

4.5           Other Agreements.  Borrower is not in default under any agreement for the payment of money.

4.6           Unfunded Liabilities - ERISA.  Except as set forth on Schedule 4.6, Borrower has no Plan.  None of the Pension Plans has an accumulated funding deficiency, as defined under Section 302 of ERISA and Section 412 of the Internal Revenue Code whether or not waived.  All of the Pension Plans are qualified under Section 401(a) of the Internal Revenue Code and the related trusts are exempt from tax under Section 501(a) of the Internal Revenue Code.  Borrower has not incurred and does not expect to incur any liability to the Pension Benefit Guaranty Corporation (“PBGC”), or to any trustee appointed pursuant to ERISA Section 4042, with respect to any Pension Plan, and the PBGC has not instituted proceedings to terminate any Pension Plan or to have a trustee appointed under ERISA Section 4042 to administer or terminate any Pension Plan.  There are no pending investigations by any government agency involving the Plans.  Except as set forth on Schedule 4.6 hereto, no event has occurred, and there exists no condition or set of circumstances which presents a risk of termination of any Pension Plan or which could result in any liability on the part of Borrower to the PBGC and there has been no reportable event (as defined in Section 4043(b) of ERISA.  Borrower has not engaged in any “prohibited transaction” (as defined in ERISA Section 406 and Section 4975 of the Internal Revenue Code), with respect to a Plan or any of the related trusts, which may result in any civil penalty assessed pursuant to ERISA Section 502(i) or a tax imposed by the Internal Revenue Code.  Borrower has no withdrawal liability assessed or contingently assessable under ERISA as to any Pension Plan which is a multiemployer Plan.  Except as set forth on Schedule 4.6, Borrower does not maintain unfunded Welfare Benefit Plans (within the meaning of ERISA Section 3(1)) for employees of Borrower which cannot be terminated without further financial obligation on the part of Borrower upon notice of not more than thirty (30) days.  Each of the Plans has been administered at all times, and in all material respects, in accordance with its terms.  Borrower has fully complied with the notice and continuation of coverage requirements of Sections 601 through 608 of ERISA and Section 4980B of the Internal Revenue Code.  All reports, statements, returns, and other information required to be furnished or filed with respect to the Plans have been furnished or filed, or both, in accordance with Sections 101 through 105 of ERISA and Section 6057 through 6059 of the Internal Revenue Code, and they are true and correct.  Records of the Plans have been maintained in accordance with Section 107 of ERISA.  The Borrower and all other fiduciaries (as defined in Section 3(21) of ERISA) with respect to any of the Plans do not have any material liability for any breach of any fiduciary duties under Sections 404, 405 or 409 of ERISA.  No action, proceeding or claim has been asserted, or is pending or threatened, against Borrower or any Plan fiduciary with respect to any Plan and no basis exists therefor.  For purposes of this Section 4.6, “Borrower” shall include Borrower and any Affiliated Company.

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4.7           Ownership.  Borrower is the exclusive owner of the Collateral free of all encumbrances, security interests, liens and interests of third parties whatsoever (except Bank’s security interest and Authorized Security Interests), and chattel paper constituting Collateral evidences a perfected security interest in the goods covered by it, free from all other encumbrances and security interests, and no financing statement or assignment (absolute or conditional), or notice thereof (other than Bank’s or one giving rise to an Authorized Security Interest) is on file covering the Collateral or any of it.  If Inventory is represented or covered by documents of title, Borrower is the owner of the documents, free of all encumbrances and security interests other than Bank’s security interest and Authorized Security Interests.  Borrower is duly authorized to sell, transfer, pledge and grant a security interest in each and every item of the Collateral.

4.8           Litigation.  There is no litigation or proceeding pending or, to the knowledge of any of Borrower’s officers, threatened against Borrower which might materially adversely affect the condition of the Borrower or the ability of the Borrower to perform the Obligations.

4.9           Fiscal Year.  Borrower’s fiscal year ends December 31.

4.10         Validity of Agreement.  The execution and delivery of this Agreement to Bank will not violate or constitute a breach of Borrower’s Articles of Incorporation, By-Laws or other incorporation papers or any indenture, agreement or undertaking to which Borrower is a party or is subject.

4.11         Dump Sites.  With respect to the period during which Borrower owned or occupied its real estate, and to the Borrower’s knowledge, with respect to the time before Borrower owned or occupied its real estate, no person or entity has caused or permitted materials to be stored, deposited, treated, recycled or disposed of on, under or at any real estate owned or occupied by the Borrower, which materials, if known to be present, would require investigation, cleanup, removal or some other remedial action under Environmental Laws.

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4.12           Tanks.  There are not now, nor to the Borrower’s knowledge, have there ever been, tanks or other facilities on, under, or at any real estate owned or occupied by the Borrower which contained materials which, if known to be present in soils, surface water or ground water, would require investigation, cleanup, removal or some other remedial action under Environmental Laws.

4.13           Other Environmental Conditions.  To the Borrower’s knowledge, there are no conditions existing currently or likely to exist during the term of this loan which would subject Borrower to damages, penalties, injunctive relief or investigation or cleanup costs under any Environmental Laws or which require or are likely to require investigation cleanup, removal, remedial action or other response pursuant to Environmental Laws by the Borrower.

4.14           Changes in Laws.  To the Borrower’s knowledge after reasonable investigation, there are no proposed or pending changes in Environmental Laws that would adversely affect the Borrower.

4.15           Environmental Judgments, Decrees and Order.  Borrower is not subject to any judgment, decree, notice of violation, order or citation related to or arising out of Environmental Laws and has not been named or listed as a potentially responsible party by any governmental body or agency in a matter arising under any Environmental Laws.

4.16           Environmental Permits and Licenses.  Borrower has all permits, licenses and approvals required under Environmental Laws, including all permits, licenses and approvals relating to air or water discharges or emissions or disposal of hazardous waste, hazardous substances or wastewater.

4.17           Employee Controversies.  There are no controversies pending or, to the best of the Borrower’s knowledge after diligent inquiry, threatened or anticipated between the Borrower and any of its employees, other than as described on Schedule 4.17 hereto and other than employee grievances arising in the ordinary course of business which are not, in the aggregate, material to the continued financial success and well-being of the Borrower.

4.18           Labor Matters.  There are no strikes or other labor disputes against the Borrower pending or, to Borrower’s knowledge, threatened.  The hours worked and payment made to employees of the Borrower have not been in material violation of the Fair Labor Standards Act or any other applicable law dealing with such matters.  All payments due from Borrower, or for which any claim may be made against the Borrower, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of the Borrower.  The consummation of the transactions contemplated by this Agreement will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower is a party or by which the Borrower is bound.

4.19           Patents, Licenses.  The Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trademarks and trade names to continue to conduct its business as heretofore conducted.  All of the following that are federally registered or for which Borrower has made application for federal registration, whether owned by or licensed to Borrower, are listed on Schedule 4.19 hereto:  patents, patent applications, copyrights, service marks, trademarks and trade names.

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4.20           Investment Company.  Borrower is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

4.21           Consignments.  None of the inventory in Borrower’s possession was obtained by Borrower on consignment or approval.

5.  BORROWER’S AFFIRMATIVE COVENANTS

During the term of this Agreement, and until the Obligations are paid or satisfied in full, Borrower covenants and agrees as follows:

5.1           Business Records; Reports.  Borrower shall maintain a reasonable system of business records prepared in accordance with GAAP and shall furnish Bank such reports respecting the business, assets and financial condition of Borrower as Bank may reasonably request, all of which reports shall be certified, in form reasonably satisfactory to Bank, by a principal officer of Borrower or, when requested by Bank, audited by an independent certified public accountant who is reasonably satisfactory to Bank.  Bank shall have the right at any time during normal business hours to verify, check, inspect and make abstracts and copies of all of Borrower’s books, accounts, records, audits, orders, correspondence, corporate minute books and other legal records and such other papers, computer files, discs, tapes, printouts and other media as Bank may desire.  In addition to the foregoing, Borrower agrees to deliver to Bank:

5.1.1           On or before April 30, 2008 for Borrower’s fiscal year ending December 31, 2007, and within ninety (90) days after the end of each fiscal year of Borrower thereafter, a balance sheet of Borrower as of the close of such fiscal year and related statements of earnings, retained earnings and statements of cash flows for such year, each with comparative figures for the preceding fiscal year, all in reasonable detail satisfactory to the Bank, prepared in accordance with GAAP, audited by Borrower’s current accountants or by independent certified public accountants reasonably satisfactory to Bank.

5.1.2           Within thirty (30) days after the end of each fiscal month, a balance sheet and related statements of earnings, retained earnings and statements of cash flows for such month, in each case with comparative figures for the same month in the preceding fiscal year, prepared on the same basis as the most recent annual statement provided pursuant to Section 5.1.1 above, certified by an officer of Borrower.

5.1.3           Within thirty (30) days after the end of each month, based on Qualified Accounts and Qualified Inventory figures as of the end of such month, and at such other times as requested by Bank, a report in the form required by the Bank reflecting the Collateral-Obligation Ratio, together with such information relating to the Collateral as Bank may request, certified by an authorized signatory of Borrower.

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5.1.4           On or before thirty (30) days prior to the beginning of each fiscal year of Borrower commencing with the fiscal year of Borrower ending December 31, 2009, Borrower shall furnish to Bank a Business Plan (as defined hereinafter) for Borrower for such fiscal year of Borrower.  For purposes of this Section 5.1.4, “Business Plan” shall mean a statement prepared by Borrower’s management of management’s intentions and projections with regard to anticipated business developments or objectives relating to Borrower’s business, including (a) a statement of Borrower’s projected Inventory and sales, (b) an operating and capital budget, and (c) projections of (i) monthly balance sheets of Borrower, for such fiscal year of Borrower, (ii) monthly statements of income and expense and of shareholders’ equity of Borrower, for such fiscal year of Borrower, and (iii) monthly budgets of capital expenditures to be incurred by the Borrower during such fiscal year of Borrower.  The Business Plan shall be in reasonable detail and certified by the President of Borrower as having been prepared in good faith and to the best knowledge and ability of Borrower.  Borrower shall, promptly upon any material revision of any of the foregoing, provide a copy of such revision to Bank.

5.1.5            Upon receipt by Borrower, copies of all management letters and detailed reports submitted to Borrower by independent accountants.

5.1.6            On or before April 1 of each year, an updated personal financial statement for each Guarantor.

5.1.7            Within 30 days after the end of each fiscal month, a statement on the form of Exhibit C hereto certified by an officer of Borrower, in form and content satisfactory to Bank, representing the warranting that (a) the representations and warranties contained in this Agreement are true and correct as of the date of such statement, except for changes permitted or contemplated by this Agreement which have been disclosed in writing to Bank; (b) no condition, event, act or omission has occurred or exists which constitutes an Event of Default under this Agreement; (c) no condition, event, act or omission has occurred which, with the giving of notice or the passage of time, will constitute an Event of Default under this Agreement; and (d) Borrower is in compliance with the following Sections of this Agreement:  5.21 (for certifications given as of the end of a fiscal year of Borrower commencing December 31, 2008), 5.22 (for each certification commencing with the certification given as of December 31, 2008) and 6.3 (in each case, on a fiscal year to date basis).

5.2           Conduct of Business; State of Incorporation.  Borrower shall maintain current filings of its Articles of Incorporation in all states in which Borrower is qualified to do business, and do all things necessary for the Borrower to remain duly organized and validly existing as a Wisconsin corporation and maintain all requisite authority to conduct its business in Wisconsin and in all other states as may be required.  Borrower shall not change its state of incorporation.

5.3           Chattel Paper, Instruments, etc.  Chattel Paper, instruments, drafts, notes, acceptances, and other documents which constitute Collateral shall be on forms satisfactory to the Bank.  Borrower shall promptly mark all such forms of Collateral to indicate conspicuously the Bank’s interest and immediately deliver them to the Bank.

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5.4           Collateral Records and Statements.  Borrower shall keep accurate and complete books and records pertaining to the Collateral in such detail and form as Bank requires and in accordance with GAAP, including but not limited to, schedules of inventory, original orders, invoices, and shipping documents.  At the request of Bank, Borrower shall furnish to Bank a statement, certified by Borrower and in such form and containing such information as may be prescribed by Bank, showing the current status and value of the Collateral.

5.5           Taxes and Expenses.  Any taxes (excluding income taxes of the Bank and taxes imposed on Bank in lieu of income taxes) payable or ruled payable by Federal or State authority in respect of this Agreement, the Notes or the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any, provided that Borrower shall be allowed to contest the same in good faith so long as (1) Borrower maintains adequate reserves therefor, (2) Borrower gives Bank notice thereof, and (3) the Bank will not be adversely affected thereby.  Borrower shall also reimburse the Bank for all reasonable fees and out-of-pocket expenses and disbursements incurred by Bank in connection with this Agreement, including the actual legal fees and expenses of the Bank’s legal counsel.  Borrower also agrees to pay the fees and expenses incurred by the Bank in connection with any subsequent amendment or modification of this Agreement, the Notes or any of the Loan Documents, or their collection and/or enforcement (including, but not limited to, reasonable attorney fees and reasonable time charges of attorneys who may be employees of the Bank).  In the event that Bank ever agrees to limit the amount of attorneys fees to be paid by Borrower, the amount charged to Borrower shall comply with such limit.

5.6           Inspection of Collateral.  At reasonable times on reasonable notice Bank may examine the Collateral and have full access to, and right to audit, check, inspect and make abstracts and copies from Borrower’s books and records pertaining to it, wherever located; and Borrower shall assist Bank in so doing.

5.7           Insurance.  Borrower shall procure forthwith and maintain insurance against loss, theft, destruction and damage to the Collateral for the full insurable value thereof, with such companies as are acceptable to the Bank for the life of this Agreement, plus other insurance thereon in the amounts and against such risks as the Bank may reasonably specify, and promptly deliver an original copy of each policy to the Bank, with a standard Lender’s Loss Payable Clause in favor of Bank.  Loss or damage to the Collateral shall not release Borrower from any of its Obligations to Bank.  Bank is authorized, but not obligated, in the name of Borrower or otherwise, to make, adjust, settle claims under or cancel any insurance on the Collateral and apply all insurance proceeds against the Obligations.  All policies of insurance shall provide for at least ten (10) days prior written notice of cancellation to Bank.  In addition, Borrower agrees to maintain business interruption and workman’s compensation insurance in reasonable amounts designated at any time or from time to time by Bank.

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5.8             Maintenance of Collateral.  Borrower shall maintain the Collateral and every part thereof in good condition and repair and not permit its value to be impaired (excepting only reasonable wear and tear); keep it free from all tax liens and other liens, encumbrances and security interests (other than Bank’s security interest and Authorized Security Interests); defend it at its own expense against all claims and legal proceedings by persons other than Bank; pay and discharge when due all taxes, levies and other charges or fees levied or assessed upon it, provided, however, that Borrower shall be allowed to contest the same in good faith so long as (1) Borrower maintains adequate reserves therefor, (2) Borrower gives Bank notice thereof, and (3) the Bank will not be adversely affected thereby; not lease, sell, transfer it from the premises where now located, or otherwise dispose of it or permit it to become a fixture or accession to other goods, without the prior written approval of Bank, except for sales or leases of Inventory in the ordinary course of business; not permit it to be used in violation of any applicable law, regulations, or policy of insurance; and, as to Collateral consisting of instruments, chattel paper and General Intangibles, preserve rights in it against prior parties.  Preservation of rights against prior parties includes, without limitation, defense of lawsuits, arbitrations, oppositions, reexaminations, interferences, public use proceedings and the like in any court of law, administrative agency or other tribunal and the like.  In the event Bank is named or impleaded in any of the aforementioned proceedings, Borrower shall hold Bank harmless and indemnify Bank for all losses, expenses and attorneys’ fees the Bank incurs in participating in same or otherwise preserving its legal rights and complying with any legal or procedural requirements associated with same.  Borrower will mark all of its chattel paper with a legend acceptable to Bank indicating that Bank has a security interest in the chattel paper.

5.9             Maintenance of Security Interest.  Borrower shall pay all expenses and, upon request, take any action reasonably deemed advisable by Bank to preserve the Collateral or to establish priority of, perfect, continue perfected, terminate or enforce Bank’s interest in it or rights under this Agreement.  Borrower shall execute and deliver to Bank any and all documents Bank reasonably requests to perfect its security interest in any or all Collateral.

5.10           Notice of Changes.  Borrower shall promptly notify Bank in writing of any change of its officers, directors or key employees; change of location of its principal offices; change of location of any of its assets (except the shipment, temporary storage or temporary use in its manufacturing processes of Inventory in the ordinary and normal course of Borrower’s business); change of Borrower’s name or use of any trade name not listed on Schedule 4.3 hereto, acquisition of any federally registered patents, patent applications, copyrights, service marks, trademarks or trade names;  application for registration of any patents, patent applications, copyrights, service marks, trademarks or trade names; death of any guarantors; any sale or purchase not in the regular course of Borrower’s business; or any other material change in the business or financial affairs of Borrower.

5.11           Use of Proceeds.  Advances by Bank to Borrower under this or other agreements shall be used exclusively by Borrower in connection with the acquisition of stock of Borrower from Mike Buckna and for operating capital and other valid corporate purposes.

5.12           Compliance with Laws.  Borrower shall comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject.

5.13           Notice of Default.  Borrower shall give prompt notice in writing to Bank of the occurrence of any default or of any other development, financial or otherwise, which might materially adversely affect its business, properties or affairs or the ability of Borrower to perform the Obligations.

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5.14           Further Assurances.  Borrower authorizes Bank to file financing statements describing the Collateral.  Borrower shall cooperate in Bank’s efforts to comply with or address any amendments to the Article 9 of the Uniform Commercial Code that may be in effect from time to time.  Upon the reasonable request of the Bank from time to time, Borrower shall execute and deliver to Bank in form reasonably acceptable to Bank’s counsel (i) all such further documents and assurances in order to perfect and/or maintain any assignment, security interest or mortgage granted to the Bank, (ii) collateral assignments of all leases of real or personal property, and all patents and patent applications, acquired by Borrower after the date of this Agreement, (iii) mortgage and security agreements covering all General Intangibles acquired by the Borrower, (iv) mortgages covering all real estate acquired by the Borrower after the date hereof, (v) motor vehicle lien applications and other documentation reasonably requested by Bank to cause Bank to be named as a secured party on the titles to Borrower’s vehicles, (vi) assignments of life insurance, (vii) agreements from third parties who may be holding Collateral that they are holding the Collateral for the benefit of Bank, and (viii) control agreements in form and substance satisfactory to Bank with respect to Collateral consisting of deposit accounts, investment property, letter of credit rights and electronic chattel paper.

5.15           Maintain Deposits.  Borrower shall maintain all its commercial demand deposit and other accounts with the Bank.  Such accounts shall at all times have deposits in sufficient amounts to pay all bank charges and fees charged by Bank, including but not limited to all deposit account charges, all lockbox charges and all fees for cash management services.

5.16           Margin Security.  As of the execution hereof, the Borrower does not own any margin security and none of the loans advanced hereunder will be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System.

5.17           Compliance with Environmental Laws.  Borrower shall timely comply with all applicable Environmental Laws.

5.18           Orders, Decrees and Other Documents.  Borrower shall provide to the Bank immediately upon receipt copies of any correspondence, notice relating to a violation or alleged violation, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a circumstance or condition which requires or may require a financial contribution by Borrower or an investigation, cleanup, removal, remedial action, or other response by or on the part of the Borrower under Environmental Laws which seeks injunctive relief, damages or civil, criminal or punitive penalties from Borrower for an alleged violation of Environmental Laws.

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5.19           Agreement to Update.  Borrower shall advise the Bank in writing as soon as Borrower becomes aware of any condition or circumstance which makes the environmental warranties contained in this Agreement incomplete or inaccurate.

5.20           Sales on Consignment.  Borrower shall promptly notify Bank of all sales of Inventory on consignment, on “sale or return” or on “sale on approval,” and Borrower shall take all steps requested by Bank to protect Borrower’s interest in such Inventory and to perfect Bank’s security interest in such Inventory.

5.21           Net Income.  Borrower shall achieve, as of the last day of each fiscal year of Borrower, commencing with Borrower’s fiscal year ending on December 31, 2008, for the twelve month period ending on such day, Net Income of at least $1,000,000.00.

5.22           Debt Service.  Borrower shall maintain as of the last day of each fiscal month of Borrower, commencing December 31, 2008, in each case for the period of twelve months ending on such date, a ratio of (1) Borrower’s Net Cash Flow, to (2) the sum of Borrower’s required principal payments, plus interest expense, of at least 1.25 to 1.0.

5.23           Non-Guarantor Subsidiaries.  On or before January 31, 2008, each of Jefferson Electric Equipment, Inc. and Jefferson Electric Staffing, Inc. shall either (a) dissolve or merge into Borrower, or (b) provide to Bank a guaranty of the Obligations in form and substance satisfactory to Bank, together with such evidence of authority and other due diligence documentation as Bank may request.

5.24           Life Insurance Assignment.  On or before February 29, 2008, Borrower shall increase the amount of life insurance on the life of Thomas Klink that is assigned to Bank to $4,000,000, with the form and substance of such Assignment to be satisfactory to Bank and with satisfactory evidence regarding such insurance, including but not limited to ownership, lack of other liens, cash value, issuer and policy number.

6.  BORROWER’S NEGATIVE COVENANTS

During the term of this Agreement, and until the Obligations are paid or satisfied in full, Borrower covenants and agrees that it will not, except with the prior written approval of Bank:

6.1           Indebtedness.  Become or remain liable in any manner in respect of any indebtedness or contractual liability (including, without limitation, notes, bonds, debentures, loans, guaranties, endorsements, obligations of partnerships, and pension liabilities, in each case whether or not contingent and whether or not subordinated), except:

6.1.1           Indebtedness arising under this Agreement;

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6.1.2           Secured indebtedness corresponding to Authorized Security Interests;

6.1.3           Unsecured indebtedness, other than for money borrowed for the purchase of a capital asset, incurred in the ordinary course of its business, which becomes due and must be fully satisfied within twelve (12) months after the date on which it is incurred;

6.1.4           Indebtedness arising out of the lease or purchase of goods constituting equipment and either unsecured or secured only by a purchase money security interest securing purchase money indebtedness, but in any event only if such equipment is acquired in compliance with Section 6.3 hereof.

6.2           Liens.  Create, incur or cause to exist any mortgage, security interest, encumbrance, lien or other charge of any kind upon any of its property or assets, whether now owned or hereafter acquired, except:

6.2.1           The interests created by this Agreement and other documents between the Borrower and the Bank in favor of the Bank;

6.2.2           Liens for taxes or assessments not yet due or contested in good faith by appropriate proceedings;

6.2.3           A purchase money security interest or lessor’s interest securing indebtedness permitted to be outstanding or incurred under Section 6.1.4 hereof;

6.2.4           Construction lien claims arising from work done pursuant to construction contracts, provided that Borrower is not in default under such construction contracts;

6.2.5           Liens in connection with workers compensation or other insurance or to secure performance of bids, trade contracts, leases, public or statutory obligations, surety or appeal bonds or other obligations of like nature incurred in the ordinary course of business, provided that Borrower is not in default under or delinquent in any of the foregoing agreements or obligations;

6.2.5           Liens described on Schedule 6.2 relating to amounts outstanding on the date hereof; and

6.2.7           Other liens, charges and encumbrances incidental to the conduct of its business or the ownership of its property which were not incurred in connection with the borrowing of money or the purchase of property on credit and which do not in the aggregate materially detract from the value of its property or materially impair the use thereof in its business.

6.3           Expenditures.  Expend or contract to expend in any fiscal year of Borrower more than $800,000.00 in the aggregate for the lease (other than operating lease), purchase or other acquisition of any capital asset, or for the lease (other than operating lease) of any other asset, whether payable currently or in the future.

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6.4           Sale of Assets.  Sell, lease, or otherwise dispose of all or any substantial part of its property, except as permitted hereunder.

6.5           Recapitalization and Merger.  Recapitalize its corporate structure, consolidate or merge with any other corporation, acquire any business, acquire stock of any corporation, or enter into any partnership or joint venture.

6.6           Conduct of Business.  Substantially alter the nature of the business in which it has advised Bank it plans to engage.

6.7           Distributions.  Except with the Bank’s prior written approval, (a) directly or indirectly declare or pay any dividends or make any distributions or payments on account of stock, including preferred stock, to shareholders, relatives of shareholders or Affiliates of shareholders (except dividends payable solely in its capital stock); (b) purchase or redeem any of its capital stock or purchase or redeem any interest or property of any of its shareholders, relatives of shareholders or Affiliates of shareholders; or (c) enter into any agreement for any of the foregoing.The foregoing notwithstanding, so long as Borrower is an “S Corporation” as defined in Section 1361(a)(1) of the Internal Revenue Code of 1986, Borrower may make dividend distributions to its shareholders in an equal amount per share and in amounts sufficient, when added to all prior distributions made hereunder, to allow each shareholder of Borrower to have paid all federal, state and local income taxes on the cumulative income of Borrower which is includable in the taxable income of such shareholder from the date hereof through the date of the proposed distribution, provided, however, that (i) such distributions shall not exceed 45% of Pre-Tax Net Income for any fiscal year of Borrower; (ii) at the time of such distribution no Event of Default exists; (iii) such distribution will not create an Event of Default; and (iv) the assumed tax rate will equal the maximum federal and state rates for individuals living in Wisconsin adjusted for the deductibility of state taxes.

6.8           Investments.  Purchase stock or securities of, extend credit to (other than that expressly permitted in Section 6.11 hereof) or make investments in, become liable as surety for, or guarantee or endorse any obligation of, any person, firm or corporation, except investments in direct obligations of the United States and commercial bank deposits with Bank and extensions of credit reflected by trade accounts receivables arising for goods sold by Borrower in the ordinary course of its business.

6.9           Discounts and Allowances.  After notice of default from Bank which default is continuing, grant any discount, credit or allowance to any customer of Borrower or accept any return of goods sold.

6.10         Restricted Transfers.  In any manner transfer any property without prior or present receipt of full and adequate consideration.

6.11         Restricted Payments.  Permit any amount to be owing to Borrower by the officers, directors or shareholders of Borrower or any Affiliate of Borrower, or members of their families, excepting any reasonable loans and advances to employees and agents in the ordinary course of business.

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6.12           Salaries; Compensation; Management Fees.  Pay any excessive or unreasonable salaries, bonuses, commissions, consultant fees, or other compensation; or pay any management fees.

6.13           Guarantees.  Make or suffer to exist any guarantees, except by endorsement of instruments for deposit or collection in the ordinary course of business.

6.14           ERISA.  Except as set forth on Schedule 4.6, become a party to, or directly or contingently liable under, any Plan.

6.15           Obligations to Third Parties.  Permit any breach, default or event of default to occur under any note, loan agreement, indenture, lease, mortgage, contract for deed, security agreement or other contractual obligation binding upon Borrower which would materially adversely affect Borrower’s business, properties or affairs or the ability of Borrower to perform the Obligations.

6.16           Subsidiaries.  Create or permit to exist any subsidiaries of Borrower.

6.17           Fiscal Year.  Change its fiscal year.

6.18           Change of Name or Location.  Without at least 30 days’ prior written notice to Bank, change its name, its principal office, its office where its records concerning Receivables are kept or the location of any of its assets (except the shipment or temporary storage of Inventory in the ordinary and usual course of Borrower’s business).

6.19           Government Regulation.  (1) Be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from making any advance or extension of credit to Borrower or any Subsidiary or from otherwise conducting business with Borrower or any Subsidiary, or (2) fail to provide documentary and other evidence of Borrower’s and each Subsidiary’s identity as may be requested by Bank at any time to enable Bank to verify Borrower’s and each Subsidiary’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

7. DEFAULT

7.1           Upon the occurrence of one or more of the following events of default (each an “Event of Default”):

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7.1.1           Insolvency, Bankruptcy, et. al.  The commencement by the Borrower or any Guarantor of a voluntary case under the federal bankruptcy laws, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by any of them to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Borrower or any Guarantor or of any substantial part of any of their property, or the making by any of them of any assignment for the benefit of creditors or the failure of the Borrower or any Guarantor generally to pay such party’s debts as such debts become due or the taking of action by the Borrower or any Guarantor in furtherance of any of the foregoing; in addition, the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Borrower or any Guarantor in an involuntary case under the federal bankruptcy laws or any other applicable federal or state bankruptcy, insolvency or other similar law, or the appointment by a court of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or any Guarantor or of any substantial part of the property of any of them, or the ordering by a court of the winding-up of Borrower’s or any Guarantor’s affairs or liquidation of Borrower’s or any Guarantor’s affairs or assets and the continuance of any such decree or order unstayed, uncontested by such party in good faith and in effect for a period of thirty (30) consecutive days;

7.1.2           Nonperformance.  Borrower fails to pay when due any of the Obligations or breaches or fails to perform any warranty, covenant or undertaking by Borrower in this Agreement or the Obligations; or fails to perform pursuant to or breaches any provisions of any other agreement with Bank;

7.1.3           Continuation of Guarantors.  Any Guarantor terminates, revokes or repudiates his, her or its suretyship or guaranty obligations or defaults under any agreement securing such obligations;

7.1.4           Continuation of Subordination Agreements.  Any creditor of Borrower which is a party to a subordination agreement or intercreditor agreement with Bank terminates, revokes or defaults under such subordination agreement or intercreditor agreement, or a standstill period or payment blockage period is in effect or has expired under any such agreement;

7.1.5           Inability to Perform.  Borrower or any guarantor of any of the Obligations dies, ceases to exist, or becomes insolvent;

7.1.6           Misrepresentation.  Any representation, whether oral or written, made to induce Bank to extend credit to Borrower, under this Agreement or otherwise, is false in any material respect when made;

7.1.7           Injunction or Attachment.  There is an injunction or attachment issued against any of Borrower’s property or materially restricting the operation of Borrower’s business;

7.1.8           Acceleration of Indebtedness.  Any event shall arise which results in the acceleration of the maturity of the indebtedness of Borrower to others under any indenture, note, agreement or other form of undertaking; or

7.1.9           Ownership of Borrower.  Except with Bank’s written consent, any transfer or issuance of stock of Borrower shall occur if after giving effect to such transfer or issuance Thomas Klink owns less than 85% of any class of Borrower’s stock;

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7.2           then all of the Obligations shall, at the option of Bank and without any notice or demand, become immediately due and payable; and Bank shall have (i) the rights and remedies provided for in the Loan Documents, (ii) all rights and remedies for default provided by the applicable Uniform Commercial Code, as well as any other applicable law, INCLUDING WITHOUT LIMITATION THE RIGHT TO REPOSSESS, RENDER UNUSABLE OR DISPOSE OF THE COLLATERAL WITHOUT JUDICIAL PROCESS, WHICH IS HEREBY EXPRESSLY WAIVED BY BORROWER and the right to foreclose the security interest granted herein by any available judicial procedure to the fullest extent permitted by law.  With respect to such rights and remedies:

7.2.1           Assembling Collateral.  Bank may require Borrower to assemble the Collateral and to make it available to Bank at any convenient place designated by Bank, and Borrower hereby consents to the entry of any injunctive order, or other appropriate equitable relief, compelling Borrower to assemble the Collateral and to make it available to Bank at any convenient place designated by Bank.  Borrower waives any bond or undertaking which might otherwise be required in connection with such relief.  Bank may enter any premises of the Borrower, or wherever the Collateral may be located, and keep and store the same on said premises without charge, until sold.

7.2.2           Collection and Handling of Receivables.  Bank may receive, open and process all mail addressed to Borrower and notify the Post Office authorities to change the address for delivery of mail addressed to Borrower to such address as Bank may designate and may, pursuant to the power of attorney granted herein, endorse the name of Borrower on any notes, acceptances, checks, drafts, money orders or other instruments for the payment of money or any document relating to any security interest that may come into Bank’s possession and sign Borrower’s name on any invoice or bill of lading relating to any of the Receivables, on drafts against customers and notices to customers.  The Bank may without notice to Borrower, collect, by legal proceedings or otherwise, extend the time of payment of, or compromise or settle for cash, credit or otherwise upon any terms, any of the Receivables or any security interest, instrument or insurance applicable thereto or release the obligor thereon and release and/or impair Collateral.  Nothing in this Agreement shall be construed to constitute the Bank as Borrower’s agent for any purpose.  The Bank shall not be liable for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof or for any damages resulting therefrom, except for Bank’s gross negligence or willful misconduct.

7.2.3           Expenses and Application of Proceeds.  Borrower shall reimburse the Bank for any expense incurred by Bank in protecting or enforcing its rights under this Agreement, including without limitation, reasonable attorneys’ fees incurred in the efforts made to enforce payment or otherwise effect collection of any Receivables, as well as reasonable attorneys’ fees and legal expenses incurred in instituting, maintaining, preserving, enforcing and foreclosing the security interest in any of the Collateral, whether through judicial proceedings or otherwise or in defending or prosecuting any actions or proceedings arising out of or relating to Borrower’s transactions with Bank, including reasonable attorneys’ fees on appeal, all expenses of taking possession, holding, preparing for disposition and disposing of the Collateral, and all other collection expenses, whether or not in a legal proceeding.  After deduction of such expenses, Bank may apply the proceeds of disposition to the Obligations in such order and amounts as it elects.

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7.2.4           Jurisdiction and Venue.  Borrower consents to the venue and jurisdiction of any Circuit Court of Milwaukee County Civil Division in the State of Wisconsin and agrees that all actions, proceedings or other matters arising directly or indirectly hereunder may be initiated in such courts and expressly consents that any service of process may be made by personal service upon Borrower wherever Borrower can be located or by certified or registered mail directed to Borrower at Borrower’s address set forth herein to the full extent permitted by law.

7.2.5           Notice of Disposition of Collateral.  Written notice, when required by law, sent to any address of Borrower in this Agreement, at least ten (10) calendar days (counting the day of mailing) before the date of a proposed disposition of the Collateral is reasonable notice.

7.2.6           Protection or Preservation of Collateral.  The Bank has no duty to protect, insure, collect or realize upon the Collateral or preserve rights in it against prior parties.  The Bank shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral regardless of the cause thereof.  Bank has no obligation to clean the Collateral or otherwise prepare the Collateral for sale.

7.2.7           Waiver.  Bank may, at its option, take such action, in Borrower’s name or otherwise, as may be necessary or desirable to fully or partially remedy such default, including without limitation signing Borrower’s name or paying any amount so required, and the cost shall be debited to Borrower’s loan account ledger for the Revolving Credit Facility and treated for all purposes as an advance made by Bank hereunder, or the Bank may permit Borrower to remedy any default, each without waiving any other subsequent or prior default by Borrower.  Bank may permit Borrower to remedy any default without waiving any other subsequent or prior default by Borrower.  Borrower waives any right it may have to require Bank to pursue any third person for any of the Obligations.

7.2.8           Compliance with Other Laws.  Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

7.2.9           Warranties.  Bank may sell the Collateral without giving any warranties as to the Collateral.  Bank may specifically disclaim any warranties of title or the like.  This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

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8.  INDEMNIFICATION

In consideration of the execution and delivery of this Agreement by Bank and the agreement to extend the credit provided hereunder, Borrower and any Guarantor of the Obligations hereby agree to indemnify, exonerate and hold free and harmless Bank and each of the officers, directors, employees and agents of Bank (collectively, herein called the “Bank Parties”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys’ fees and disbursements (collectively, and including all of the foregoing  based upon contract, tort or otherwise, herein called the “Indemnified Liabilities”), incurred by the Bank Parties or any of them as a result of, or arising out of, or relating to (a) the execution, delivery, performance, enforcement or administration of this Agreement, the Notes, the Documents, any Guaranty of the Obligations, or any other document or instrument executed or delivered in connection with this Agreement, (b) the relationship of the parties as borrower, guarantor and lender, or (c) the noncompliance by Borrower or by any property of Borrower with Environmental Laws.  Notwithstanding the foregoing, Borrower and Guarantor shall not be required to indemnify Bank for any such Indemnified Liabilities arising on account of the willful misconduct of Bank, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower and all Guarantors of the Obligations hereby agree to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

9.  INCREASED COSTS; CAPITAL ADEQUACY

9.1           Increased Costs.  If (i) the amendment of Regulation D of the Board of Governors of the Federal Reserve System, or (ii) after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency issued after the date hereof,

9.1.1           shall subject Bank to any tax, duty or other charge with respect to the Credit Facilities, the Notes or Bank’s obligation to make or maintain any extension of credit hereunder, or shall change the basis of taxation of payments to Bank of the principal of or interest on the Credit Facilities or any other amounts due under this Agreement in respect of any extension of credit hereunder or Bank’s obligation to make or maintain any extension of credit hereunder (except for changes in the rate of tax on the overall net income of Bank imposed by the jurisdiction in which the Bank’s principal executive office is located); or

9.1.2           shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended hereunder by, Bank; or

9.1.3           shall impose on Bank any other condition affecting any extension of credit hereunder, the Notes or Bank’s obligation to make or maintain any extension of credit hereunder;

and the result of any of the foregoing is to increase the cost to (or to impose a cost on) Bank of making or maintaining any extension of credit hereunder or to reduce the amount of any sum received or receivable by Bank under this Agreement or under the Notes with respect thereto, then upon demand by Bank (which demand shall be accompanied by a statement reasonably setting forth the basis of such demand), Borrower shall pay directly to Bank such additional amount or amounts as will compensate Bank for such increased cost or such reduction.

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9.2           Capital Adequacy.  If either (i) the introduction of or any change in or in the interpretation of any law or regulation, or (ii) compliance by Bank with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by Bank or any corporation controlling Bank and Bank determines that the amount of such capital is increased by or based upon the existence of Bank’s commitment to make or maintain extensions of credit hereunder and other commitments of this type, then, upon demand by Bank, Borrower shall immediately pay to Bank, from time to time as specified by Bank, additional amounts sufficient to compensate for Bank’s losses or costs in light of such circumstances in connection with Bank’s compliance with such requirement or expectation, to the extent that Bank reasonably determines such increase in capital to be allocable to the existence of Bank’s commitment to make or maintain extensions of credit hereunder.  If Bank’s exercise of its rights under this Section 9.2 results in higher costs to Borrower, and if Borrower is able to refinance the Obligations within 90 days thereafter at a cost to Borrower that is less than the cost of continuing under this Agreement, then Borrower may proceed with such refinancing without paying the prepayment premium that would otherwise be required under Section 2.9 hereof.

10.  PERSONS BOUND

This Agreement benefits the Bank, its successors and assigns, and binds Borrower and Borrower’s successors and assigns.

11.  INTERPRETATION

All of the terms and conditions hereof and the rights, duties and remedies of the parties hereto are governed by the laws of Wisconsin.  The provisions of this Agreement are severable, and invalidity of any provision of this Agreement shall not affect the validity of any other provisions.  The decision by Bank at any time or times hereafter to not enforce strict performance by Borrower relative to any of the provisions, warranties, terms and conditions contained in this Agreement or any other agreement between Borrower and Bank shall not waive, affect, or diminish the right of Bank thereafter to demand strict compliance and performance therewith.  None of the provisions, warranties, terms and conditions contained in this Agreement or any other agreement now or hereafter executed between Borrower and Bank shall be deemed to have been waived by any act or knowledge of Bank unless in writing and signed by an officer of Bank and directed to Borrower specifying such waiver.  The titles of sections in this Agreement are for convenience only and do not limit or construe the meaning of any section.

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12.  NOTICES

Any notice required to be given to either party hereunder shall be deemed given when placed in the U.S. mail, certified or registered, and properly addressed with postage prepaid, or when delivered by hand delivery or overnight courier to the following address or upon transmission by facsimile to the relevant party at the facsimile number set forth and a confirmation is received, or at any other address or facsimile number as may be designated by the party in a notice to the other party:

If to Bank:

Johnson Bank

333 E. Wisconsin Ave.

Milwaukee, WI 53202

Attn:  Roberta Cummings

Facsimile: (414) 287-6455

If to Borrower:

Jefferson Electric, Inc.

9650 S. Franklin Dr.

Franklin, WI 53132

Attn:  Thomas Klink

Facsimile: (414) 209-1621

with a copy to:

Dean Delforge

15850 W. Bluemound Road

#200

Brookfield, WI  53005-6007

Facsimile:  (262) 787-0606

13.  RETURN OF DOCUMENTS, SCHEDULES AND INVOICES

Any documents, schedules, invoices or other papers delivered to the Bank by Borrower may be destroyed or otherwise disposed of by the Bank three months after they are delivered to or received by the Bank unless Borrower requests, in writing, the return of said documents, schedules, invoices or other papers and makes arrangements for such return, at Borrower’s expense.

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14.  PARTICIPATING LENDERS

Borrower agrees that Bank may, at its option, grant to one or more other financial institutions the right to participate in the loan advances described in this Agreement, provided however that Bank shall alone retain the right to amend, modify, waive, or enforce the provisions of this Agreement.  If any Participating Lender shall at any time participate with Bank in making any loan advances hereunder, Borrower hereby grants to such Participating Lender (in addition to any other rights which such Participating Lender may have) both a continuing lien and security interest in any money, security and other personal property of Borrower which is in the possession of such Participating Lender, and an express, contractual right of setoff therein, for the benefit of all Participating Lender(s) and the Bank (such interests, rights and the proceeds thereof to be shared on a pro-rata basis by the Participating Lenders and Bank according to their respective outstanding balances).  Bank may disclose to any Participating Lender, or any potential or prospective Participating Lender, any financial, credit or confidential information or documents of or concerning Borrower.

15.  CONDITIONS PRECEDENT

Bank will not lend any money to Borrower hereunder until this Agreement has been executed by Borrower, and Bank shall have received the following documents fully executed, where applicable, and in form satisfactory to Bank and its counsel:

15.1           Certificates of Status for the Borrower and the Company Guarantor certified by the Wisconsin Department of Financial Institutions;

15.2           The Notes;

15.3           UCC Financing Statements;

15.4           Consent of Lessor;

15.5           Warehouseman Letters;

15.6           A Designation of Authority;

15.7           Completed requests for information establishing to the satisfaction of the Bank that the financing statements have been effectively filed and/or recorded in all appropriate offices providing the Bank with a perfected first priority security interest in the personal property and fixtures Collateral described herein;

15.8           Copies of evidence satisfactory to the Bank to the effect that the Bank is the Lender’s Loss Payee, Mortgagee and Additional Insured under the policies of insurance required by this Agreement;

15.9           A copy of the resolutions of the Board of Directors of the Borrower and of the Members of the Company Guarantor authorizing the execution, delivery and performance of this Agreement, the Notes, the Guaranty of the Company Guarantor and all other matters contemplated hereby, certified for accuracy and due adoption by an Officer of the Borrower and of the Company Guarantor as of the date hereof, together with such other necessary corporate action as the Bank shall reasonably request;

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15.10           A certificate, dated of even date herewith, signed by an officer of the Borrower and of the Company Guarantor as to the incumbency and signature of the person or persons authorized to execute and deliver this Agreement, the Notes, the Guaranty of the Company Guarantor and any other instrument or agreement contemplated hereby;

15.11           Copies of (a) the Articles of Incorporation of Borrower certified by the Wisconsin Department of Financial Institutionsand (b) the By-Laws of the Borrower and the Operating Agreement of the Company Guarantor, each as existing on the date hereof, and copies of any documents creating, evidencing or relating to preferred shareholders’ rights, certified for accuracy and due adoption by an officer of the Borrower;

15.12           The Bank’s satisfaction with terms and conditions of the documentation for the contemplated transfer of stock of Borrower;

15.13           A favorable written opinion, dated of even date herewith, of counsel for the Borrower, in form and substance satisfactory to Bank;

15.14           Assignment of Life Insurance Policy for a policy on the life of Thomas Klink, in the face amount of at least $1,500,000.00, along with such documentation regarding such policy as Bank may request;

15.15           The continuing unlimited guaranties of Thomas Klink and the Company Guarantor, provided that the guaranty of Thomas Klink shall provide that it will be released as of the Release Date;

15.16           A Borrowing Base Certificate; and

15.17           A payoff letter and appropriate releases relating to Borrower’s existing indebtedness.

16.  LIMITATION ON DAMAGES

The Borrower, any Guarantor of the Obligations and Bank hereby voluntarily, knowingly, irrevocably and unconditionally (a) agree that they shall be limited to actual, compensatory damages other than those waived pursuant to the following clause (b), and (b) waive any right to claim or recover from the other party any special, exemplary, punitive, indirect or consequential damages, in the case of the foregoing (a) and (b) for any claim (including contract, tort and all other claims) between or among the Borrower, any Guarantor and Bank arising out of or in any way related to this Agreement, the Notes, the Loan Documents, or any other related document, or arising out of or in any way related to the relationship among the parties as borrower, guarantor and lender or otherwise.  This provision is a material inducement for Bank to provide the financing described herein.

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17.           U.S.A. PATRIOT ACT NOTIFICATION

The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.  To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower: When a Borrower opens an account, if such Borrower is an individual Bank will ask for such Borrower’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify such Borrower, and if such Borrower is not an individual Bank will ask for such Borrower’s name, taxpayer identification number, business address, and other information that will allow Bank to identify such Borrower. Bank may also ask, if such Borrower is an individual, to see such Borrower’s driver’s license or other identifying documents, and if such Borrower is not an individual to see such Borrower’s legal organizational documents or other identifying documents.

18.  WAIVER OF JURY

 THE BORROWER, ANY GUARANTOR OF THE OBLIGATIONS AND BANK  HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE BORROWER, ANY GUARANTOR AND BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, ANY GUARANTY OR ANY OTHER RELATED DOCUMENT, OR ARISING OUT OF OR IN ANY WAY RELATED TO THE RELATIONSHIP AMONG THE PARTIES AS BORROWER, GUARANTOR AND LENDER OR OTHERWISE.  THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day first written above.

BORROWER: Jefferson Electric, Inc.
By:	/s/ Thomas Klink
	Thomas Klink, President

BANK: Johnson Bank
By:	/s/ Roberta S. Cummings
	Roberta S. Cummings, Vice President

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EX-10.7

EXHIBIT 10.7

AMENDMENT TO

LOAN AND SECURITY AGREEMENT

THIS AMENDMENT, dated as of January 29, 2008, is to the Loan and Security Agreement dated January 2, 2008 (“Loan Agreement”) between Johnson Bank (“Bank”), and Jefferson Electric, Inc. (“Borrower”).

RECITAL

WHEREAS, Bank and Borrower desire to amend the Loan Agreement as provided herein.

AGREEMENT

1.           Definitions.

(a)           All capitalized terms used but not defined herein shall have the meanings set forth in the Loan Agreement.

(b)           As used in the Loan Agreement as amended hereby, the following terms shall have the following meanings:

“Loan Amount” means the sum of $3,500,000 plus the outstanding balance of the Obligations.

“Revolving Note” means Borrower’s promissory note, substantially in form attached hereto as Exhibit A, as it may be amended, restated or replaced from time to time.

2.           Revolving Loans.  Section 2.1.1 of the Loan Agreement is amended to delete “Three Million Dollars ($3,000,000.00)” and replace it with “Three Million Five Hundred Thousand Dollars ($3,500,000.00).”

3.           Collateral Obligation Ratio.  Section 2.6 of the Loan Agreement is amended to delete “$3,000,000” and replace it with “$3,500,000.”

4.           Conditions Precedent.  This Amendment shall not be effective until Bank has received a fully executed copy of this Amendment, the Revolving Note, Borrowing Resolutions authorizing this amendment and an Officer’s Certificate.

5.           Effect of Amendment.  Except as otherwise provided herein, the Loan Agreement shall remain in full force and effect and Borrower shall be bound by all of the covenants therein.

6.           Law Governing.  This Amendment shall be governed by the laws of the State of Wisconsin.

7.           Binding Effect.  This Amendment shall be binding on and inure to the benefit of Borrower, Bank and their respective successors and assigns.

BORROWER: Jefferson Electric, Inc.
By:	/s/ Thomas Klink
	Thomas Klink, President

BANK: Johnson Bank
By:	/s/ Roberta S. Cummings
	Roberta S. Cummings, Vice President

CONSENT OF GUARANTORS

The undersigned hereby consent to the foregoing amendment and ratify their Guaranties of the obligations of Jefferson Electric, Inc. to Johnson Bank.

/s/ Thomas Klink
Thomas Klink
JEFFERSON ELECTRIC LEASING, LLC, A Wisconsin limited liability company
By:	/s/ Thomas Klink
	Thomas Klink, Member

2

EX-10.8

EXHIBIT 10.8

SECOND AMENDMENT TO

LOAN AND SECURITY AGREEMENT

THIS AMENDMENT, dated as of May 2, 2008, is to the Loan and Security Agreement dated January 2, 2008 between Johnson Bank (“Bank”), and Jefferson Electric, Inc. (“Borrower”), as amended by Amendment to Loan and Security Agreement dated January 29, 2008 (as amended, the “Loan Agreement”).

RECITAL

WHEREAS, Bank and Borrower desire to amend the Loan Agreement as provided herein.

AGREEMENT

1.           Definitions.

(a)           Terms Defined in Loan Agreement.  All capitalized terms used but not defined herein shall have the meanings set forth in the Loan Agreement.

(b)           Additional Definitions and Clarifications to Definitions.  As used in the Loan Agreement as amended hereby, the following terms shall have the following meanings:

“Acquisition Deliveries” means all of the following, fully executed as applicable, and in form and substance satisfactory to Bank:  (i) a Pledge Agreement granting to Bank a first priority security interest in the Borrower’s 100% membership interest in Nexus Custom Magnetics, LLC, a Texas LLC, together with such certificates of membership interest, powers executed in blank and UCC financing statements as are requested by Bank to perfect Bank’s interest in such membership interest, (ii) a Debt Subordination Agreement fully subordinating all rights of the seller of the Mexican Subsidiaries to the Obligations, (iii) copies of the documents relating to the Mexican Acquisition, together with articles of organization, operating agreement and certificate of good standing for Nexus Custom Magnetics, LLC, (iv) original signatures for the Consent of Lessor between Bank and the Borrower’s landlord in Franklin, Wisconsin, (v) copies of the UCC’s the Borrower has filed against its customers, and (vi) assignments of such UCC’s to Bank.

“Discounted Collateral Amount” shall have the meaning provided in the Loan Agreement and, without limitation, shall (i) include only equipment owned by Borrower directly and not equipment owned by Borrower’s subsidiaries, and (ii) be calculated without regard to any equipment located in Mexico.

“Loan Amount” means the sum of $4,000,000 plus the outstanding balance of the Term Note.

“Mexican Acquisition” means the acquisition by Borrower of 100% of the membership interest of Nexus Custom Magnetics, LLC, a Texas LLC, which is in turn the 100% owner of Nexus Magneticos de Mexico, S. de R.L. de C.V.

“Mexican Subsidiaries” shall mean Nexus Custom Magnetics, LLC, a Texas LLC and Nexus Magneticos de Mexico, S. de R.L. de C.V.

“Qualified Accounts” shall have the meaning provided in the Loan Agreement and, without limitation, shall include only accounts owned by Borrower directly and not accounts owned by Borrower’s subsidiaries

“Qualified Inventory” shall have the meaning provided in the Loan Agreement, and, without limitation, shall (i) include only Inventory owned by Borrower directly and not Inventory owned by Borrower’s subsidiaries, and (ii) include only Inventory located in the United States and not Inventory located in Mexico.

“Revolving Note” means Borrower’s promissory note, substantially in form attached hereto as Exhibit A, as it may be amended, restated or replaced from time to time.

2.           Consolidated Financial Information and Determinations.  The following amounts shall be calculated for Borrower on a consolidated basis with the Mexican Subsidiaries and on a combined basis with Company Guarantor:  EBITDA, Excess Cash Flow, Net Cash Flow, Net Income, Pre-Tax Net Income, Tangible Net Worth and calculations for purposes of Sections 2.8, 5.21, 5.22 and 6.3 of the Loan Agreement.  The reports delivered under Sections 5.1.1, 5.1.2, 5.1.4, 5.1.5 and 5.1.7 of the Loan Agreement shall be prepared for Borrower on a consolidated basis with the Mexican Subsidiaries and on a combined basis with Company Guarantor.

3.           Revolving Loans.  Section 2.1.1 of the Loan Agreement is amended to delete “Three Million Five Hundred Thousand Dollars ($3,500,000.00)” and replace it with “Four Million Dollars ($4,000,000.00).”

4.           Collateral Obligation Ratio.  Section 2.6 of the Loan Agreement is amended to delete “$3,500,000” and replace it with “$4,000,000.”

5.           Subordination Agreement.  Any failure by Borrower to comply with the subordination agreement between Bank and the seller of the Mexican Subsidiaries shall be an Event of Default under the Loan Agreement as amended hereby.

6.           Affirmative Covenants.  The Mexican Subsidiaries and the Company Guarantor shall comply with the covenants contained in Sections 5.5, 5.10, 5.12, 5.16, 5.17, 5.18 and 5.19 of the Loan Agreement as if each of them were “Borrower” thereunder.

7.           Negative Covenants.  The Mexican Subsidiaries and the Company Guarantor shall comply with the covenants contained in Sections 6.1, 6.2, 6.4, 6.5, 6.6, 6.7 (other than distributions to Borrower which shall not be restricted), 6.8, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18 and 6.19 of the Loan Agreement as if each of them were “Borrower” thereunder, except that (a) the Bank consents to the Mexican Acquisition, provided that Borrower delivers to Bank the Acquisition Deliveries on or before May 15, 2008, (b) the Bank consents to the Borrower having the Mexican Subsidiaries as subsidiaries, (c) the Bank consents to transfers of cash, goods and other property to Borrower, and (d) the Bank consents to the transfer by Borrower of (i) equipment with a value of approximately $142,000 currently contemplated to be transferred to the Mexican Subsidiaries, (ii) Inventory that may be transferred to the Mexican Subsidiaries or the Company Guarantor in the ordinary course of business for full and adequate consideration, and (iii) transfers of cash to the Mexican Subsidiaries for their normal operating expenses or to the Company Guarantor for its normal operating expenses in an aggregate amount for all such transfers of cash not to exceed $2,000,000 in any fiscal year of Borrower.

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8.           Defaults.  Any failure by either Mexican Subsidiary or the Company Guarantor to comply with Section 5 or 6 hereof shall be an Event of Default under the Loan Agreement.  Any event or condition that would be an Event of Default under Section 7.1.1 of the Loan Agreement with respect to Borrower or any Guarantor or any property of Borrower or any Guaranty shall also be an Event of Default if such event or condition occurs with respect to either Mexican Subsidiary or the property of either Mexican Subsidiary.

9.           Conditions Precedent.  This Amendment shall not be effective until Bank has received a fully executed copy of this Amendment and each of the following in form and substance satisfactory to the Bank, executed as appropriate:

(a)          Revolving Note;

(b)         Corporate Borrowing Resolutions; and

(c)          Officer’s Certificate.

9.           Effect of Amendment.  Except as otherwise provided herein, the Loan Agreement shall remain in full force and effect and Borrower shall be bound by all of the covenants therein.

10.         Law Governing.  This Amendment shall be governed by the laws of the State of Wisconsin.

11.         Binding Effect.  This Amendment shall be binding on and inure to the benefit of Borrower, Bank and their respective successors and assigns.

BORROWER: Jefferson Electric, Inc.
By:	/s/ Thomas Klink
	Thomas Klink, President

3

BANK: Johnson Bank
By:	/s/ Roberta S. Cummings
	Roberta S. Cummings, Vice President

CONSENT OF GUARANTORS

The undersigned hereby consent to the foregoing amendment and ratify their Guaranties of the obligations of Jefferson Electric, Inc. to Johnson Bank.

/s/ Thomas Klink
Thomas Klink
JEFFERSON ELECTRIC LEASING, LLC, A Wisconsin limited liability company
By:	/s/ Thomas Klink
	Thomas Klink, Member

4

EX-10.9

EXHIBIT 10.9

THIRD AMENDMENT TO

LOAN AND SECURITY AGREEMENT

THIS AMENDMENT, dated as of December 3, 2008, is to the Loan and Security Agreement dated January 2, 2008 between Johnson Bank (“Bank”), and Jefferson Electric, Inc. (“Borrower”), as amended by Amendment to Loan and Security Agreement dated January 29, 2008 and Second Amendment to Loan and Security Agreement dated May 2, 2008 (as amended, the “Loan Agreement”).

RECITAL

WHEREAS, Bank and Borrower desire to amend the Loan Agreement as provided herein.

AGREEMENT

1.           Definitions.

(a)           Terms Defined in Loan Agreement.  All capitalized terms used but not defined herein shall have the meanings set forth in the Loan Agreement.

(b)           Additional Definitions.  As used in the Loan Agreement as amended hereby, the following terms shall have the following meanings:

“Collateral Shortfall” means the difference between the Loan Amount and the Discounted Collateral Amount, but not less than $0.00.

“Loan Amount” means the sum of $5,000,000 plus the outstanding balance of the Term Note.

“Revolving Note” means Borrower’s promissory note, substantially in form attached hereto as Exhibit A, as it may be amended, restated or replaced from time to time.

2.           Revolving Loans; Advances.  Section 2.1.1 of the Loan Agreement is amended in its entirety to read as follows:

2.1.1           “Revolving Loans; Advances.  Subject to the terms, conditions and limitations hereof, and provided that no Event of Default has occurred hereunder, Bank agrees to lend (and upon repayment relend) money to Borrower in such amounts as Borrower from time to time requests, up to the maximum amount of Five Million Dollars ($5,000,000.00), provided that the amount available to be borrowed under the Revolving Credit Facility shall be reduced by the amount of any Letter of Credit Liabilities.  Advances by Bank hereunder shall be made by deposits or transfers to Borrower’s commercial demand account number 1001368991, maintained with Bank.  Loans so made shall be evidenced by Borrower’s Revolving Note, and, in addition, Bank shall maintain a loan account ledger for Borrower, the debit balance of which shall reflect the amount of Borrower’s indebtedness to the Bank from time to time by reason of any loans, advances or financial accommodations made in conformance with this Revolving Credit Facility.  Each month the Bank shall render to Borrower a statement of account, which statement shall be considered correct and accepted by Borrower and conclusively binding upon Borrower unless Borrower notifies the Bank to the contrary within thirty (30) days from the date of mailing of said statement.  Borrower promises to pay to Bank the outstanding principal and accrued and unpaid interest under the Revolving Note as follows:  (1) monthly payments of accrued interest on the first day of each month, and (2) a final payment of all outstanding principal and accrued but unpaid interest on June 1, 2009.”

3.           Interest Rate on the Revolving Note.  Section 2.3.1 of the Loan Agreement is amended in its entirety to read as follows:

“2.3.1           Interest Rate on the Revolving Note.  The interest rate hereunder on the Revolving Note shall be equal to (a) as to the first $4,000,000 of outstanding principal under the Revolving Note, the greater of (i) four and one-half percentage points (4.50%) per annum, or (ii) LIBOR Rate plus three percentage points (3.0%) per annum, and (b) as to any principal amount outstanding under the Revolving Note in excess of $4,000,000, the greater of (i) five percentage points (5.0%) per annum, or (ii) LIBOR Rate plus three and one-half percentage points (3.5%) per annum.  “LIBOR Rate” means the 30 Day London Interbank Offer Rate as published in the Wall Street Journal on the first business day of each calendar month and effective on the same day (the "Index").  The Index is not necessarily the lowest rate charged by Lender on its loans.  If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower.  Lender will tell Borrower the current Index rate upon Borrower's request.  Borrower understands that Lender may make loans based on other rates as well.”

4.           Collateral Obligation Ratio.  Section 2.6 of the Loan Agreement is amended to delete “$4,000,000” and replace it with “$5,000,000.”

5.           Cash Equity.  Section 5.21 (Net Income) of the Loan agreement is hereby deleted and replaced with the following:

“5.21           Cash Equity.  Borrower shall (a) on or before January 31, 2009, provide Bank with a copy of a letter of intent from a proposed investor who is satisfactory to Bank to make a contribution of equity to Borrower in the amount of at least $2,500,000 on terms and conditions satisfactory to Bank, and (b) on or before March 31, 2009, close on such transaction and obtain additional cash equity in the amount of at least $2,500,000.”

6.           Debt Service.  Section 5.22 of the Loan Agreement is amended in its entirety to read as follows:

“5.22  Debt Service.  Borrower shall maintain as of the last day of each fiscal month of Borrower, commencing December 31, 2008, in each case for the period of twelve months ending on such date, a ratio of (1) Borrower’s Net Cash Flow, to (2) the sum of Borrower’s required principal payments, plus interest expense, of at least 1.0 to 1.0.”

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7.           Conditions Precedent.  This Amendment shall not be effective until Bank has received a fully executed copy of this Amendment and each of the following in form and substance satisfactory to the Bank, executed as appropriate:

(a)  Revolving Note;

(b)  Mortgage on Grafton Real Estate;

(c)  Letter Report and Evidence of Insurance for Grafton Real Estate;

(d)  Corporate Borrowing Resolutions;

(e)  Officer’s Certificate;

(f)  Original Consent of Lessor for Borrower’s Franklin premises;

(g) Collateral Assignment of Membership Interest in Nexus Custom Magnetics, L.L.C.

(h) Debt Subordination Agreement; and

(i) Fully executed and notarized Consent of Lessor for Borrower’s Pharr premises.

8.           Effect of Amendment.  Except as otherwise provided herein, the Loan Agreement shall remain in full force and effect and Borrower shall be bound by all of the covenants therein.

9.           Law Governing.  This Amendment shall be governed by the laws of the State of Wisconsin.

10.         Binding Effect.  This Amendment shall be binding on and inure to the benefit of Borrower, Bank and their respective successors and assigns.

BORROWER: Jefferson Electric, Inc.
By:	/s/ Thomas Klink
	Thomas Klink, President

3

BANK: Johnson Bank
By:	/s/ Roberta S. Cummings
	Roberta S. Cummings, Vice President

CONSENT OF GUARANTORS

The undersigned hereby consent to the foregoing amendment and ratify their Guaranties of the obligations of Jefferson Electric, Inc. to Johnson Bank.

/s/ Thomas Klink
Thomas Klink
JEFFERSON ELECTRIC LEASING, LLC, A Wisconsin limited liability company
By:	/s/ Thomas Klink
	Thomas Klink, Member

4

EX-10.10

EXHIBIT 10.10

FORBEARANCE AGREEMENT AND

FOURTH AMENDMENT TO LOAN AGREEMENT

This Forbearance Agreement and Fourth Amendment to Loan Agreement, dated August 28, 2009, is among Johnson Bank (the “Bank”), Jefferson Electric, Inc. (“Borrower”), Thomas Klink (“Guarantor”) and Diane M. Klink (“Diane Klink,” and together with the Borrower and Guarantor, the “Borrower Parties”).

RECITALS

WHEREAS, Bank and Borrower are parties to that certain Loan and Security Agreement dated January 2, 2008, as amended by the Amendment to Loan and Security Agreement dated January 29, 2008, Second Amendment to Loan and Security Agreement dated May 2, 2008 and Third Amendment to Loan and Security Agreement dated December 3, 2008 (as amended, the “Loan Agreement”); and

WHEREAS, Borrower is in material default under the Loan Agreement, including but not limited to failure to pay the Obligations at maturity; and

WHEREAS, Borrower has informed Bank that it is pursuing certain alternatives for recapitalizing the Borrower and increasing Borrower’s profitability; and

WHEREAS, Bank is entitled to exercise its rights and remedies upon default, including but not limited to its right to demand payment of the Obligations and realize on its collateral for the Obligations; and

WHEREAS, the Bank has agreed to forbear from exercising its rights and remedies upon the terms and conditions set forth herein, provided that Bank has not agreed to continue financing Borrower beyond December 31, 2009.

AGREEMENT

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.      Definitions.  (a)  Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Loan Agreement.

(b)           As used herein and in the Loan Agreement as amended hereby, the following terms shall have the following meanings:

 “Additional Advance Amount” means $700,000; provided that such amount shall be reduced to $0.00 on the earliest of (i) September 5, 2009 if Borrower has not as of such date met the requirements of Sections 6(c)(i) and 6(c)(ii) hereof or (ii) the date of Borrower’s receipt of the Recapitalization Funds.

“Excluded Mexican Inventory” means Borrower’s Inventory that is located in Mexico.

“Forbearance Event of Default” means (a) Bank obtaining knowledge of or the occurrence of any default or Event of Default under the Loan Agreement not now known to Bank, (b) any default or Event of Default under the Loan Agreement now known to Bank increasing in scope or magnitude, or (c) the occurrence of any default under this Agreement.

“Recapitalization Funds” means amounts received by Borrower as a result of the transactions contemplated by Section 6(a) hereof.

2.      Interest Rate on the Revolving Note.  Section 2.3.1 of the Loan Agreement is amended in its entirety to read as follows:

“2.3.1           Interest Rate on the Revolving Note.  The interest rate hereunder on the Revolving Note shall be equal to 8.00% per annum.

3.      Collateral-Obligation Ratio.  Section 2.6.2 of the Loan Agreement is amended in its entirety to read as follows:

“2.6.2           the sum of (i) Fifty percent (50%) of Qualified Inventory at cost (determined in accordance with GAAP) or wholesale market value, whichever is lower, plus (ii) the Additional Advance Amount; less”

4.      Borrowing Base Certificates.  Section 5.1.3 of the Loan Agreement is amended in its entirety to read as follows:

“5.1.3           On Monday of each week, based on Qualified Accounts and Qualified Inventory figures as of the end of the day on the prior Friday, and at such other times as requested by Bank, a report in the form of the attached Exhibit A, or as otherwise required by Bank, reflecting the Collateral-Obligation Ratio, showing the value of the Collateral without the Excluded Mexican Inventory, together with such information relating to the Collateral as Bank may request, certified by an authorized signatory of Borrower.”

5.      Prepayment Premium.  If, on or before December 31, 2009, Borrower pays the Obligations in full and in good funds on or before December 31, 2009 and the Revolving Credit Facility is terminated, Bank shall waiver the prepayment premium set forth in section 2.9 of the Loan Agreement.

6.      Additional Covenants.  Borrower and Guarantor shall comply with the following covenants:

(a)           Recapitalization.  Borrower shall diligently pursue recapitalization of the Borrower and (i) on or before September 30, 2009, provide Lender with a pro forma showing proposed use of the funds received in such recapitalization, including payment of amounts satisfactory to Bank on the Revolving Note, (ii) on or before October 31, 2009, provide Bank with a copy of a letter of intent from a proposed investor who is satisfactory to Bank reflecting an intent to make a contribution of equity to Borrower in the amount of at least $3,000,000 on terms and conditions satisfactory to Bank, and (iii) on or before December 31, 2009, close on such transaction, obtain additional cash equity in the amount of at least $3,000,000 and make payment on the Revolving Note in the amount of not less than $700,000.   Upon payment of the $700,000 to Bank as required in this section 6(a), on and after the date of such payment, Borrower must be in compliance with Section 2.6 of the Loan Agreement as amended hereby, calculated with the Additional Advance Amount at $0.

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(b)           Additional Notices.  Borrower shall notify Bank promptly, and in any event within one business day, if Borrower, in its good faith judgment, at any time believes that Borrower will not be able to close in its recapitalization on or before December 31, 2009.

(c)           Mexican Documentation.  Borrower and Guarantor shall

(i) on or before August 31, 2009, provide to Bank all of the following, in  a form that is executed, and if required by Bank or otherwise required, with appropriately completed notary acknowledgement, apostille and authentication,  and otherwise suitable for registration in Mexico: all documents, filings, recordings, certifications and other documents as Bank may request to perfect and protect Bank’s interest in property of Borrower and its affiliates that may from time to time be located in Mexico; and

(ii) on or before September 5, 2009, pay all taxes, fees, costs and expenses, make all filings, and provided all certifications and other documents and actions as Bank may request to perfect and protect Bank’s interest in the such property.  Borrower shall, from time to time, take such additional action as Bank may request with respect to the perfection and protection of Bank’s interest in such property.

(d)           Inventory Levels.  Borrower shall at all times limit the amount of inventory located in Mexico to the amount reasonably necessary for the operation of Borrower’s business.  Without limitation of the foregoing, Borrower shall not at any time transfer any inventory to Mexico (i) if Borrower is not in compliance with Section 2.6 of the Loan Agreement as amended hereby or if such transfer will cause Borrower to be out of compliance with Section 2.6 of the Loan Agreement as amended hereby, or (ii) if after such transfer the value of inventory located in Mexico will exceed $1,600,000.

(e)           Facility Fee.  In addition to all other amounts owing by Borrower to Bank, Borrower shall pay to Bank a facility fee of $25,000.00 (the “Facility Fee”).  The Facility Fee shall be deemed fully earned and owing to Bank upon execution of this Agreement.  The Facility Fee shall be due and payable on the earlier of the Forbearance Termination Date (as defined below) or the date of payment in full of the Obligations and termination of the Revolving Credit Facility.

(f)           Debt Service.  Borrower shall maintain for each fiscal month of Borrower, commencing June, 2009, a ratio of (i) Borrower’s Net Cash Flow, to (ii) the sum of Borrower’s required principal payments, plus interest expense, of at least 1.0 to 1.0.

7.      Defaults; No Waiver.  Material Events of Default have occurred under the Loan Agreement and are continuing.  Bank has agreed that, subject to the terms hereof, notwithstanding the existing defaults known to Bank, Bank will forbear from exercising its rights and remedies and continue to advance funds under the Revolving Credit Facility prior to the earlier of December 31, 2009 or the occurrence of any Forbearance Event of Default, provided that Bank shall not at any time be required to advance any amount in excess of the amount permitted to be advanced under Section 2.6 of the Loan Agreement as amended hereby.  Bank does not waive any Events of Default.  Bank’s agreement to forbear under this Forbearance Agreement shall terminate on the earlier of (a) December 31, 2009, or (b) the occurrence of any Forbearance Event of Default (the earlier to occur of the foregoing, the "Forbearance Termination Date").  Borrower expressly acknowledges that subject to the terms of the Loan Agreement as amended hereby, Bank has agreed to forbear exercising its rights and remedies until the earlier of December 31, 2009 to occurrence of any Forbearance Event or Default, but in any event, Bank has not agreed to, and is not obligated to, continue to provide financing to Borrower beyond such date.

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8.        Effect of Forbearance Agreement on Loan Documents.  Except as amended hereby, the Loan Documents remain in full force and effect.

9.        Effect of Forbearance Agreement on Guaranty.  Guarantor hereby consents to this Agreement, and Guarantor hereby ratifies  his Guaranty of the Obligations and all documents by which any of them has granted collateral for any such Guaranty or any Obligations.

10.      Effect of Forbearance Agreement on Mortgage.  Guarantor and Diane Klink hereby ratify the Real Estate Mortgage securing the Obligations dated December 3, 2008 (the "Klink Mortgage").  In the event Borrower and Guarantor timely satisfy, to the satisfaction of Bank, the conditions set forth in sections 6(c)(i) and 6(c)(ii) of this Agreement, Bank shall release the Klink Mortgage.

11.      Release of Bank.  Borrower acknowledges that its obligations under the Loan Documents exist and are enforceable in accordance with their terms.  Each of the Borrower Parties, for themselves and all of their respective past and present principals, officers, directors, members, shareholders, employees, affiliated entities, guarantors, heirs, successors and assigns and all persons acting by, through, under, or in concert with any of them (the “Releasing Parties”) do hereby release and discharge Bank and all of the Bank’s officers, directors, managers, employees, successors, predecessors, and assigns (each a "Released Party")), of and from any and all manner of action or actions, cause or causes of action, suits, claims, counterclaims, demands, and expenses (including attorneys’ fees and costs) whatsoever in law or equity, whether known or unknown, which they have had, now have, or may in the future have against any Released Party arising out of or relating to any act or omission by Bank or any other Released Party, on or before the date of this Agreement.

12.      Conditions Precedent.  This Forbearance Agreement shall not be effective until (a) it shall have been executed and delivered by the parties hereto, (b) Bank shall have received from Borrower (i) fully executed documentation in form and substance satisfactory to Bank requiring prefunding of all of Borrower’s ACH transfers, (ii) a copy, certified by the secretary of Borrower to be true and correct and in full force in effect on the date hereof, of the resolutions Borrower's board of directors authorizing the execution and delivery of this Agreement and all documents required to be executed and delivered in connection herewith and (iii) documentation satisfactory to Bank evidencing the merger of Jefferson Electric Leasing, LLC into Borrower prior to the date hereof and (c) Borrower shall have received from Bank an executed consent related to the sale of certain of Borrower's accounts receivable from Siemens Energy & Automation, in the form of Exhibit B attached hereto.

13.      Attorneys’ Fees.  The Borrower agrees to pay all reasonable attorneys’ fees of Bank relating to this Forbearance Agreement and all amendments, modifications and supplements hereto, which attorneys' fees shall be due and payable on the earlier of (a) the Forbearance Termination Date or (b) the date of payment in full of the Obligations and termination of the Revolving Credit Facility.

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14.      Law Governing.  This Forbearance Agreement shall be governed by the laws of the State of Wisconsin.

15.      Binding Effect.  This Forbearance Agreement shall be binding upon the parties hereto and their respective successors and assigns.

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

BANK:
JOHNSON BANK
By:	/s/ Kelly Foster
	Kelly Foster

BORROWER PARTIES:
JEFFERSON ELECTRIC, INC.
By:	/s/ Thomas Klink
	Thomas Klink, President
/s/ Thomas Klink
Thomas Klink, an individual
/s/ Diane M. Klink
Diane M. Klink, an individual

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EX-10.11

EXHIBIT 10.11

FIRST AMENDED AND RESTATED

FORBEARANCE AGREEMENT AND

FOURTH AMENDMENT TO LOAN AGREEMENT

This First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, dated December 8, 2009, is among Johnson Bank (the “Bank”), Jefferson Electric, Inc. (“Borrower”), Thomas Klink (“Guarantor”) and Diane M. Klink (“Diane Klink,” and together with the Borrower and Guarantor, the “Borrower Parties”).

RECITALS

WHEREAS, Bank and Borrower are parties to that certain Loan and Security Agreement dated January 2, 2008, as amended by the Amendment to Loan and Security Agreement dated January 29, 2008, Second Amendment to Loan and Security Agreement dated May 2, 2008 and Third Amendment to Loan and Security Agreement dated December 3, 2008 (as amended, the “Loan Agreement”); and

WHEREAS, Borrower is in material default under the Loan Agreement, including, but not limited to, failure to pay the Obligations at maturity; and

WHEREAS, Borrower has informed Bank that it is pursuing certain alternatives for recapitalizing the Borrower and increasing Borrower’s profitability; and

WHEREAS, Bank is entitled to exercise its rights and remedies upon default, including but not limited to its right to demand payment of the Obligations and realize on its collateral for the Obligations; and

WHEREAS, the Borrower Parties and Lender are parties to a certain Forbearance Agreement and Fourth Amendment to Loan Agreement dated August 28, 2009 (the "Forbearance Agreement"), pursuant to which Lender agreed to forbear from exercising its rights and remedies through December 31, 2009, subject to the terms and conditions set forth in such agreement; and

WHEREAS, the Borrower Parties have requested that the Bank forbear for an additional period of time beyond December 31, 2009; and

WHEREAS, the Bank and the Borrower Parties desire to amend and restate the Forbearance Agreement.

AGREEMENT

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.      Definitions.  (a)  Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Loan Agreement.

(b)           As used herein and in the Loan Agreement as amended hereby, the following terms shall have the following meanings:

 “Additional Advance Amount” means $700,000; provided that such amount shall be reduced to $0.00 on the earliest of (i)December 15, 2009 if Borrower has not as of such date met the requirements of Sections 6(c)(i) and 6(c)(ii) hereof or (ii) the date of Borrower’s receipt of the Recapitalization Funds.

“Excluded Mexican Inventory” means Borrower’s Inventory that is located in Mexico.

“Forbearance Event of Default” means (a) Bank obtaining knowledge of or the occurrence of any default or Event of Default under the Loan Agreement not now known to Bank, (b) any default or Event of Default under the Loan Agreement now known to Bank increasing in scope or magnitude, or (c) the occurrence of any default under this Agreement.

“Recapitalization Funds” means amounts received by Borrower as a result of the transactions contemplated by Section 6(a) hereof.

2.      Interest Rate on the Revolving Note.  Section 2.3.1 of the Loan Agreement is amended in its entirety to read as follows:

“2.3.1           Interest Rate on the Revolving Note.  The interest rate hereunder on the Revolving Note shall be equal to 8.00% per annum.

3.      Collateral-Obligation Ratio.  Section 2.6.2 of the Loan Agreement is amended in its entirety to read as follows:

“2.6.2           the sum of (i) Fifty percent (50%) of Qualified Inventory at cost (determined in accordance with GAAP) or wholesale market value, whichever is lower, plus (ii) the Additional Advance Amount; less”

4.      Borrowing Base Certificates.  Section 5.1.3 of the Loan Agreement is amended in its entirety to read as follows:

“5.1.3           On Monday of each week, based on Qualified Accounts and Qualified Inventory figures as of the end of the day on the prior Friday, and at such other times as requested by Bank, a report in the form of the attached Exhibit A, or as otherwise required by Bank, reflecting the Collateral-Obligation Ratio, showing the value of the Collateral without the Excluded Mexican Inventory, together with such information relating to the Collateral as Bank may request, certified by an authorized signatory of Borrower.”

5.      Prepayment Premium.  If, on or before March 31, 2010, Borrower pays the Obligations in full and in good funds and the Revolving Credit Facility is terminated, Bank shall waive the prepayment premium set forth in section 2.9 of the Loan Agreement.

6.      Additional Covenants.  Borrower and Guarantor shall comply with the following covenants:

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(a)           Recapitalization.  Borrower shall diligently pursue recapitalization of the Borrower and (i) on or before September 30, 2009, provide Lender with a pro forma showing proposed use of the funds received in such recapitalization, including payment of amounts satisfactory to Bank on the Revolving Note, (ii) on or before December 31, 2009, provide Bank with a copy of a letter of intent from a proposed investor who is satisfactory to Bank reflecting an intent to make a contribution of equity to Borrower in the amount of at least $3,000,000 on terms and conditions satisfactory to Bank, and (iii) on or before March 31, 2010, close on such transaction, obtain additional cash equity in the amount of at least $3,000,000 and make payment on the Revolving Note in the amount of not less than $700,000.   Upon payment of the $700,000 to Bank as required in this section 6(a), on and after the date of such payment, Borrower must be in compliance with Section 2.6 of the Loan Agreement as amended hereby, calculated with the Additional Advance Amount at $0.

(b)           Additional Notices.  Borrower shall notify Bank promptly, and in any event within one business day, if Borrower, in its good faith judgment, at any time believes that Borrower will not be able to close in its recapitalization on or before March 31, 2010.

(c)           Mexican Documentation.

(i)           Borrower shall and Borrower and Guarantor shall cause Nexus Magnéticos de Mexico, S. de R.L. de C.V. to execute and deliver to the Bank, on or before December 15, 2009, a pledge agreement for all of Borrower's assets located in Mexico (the "Pledge Agreement"), in order to perfect and protect the Bank's interest in the property of Borrower and its affiliates that may from time to time be located in Mexico.; and

(ii)           On or before January 15, 2010, Borrower and Guarantor shall [1] pay all fees, costs and expenses in connection with the formalization of the Pledge Agreement before a Mexican notary public and its registration  before the Public Registry of Commerce in Reynosa, Tamaulipas and [2] cause the deed issued by such notary public to be properly filed for registration with the Public Registry of Commerce in Reynosa, Tamaulipas.

(d)           Inventory Levels.  Borrower shall at all times limit the amount of inventory located in Mexico to the amount reasonably necessary for the operation of Borrower’s business.  Without limitation of the foregoing, Borrower shall not at any time transfer any inventory to Mexico (i) if Borrower is not in compliance with Section 2.6 of the Loan Agreement as amended hereby or if such transfer will cause Borrower to be out of compliance with Section 2.6 of the Loan Agreement as amended hereby, or (ii) if after such transfer the value of inventory located in Mexico will exceed $1,600,000.

(e)           Facility Fee.  In addition to all other amounts owing by Borrower to Bank, Borrower shall pay to Bank a facility fee of $25,000.00 (the “Facility Fee”).  The Facility Fee shall be deemed to have been fully earned and owing to Bank upon execution of the Forbearance Agreement.  The Facility Fee shall be due and payable on the earlier of the Forbearance Termination Date (as defined below) or the date of payment in full of the Obligations and termination of the Revolving Credit Facility.

(f)           Debt Service.  Borrower shall maintain for each fiscal month of Borrower, commencing June, 2009, a ratio of (i) Borrower’s Net Cash Flow, to (ii) the sum of Borrower’s required principal payments, plus interest expense, of at least 1.0 to 1.0.

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7.        Defaults; No Waiver.  Material Events of Default have occurred under the Loan Agreement and are continuing.  Bank has agreed that, subject to the terms hereof, notwithstanding the existing defaults known to Bank, Bank will forbear from exercising its rights and remedies and continue to advance funds under the Revolving Credit Facility prior to the earlier of March 31, 2010 or the occurrence of any Forbearance Event of Default, provided that Bank shall not at any time be required to advance any amount in excess of the amount permitted to be advanced under Section 2.6 of the Loan Agreement as amended hereby.  Bank does not waive any Events of Default.  Bank’s agreement to forbear under this Agreement shall terminate on the earlier of (a) March 31, 2010, or (b) the occurrence of any Forbearance Event of Default (the earlier to occur of the foregoing, the "Forbearance Termination Date").  Borrower expressly acknowledges that subject to the terms of the Loan Agreement as amended hereby, Bank has agreed to forbear exercising its rights and remedies until the earlier of March 31, 2010 to occurrence of any Forbearance Event or Default, but in any event, Bank has not agreed to, and is not obligated to, continue to provide financing to Borrower beyond such date.

8.        Effect of this Agreement on Loan Documents.  Except as amended hereby, the Loan Documents remain in full force and effect.

9.        Effect of this Agreement on Guaranty.  Guarantor hereby consents to this Agreement, and Guarantor hereby ratifies  his Guaranty of the Obligations and all documents by which any of them has granted collateral for any such Guaranty or any Obligations.

10.      Effect of this Agreement on Mortgage.  Guarantor and Diane Klink hereby ratify the Real Estate Mortgage securing the Obligations dated December 3, 2008 (the "Klink Mortgage").  In the event Borrower and Guarantor timely satisfy, to the satisfaction of Bank, the conditions set forth in sections 6(c)(i) and 6(c)(ii) of this Agreement, Bank shall release the Klink Mortgage.

11.      Release of Bank.  Borrower acknowledges that its obligations under the Loan Documents exist and are enforceable in accordance with their terms.  Each of the Borrower Parties, for themselves and all of their respective past and present principals, officers, directors, members, shareholders, employees, affiliated entities, guarantors, heirs, successors and assigns and all persons acting by, through, under, or in concert with any of them (the “Releasing Parties”) do hereby release and discharge Bank and all of the Bank’s officers, directors, managers, employees, successors, predecessors, and assigns (each a "Released Party")), of and from any and all manner of action or actions, cause or causes of action, suits, claims, counterclaims, demands, and expenses (including attorneys’ fees and costs) whatsoever in law or equity, whether known or unknown, which they have had, now have, or may in the future have against any Released Party arising out of or relating to any act or omission by Bank or any other Released Party, on or before the date of this Agreement.

12.      Conditions Precedent.  This Agreement shall not be effective until (a) it shall have been executed and delivered by the parties hereto and (b) Bank shall have received from Borrower a copy, certified by the secretary of Borrower to be true and correct and in full force in effect on the date hereof, of the resolutions Borrower's board of directors authorizing the execution and delivery of this Agreement and all documents required to be executed and delivered in connection herewith.

13.      Attorneys’ Fees.  The Borrower agrees to pay all reasonable attorneys’ fees of Bank relating to the Forbearance Agreement or this Agreement and all amendments, modifications and supplements thereto, which attorneys' fees shall be due and payable on the earlier of (a) the Forbearance Termination Date or (b) the date of payment in full of the Obligations and termination of the Revolving Credit Facility.

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14.      Law Governing.  This Agreement shall be governed by the laws of the State of Wisconsin.

15.      Binding Effect.  This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

16.      Amendment and Restatement.  The Forbearance Agreement is amended, restated and superseded by this Agreement.

17.      Execution in Counterparts.  This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

18.      Electronic and Facsimile Signatures.  Electronic or facsimile copies of any party's signature hereto shall be deemed effective execution of this Agreement by such party.

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

BANK:
JOHNSON BANK
By:	/s/ Kelly Foster
	Kelly Foster

BORROWER PARTIES:
JEFFERSON ELECTRIC, INC.
By:	/s/ Thomas Klink
	Thomas Klink, President
/s/ Thomas Klink
Thomas Klink, an individual
/s/ Diane M. Klink
Diane M. Klink, an individual

5

EX-10.12

EXHIBIT 10.12

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED FORBEARANCE AGREEMENT AND FOURTH AMENDMENT TO LOAN AGREEMENT

THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED FORBEARANCE AGREEMENT AND FOURTH AMENDMENT TO LOAN AGREEMENT, dated as of March 31, 2010, amends and supplements that certain First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement dated as of December 8, 2009 (the "Forbearance Agreement") among Johnson Bank ("Lender"), Jefferson Electric, Inc. ("Borrower"), Thomas Klink ("Guarantor") and Diane M. Klink ("Diane Klink," and together with Borrower and Guarantor, the "Borrower Parties").

RECITAL

Lender and Borrower Parties desire to amend the Forbearance Agreement as follows.

AGREEMENTS

In consideration of the Recitals and the agreements contained herein and in the Forbearance Agreement, as amended hereby, Lender and Borrower Parties agree as follows:

1.           Definitions and References.

Except as otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Forbearance Agreement.  Upon satisfaction of the conditions in section 3 herein, all references to the Forbearance Agreement in any documents related to the Loan Agreement shall mean the Forbearance Agreement as amended by this Amendment.

2.           Amendments.  The Forbearance Agreement is amended by deleting the date "March 31, 2010" in each place such date appears therein and inserting "April 30, 2010" in its place.

3.           Effectiveness of the Amendment.  This Amendment will not be effective until it shall have been duly executed and delivered by Lender and Borrower Parties.

4.           No Waiver.  Borrower Parties agree that nothing contained herein shall be construed as a waiver by Lender of (a) any existing or future default or event of default under the Loan Documents (as defined in the Loan Agreement) or the Forbearance Agreement or (b) the compliance by Borrower Parties with any representation, warranty or covenant contained in the Loan Documents or the Forbearance Agreement.  No waiver of any provision of the Loan Documents or the Forbearance Agreement by Lender has occurred.  Borrower Parties further agree that nothing contained herein shall impair the right of Lender to require strict performance by Borrower Parties of the Loan Documents and the Forbearance Agreement.

5.           Representations and Warranties.  Borrower Parties represent and warrant to Lender that the execution and delivery of this Amendment:  (a) are within Borrower's power, (b) has been duly authorized by proper action on the part of Borrower, (c) are not in violation of any applicable law or the charter documents of Borrower, (d) are not in violation of the terms of any agreement, restriction, or undertaking to any of the Borrower Parties is a party or by which any of them is bound, and (e) do not require the approval or consent of any governmental authority or any other person or party, other than those obtained and in full force and effect.

6.           No Commitment to Extend Forbearance Period.  Borrower Parties acknowledge and agree that Lender has not agreed to forbear beyond the termination of the Forbearance Period and that this Amendment shall not constitute an agreement by or require Lender to extend the Forbearance Termination Date beyond April 30, 2010, grant additional forbearance periods, extend the time for payment of any the Obligations, or make any loans or otherwise extend credit to Borrower Parties after termination of the Forbearance Period.

7.           Costs and Expenses.  Borrower agrees to pay on demand all out-of-pocket costs and expenses paid or incurred by Lender in connection with the negotiation, preparation, execution and delivery of this Amendment and all documents, instruments and agreements related hereto and thereto, including the reasonable fees and expenses of Lender's counsel.

8.           Full Force and Effect.  The Forbearance Agreement, as amended hereby, remains in full force and effect.

9.           Titles.  The titles of the sections in this Amendment are for convenience only and do not limit, construe, or otherwise affect the meaning of any section.

10.         Execution in Counterparts.  This Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

[remainder of page intentionally left blank]

11.           Facsimile Signatures.  Facsimile copies of any party's signature hereto shall be deemed effective execution of this Amendment by such party.

BANK:
JOHNSON BANK
By:	/s/ Robert Spitzer
	Robert Spitzer

BORROWER PARTIES:
JEFFERSON ELECTRIC, INC.
By:	/s/ Thomas Klink
	Thomas Klink, President
/s/ Thomas Klink
Thomas Klink, an individual
/s/ Diane M. Klink
Diane M. Klink, an individual

EX-10.13

EXHIBIT 10.13

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment"), dated as of April 30, 2010, amends and supplements that certain Loan and Security Agreement dated as of January 2, 2008, as amended to date, between JEFFERSON ELECTRIC, INC., a Delaware corporation (formerly a Wisconsin corporation) ("Borrower"), and JOHNSON BANK ("Bank").

RECITALS

A.           Borrower and Bank are parties to that certain Loan and Security Agreement dated January 2, 2008, as amended by an Amendment to Loan and Security Agreement dated January 29, 2008, a Second Amendment to Loan and Security Agreement dated May 2, 2008, a Third Amendment to Loan and Security Agreement dated December 3, 2008 and a First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan Agreement, as amended to date (as so amended, the "Fourth Amendment").  Such Loan and Security Agreement, as so amended is referred to herein as the "Loan Agreement."

B.           Concurrent with the Amendment (or immediately prior hereto), (i) Borrower converted from a Wisconsin corporation to a Delaware corporation and (ii) Borrower merged with JEI Acquisition Corp. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Pioneer Power Solutions, Inc., a Delaware corporation, with Borrower as the surviving entity.

C.           Borrower and Bank desire to amend and supplement the Loan Agreement as provided below.

AGREEMENTS

In consideration of the promises and agreements set forth in the Loan Agreement, as amended hereby, the parties agree as follows:

1.           Definitions and References.  Capitalized terms not otherwise defined herein have the meanings assigned in the Loan Agreement.  All references to the Loan Agreement contained in the Loan Documents shall, upon fulfillment of the conditions specified in Section 3 below, mean the Loan Agreement as amended by this Amendment.

2.           Amendments to Loan Agreement.  The Loan Agreement is amended as follows:

(a)           The following defined terms are added to Article I of the Loan Agreement to appear in proper alphabetical order therein:

"Fifth Amendment" means the Fifth Amendment to this Loan Agreement dated as of April 30, 2010 between Borrower and Bank.

"Fourth Amendment" has the meaning assigned to such term in the Fifth Amendment.

"JEM Holdings" means Jefferson Electric Mexico Holdings, LLC, a Wisconsin limited liability company.

"Merger Agreement" means that certain Agreement and Plan of Merger dated as of the date of the Fifth Amendment among Borrower, Guarantor, PPSI and JEI Acquisition Corp., a Delaware corporation.

"Nexus Mexico" means Nexus Magneticos de México, S. de R.L. de C.V., a company duly organized and operating under the laws of Mexico.

"Nexus Texas" means Nexus Custom Magnetics, L.L.C., a Texas limited liability company.

"PPSI" means Pioneer Power Solutions, Inc., a Delaware corporation.

"PPSI Advance" means the $3,000,000 advance made by PPSI to Borrower on the date of the Fifth Amendment.

"Reference Rate" means the rate of interest announced by Bank from time to time as its reference rate for interest rate determinations.  The Reference Rate may or may not be the lowest interest rate charged by Bank for loans to its customers.

(b)           The defined term "Additional Advance Amount" in Article I of the Loan Agreement is deleted in its entirety.

(c)           The defined term "Company Guarantor" in Article I of the Loan Agreement is deleted in its entirety.  References to Company Guarantor in the Loan Agreement shall be deemed to refer to Nexus Mexico.

(d)           The defined term "Forbearance Event of Default" in Article I of the Loan Agreement is deleted in its entirety.

(e)           The defined term "Guarantors" in Article I of the Loan Agreement is amended in its entirety to read as follows:

"Guarantor" means Thomas Klink.

(f)            The defined term "Recapitalization Funds" in Article I of the Loan Agreement is deleted in its entirety.

(g)           The defined term "Release Date" in Article I of the Loan Agreement is deleted in its entirety.

(h)           Section 2.1.1 of the Loan Agreement is amended by deleting the date "June 1, 2009" in the last sentence thereof and inserting "October 31, 2011" in its place.  Additionally, Section 2.1.1 of the Loan Agreement is amended by inserting the following sentence at the end thereof:

Borrower and Bank acknowledge that, as of the date immediately prior to the date of the Fifth Amendment, the outstanding principal balance of the Revolving Note was $4,242,516.00.

(i)            Section 2.2 of the Loan Agreement is amended by deleting the date "January 1, 2013" in the last sentence thereof and inserting "October 31, 2011" in its place.  Additionally, Section 2.2 of the Loan Agreement is amended by inserting the following sentence at the end thereof:

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Borrower and Bank acknowledge that, as of the date immediately prior to the date of the Fifth Amendment, the outstanding principal balance of the Term Note was $3,455,363.53.

(j)            Section 2.3.1 of the Loan Agreement is amended in its entirety to read as follows:

2.3.1           Interest Rate on the  Revolving Note.  The interest rate hereunder on the Revolving Note shall be equal to the greater of (a) the Reference Rate plus 2.5% per annum and (b) 6.5% per annum, changing as and when the Reference Rate changes.  As of the date of the Fifth Amendment, the Reference Rate is 3.25%.  Bank will advise Borrower of the then-current Reference Rate upon Borrower's request.

(k)           Section 2.6.1 of the Loan Agreement is amended in its entirety to read as follows:

2.6.1           Eighty percent (80%) of Qualified Accounts (after deducting payments on Qualified Accounts which are in the process of collection by the Bank); plus

(l)           Section 2.6.2 of the Loan Agreement is amended in its entirety to read as follows:

2.6.2           Fifty percent (50%) of Qualified Inventory (which shall not include Excluded Mexican Inventory) at cost (determined in accordance with GAAP) or wholesale market value, whichever is lower (Borrower shall value Inventory under revised standard costs as of December 31, 2009, and Inventory values shall be adjusted for costs and revalued once per year thereafter); less

(m)          Section 2.9 of the Loan Agreement is deleted in its entirety.

(n)          Section 4.22 of the Loan Agreement is created to read as follows:

4.22         Affiliated Entities; Nexus Mexico.  Borrower is a wholly-owned subsidiary of PPSI.  Nexus Texas is a wholly-owned subsidiary of Borrower.  Nexus Texas has no operations and the sole asset owned by Nexus Texas is 2999 shares of Nexus Mexico (representing greater than a 99.9% interest in Nexus Mexico).  JEM Holdings is an affiliate of Borrower.  JEM Holdings has no operations and the sole asset owned by JEM Holdings is 1 share of Nexus Mexico (representing less than a 0.1% interest in Nexus Mexico).  Nexus Texas and JEM Holdings may be converted to Delaware entities; provided that Borrower provides Bank prior written notice of any such conversion.

All assets (other than cash permitted by this Agreement to be advanced by Borrower to Nexus Mexico) now or hereafter delivered or otherwise furnished by Borrower to Nexus Mexico shall remain titled in Borrower's name.  Ownership of such assets shall not transfer, be deemed to have transferred or in any way be represented to have transferred from Borrower to Nexus Mexico.  Without the prior written consent of Bank, Borrower shall remain Nexus Mexico's sole customer and the nature of the relationship between Borrower and Nexus Mexico shall not be modified from the present arrangement in any material way.

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(o)           Section 4.23 of the Loan Agreement is created to read as follows:

4.23            Merger.  The Merger Agreement and documents related thereto (the "Merger Documents"), as delivered to Bank, have not been modified, amended, supplemented or in any manner changed, and all Merger Documents are true, complete versions of the documents they purport to be.  All terms and conditions set forth in the Merger Documents have been satisfied by the parties thereto in accordance with the terms thereof.  The parties to the Merger Documents have obtained all necessary consents from and effected all filings or registrations with any governmental authority necessary to consummate the terms and conditions of the Merger Documents and the transactions identified therein.  The parties to the Merger Documents have obtained all other consents necessary to consummate the terms and conditions of the Merger Documents and the transactions identified therein.

(p)           The first paragraph of Section 5.1 of the Loan Agreement is amended in its entirety to read as follows:

5.1              Business Records; Reports.  Borrower shall maintain, and shall cause Nexus Mexico to maintain, a reasonable system of business records prepared, in the case of Borrower only, in accordance with GAAP, and shall furnish Bank such reports respecting the business, assets and financial condition of Borrower and Nexus Mexico as Bank may reasonably request, all of which reports shall be certified, in form reasonably satisfactory to Bank, by a principal officer of Borrower or, when requested by Bank, audited by an independent public accountant who is reasonably satisfactory to Bank.  Bank shall have the right at any time during normal business hours to verify, check, inspect and make abstracts and copies of all of Borrower's and Nexus Mexico's books, accounts, records, audits, orders, correspondence, corporate minute books and other legal records and such other papers, computer files, discs, tapes, printouts and other media as Bank may desire.  In addition to the foregoing, Borrower agrees to deliver to Bank:

(q)           Section 5.1.3 of the Loan Agreement is amended in its entirety to read as follows:

5.1.3           Within twenty-five (25) days after the end of each month, based on Qualified Accounts and Qualified Inventory figures as of the end of such month, and at such other times as requested by Bank, a report in the form Exhibit D attached hereto, or as otherwise required by Bank, together with such information relating thereto as Bank may request, including accounts receivable and accounts payable agings and a detailed inventory report, all certified by an authorized signatory of Borrower.

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(r)           Section 5.1.6 of the Loan Agreement is amended in its entirety to read as follows:

5.1.6           On or before April 1 of each year, an updated personal financial statement for Guarantor.

(s)           Section 5.1.7 of the Loan Agreement is amended by restating clause (d) therein in its entirety to read as follows:

(d)           Borrower is in compliance with Sections 5.21, 5.22 and 6.3 of this Agreement.

(t)           Section 5.1.8 of the Loan Agreement is created to read as follows:

5.1.8           Annual income returns of Borrower and Guarantor within fifteen (15) days after the date on which such returns are required to be filed, including any extensions received for the filing of the tax returns.

(u)           Section 5.21 of the Loan Agreement is amended in its entirety to read as follows:

5.21           Tangible Net Worth.  Borrower shall achieve, as of the following dates, a Tangible Net Worth not less than the following amounts:

Date	Amount
June 30, 2010 September 30, 2010 December 31, 2010 March 31, 2011 June 30, 2011 September 30, 2011	($4,500,000) ($4,300,000) ($4,000,000) ($3,800,000) ($3,600,000) ($3,400,000)

(v)           Section 5.22 of the Loan Agreement is amended in its entirety to read as follows:

5.22           Debt Service Coverage Ratio.  Borrower shall achieve, as of the last day of each fiscal quarter of Borrower, commencing June 30, 2010, a ratio of (a) Net Cash Flow to (b) the sum of required principal payments plus interest expense (not including accrued but unpaid interest expense on subordinated indebtedness owing to PPSI), all calculated for the four fiscal quarter period ending on the date of determination, of at least 1.0 to 1.0; provided that, (i) the June 30, 2010 determination shall be calculated for the one fiscal quarter period ending on that date, (ii) the September 30, 2010 determination shall be calculated for the two fiscal quarter period ending on that date and (iii) the December 31, 2010 determination shall be calculated for the three fiscal quarter period ending on that date.  In all circumstances, the financial results for the one month period ended April 30, 2010 shall be excluded.

(w)           Section 5.25 of the Loan Agreement is created to read as follows:

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5.25           Guarantor.  Borrower shall retain Guarantor as President of Borrower, pursuant to the terms of the Employment Agreement entered into concurrently with the Merger Agreement, and Guarantor shall continue to be responsible for overseeing the management of Borrower.

(x)           Section 6.1 of the Loan Agreement is amended by deleting the period at the end of subsection 6.1.4 and inserting ": and" in its place and by inserting the following subsection at the end thereof:

6.1.5           Indebtedness owing to PPSI, provided that any such Indebtedness shall be contractually subordinated to Bank in a manner satisfactory to Bank.  Bank acknowledges that PPSI is not obligated to make advances whatsoever to Borrower other than the PPSI Advance.

(y)           Section 6.7 of the Loan Agreement is amended by inserting the following sentence at the end thereof:

Additionally and notwithstanding the foregoing or Section 6.10, Borrower may make dividends, distributions, advances or other transfers of assets to PPSI (in addition to the foregoing tax distributions) in an amount not to exceed $500,000 per fiscal year to reimburse PPSI for direct expenses actually incurred by PPSI on Borrower's behalf, provided, however, that (i) such amounts must represent a reasonable allocation of expenses by PPSI and (ii) PPSI shall promptly furnish reasonable evidence of such expenses and allocation upon request of Bank.

(z)           Section 6.20 of the Loan Agreement is created to read as follows:

6.20           Mexican Inventory.  Borrower shall at all times limit the amount of inventory located in Mexico to the amount reasonably necessary for the operation of Borrower’s business.  Without limitation of the foregoing, Borrower shall not at any time transfer any inventory to Mexico if Borrower is not in compliance with Section 2.6 hereof or if such transfer will cause Borrower to be out of compliance with Section 2.6 hereof.

(aa)          Section 6.21 of the Loan Agreement is created to read as follows:

6.21           Merger Documents.  Consent to any change, modification or amendment to any Merger Document which constitutes a waiver or is otherwise in any way materially adverse to Bank without the consent of Bank, which consent will not be unreasonably withheld.

(bb)         Section 7.1.9 of the Loan Agreement is amended in its entirety to read as follows:

7.1.9           Ownership and Related Matters.  Any representation in Section 4.22 is false in any material respect.

(cc)          The financial statements required under Section 5.1.1 shall be prepared on a consolidated and consolidating basis for only Borrower and Nexus Mexico.  The other financial statements and deliveries shall not be required to be prepared on a consolidated and consolidating basis for Borrower and Nexus Mexico.  Unless expressly stated to the contrary, Nexus Mexico shall not be included in calculations pursuant to the Loan Agreement.

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(dd)         Borrower shall cause Nexus Mexico to comply with the covenants contained in Sections 5.10, 5.12, 5.18, 6.1, 6.2, 6.4, 6.5, 6.6, 6.7 (other than distributions to Borrower which shall not be restricted), 6.9, 6.10, 6.12, 6.13, 6.15, 6.16, 6.17 and 6.18 of the Loan Agreement (but not other covenants of the Loan Agreement) as if it was also "Borrower" thereunder, except that (i) Bank consents to Borrower having the organizational structure and affiliates referenced in Section 4.22 of the Loan Agreement, (ii) Bank consents to transfers of cash, goods and other property to Borrower and (iii) Bank consents to the transfer by Borrower of (A) Inventory that may be transferred to Nexus Mexico in the ordinary course of business for full and adequate consideration and (B) transfers of cash to Nexus Mexico for its normal operating expenses in an aggregate amount for all such transfers of cash not to exceed $3,000,000 in any fiscal year of Borrower and provided that no such transfer may be made if an Event of Default exists or would be created by such transfer.

(ee)          Schedule 4.3 attached hereto shall be deemed an exhibit to the Loan Agreement and shall replace its predecessor thereto.

(ff)           Exhibit D attached hereto shall be deemed an exhibit to the Loan Agreement.

(gg)         Sections 5, 6 (other than Section 6(e)), 7 and 10 (the mortgage referenced therein has been released) of the Fourth Amendment are deleted in their entirety.  Additionally, the Fourth Amendment shall be renamed "Fourth Amendment to Loan Agreement" and the phrase "Forbearance Agreement" in the Fourth Amendment or in the other Loan Documents shall be deleted and shall be deemed to refer to such "Fourth Amendment to Loan Agreement."

(hh)         Bank consents to the transactions contemplated by the Merger Agreement.

3.           Closing Conditions.  This Amendment shall become effective upon the execution and delivery by Borrower and Bank of this Amendment and receipt by Bank of:

(a)           payment of (i) the Facility Fee of $25,000 referenced in Section 6(e) of the Fourth Amendment, (ii) the Undercharged Interest Amount (as defined in that letter agreement between Bank and Borrower dated January 4, 2010) of $36,944.44 and (iii) all out-of-pocket costs and expenses related to Borrower paid or incurred by Bank through the date hereof, including the fees and expenses of Bank's counsel;

(b)           full, complete and accurate copies of all Merger Documents, together with all consents required to consummate the transactions identified in the Merger Documents and confirmation that the parties to the Merger Documents shall have comported with all requirements of law, including those of any applicable state department of revenue, labor or other taxing authority;

(c)           evidence that the transactions contemplated by the Merger Agreement have occurred, including the PPSI Advance, repayment of $700,000 of the outstanding principal of the Revolving Note and repayment of the Term Note in an amount equal to $200,000;

(d)           an assignment and assumption of pledge, duly executed by JE Mexican Holdings, Inc., a Delaware corporation ("JEMHI"), related the equity interests in JEM Holdings;

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(e)            a subordination agreement, duly executed by PPSI;

(f)            an amendment to guaranty, duly executed by Guarantor;

(g)            a collateral pledge of Guarantor's equity interests in PPSI, including warrants, together with the original stock certificate, warrant and blank stock powers and assignments, as applicable, duly executed by Guarantor;

(h)            all financing statements or amendments to existing financing statements and other instruments required to perfect or continue perfection of the liens granted to Bank securing the Obligations;

(i)           searches of the appropriate public offices demonstrating that no lien is of record affecting Borrower, Merger Sub, JEMHI, Guarantor or their respective properties (limited in the case of Guarantor to equity interests, including warrants, in PPSI), except Authorized Security Interests;

(j)           an updated Schedule 4.3 to the Loan Agreement, together with landlord consent and waivers, to the extent not previously furnished to Bank, for each Collateral location not owned by Borrower;

(k)           a borrowing base report in the form of Exhibit D attached hereto (and utilizing the revised standard costs for Inventory), duly executed by Borrower; provided that the Bank agrees that such borrowing base report may be furnished to Bank on May 3, 2010 showing the calculations as of April 30, 2010;

(l)           evidence of insurance coverage as required by the Loan Documents;

(m)          copies, certified by a duly authorized representative of Borrower, PPSI, Merger Sub and JEMHI, to be true and correct and in full force and effect on the date hereof, of (i) the charter documents of such entity; (ii) resolutions of such entity authorizing the issuance, execution and delivery of the Loan Documents to which such entity is a party; and (iii) a statement containing the names and titles of the representatives of such entity authorized to sign such Loan Documents, together with true signatures of such persons; and

(n)           such other documents as Bank may reasonably request; and all proceedings taken in connection with the transactions contemplated by this Amendment, and all instruments, authorizations and other documents applicable thereto, shall be reasonably satisfactory to Bank.

4.           Limited Waiver.  Bank hereby waives any Events of Default existing under the Loan Agreement as of the date hereof; provided that such waiver does not in any way extend to Borrower's compliance with the Loan Agreement, as amended hereby, after the date of this Amendment.  Borrower further agrees that nothing contained herein shall impair the right of Bank to require strict performance by Borrower of the Loan Agreement.

5.           Representations and Warranties.  Borrower represents and warrants to Bank that:

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(a)           The execution and delivery of this Amendment and the other Loan Documents referenced herein is within its corporate power, has been duly authorized by proper corporate action on the part of Borrower, is not in violation of any existing law, rule or regulation of any governmental agency or authority, any order or decision of any court, the charter documents of Borrower or the terms of any agreement, restriction or undertaking to which Borrower is a party or by which it is bound, and do not require the approval or consent of any governmental body, agency or authority or any other person or entity; and

(b)           The representations and warranties of Borrower contained in the Loan Documents are true and correct in all material respects as of the date of this Amendment (except to the extent that such representations and warranties specifically refer only to another date).

6.           Costs and Expenses.  Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses paid or incurred by Bank in connection with the negotiation, preparation, execution and delivery of this Amendment and all documents, instruments and agreements related hereto and thereto, including the reasonable fees and expenses of Bank's counsel.

7.           Full Force and Effect.  The Loan Agreement, except as otherwise expressly amended hereby, remains in full force and effect.

8.           Execution in Counterparts.  This Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

[remainder of page intentionally left blank]

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9.           Facsimile Signatures.  Facsimile copies of any party's signature hereto shall be deemed effective execution of this Amendment by such party.

JEFFERSON ELECTRIC, INC.
BY	/s/ Thomas Klink
	Its	President
JOHNSON BANK
BY	/s/ Robert Spitzer
	Its

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EX-99.1

EXHIBIT 99.1

Pioneer Power Solutions Completes Acquisition of Jefferson Electric

Acquisition Expected to Be Immediately Accretive; Significantly Broadens Pioneer’s Operating and Product Profile

May 3, 2010

FORT LEE, NJ -- 05/03/10 -- Pioneer Power Solutions, Inc. (OTCBB: PPSI) (“Pioneer”), a manufacturer of liquid-filled electric transformers for utility, industrial and commercial applications, today announced its acquisition of privately-held Jefferson Electric, Inc. (“Jefferson”), a Wisconsin-based manufacturer and supplier of dry-type transformers.

The transaction, valued at approximately $10 million, includes a combination of restricted stock and warrants issued to Mr. Thomas Klink, previously the sole stockholder of Jefferson, as well as extending the term of Jefferson’s existing credit facility. As a result of the acquisition, Jefferson will operate as a wholly owned subsidiary of Pioneer and Mr. Klink will remain as Jefferson’s President. Mr. Klink will also join Pioneer’s board of directors, expanding the total number of directors to six. Jefferson recorded 2009 revenues of approximately $20 million and is expected to be immediately accretive to Pioneer’s earnings per share in 2010.

With over 90 years of operating history, Jefferson is a premier manufacturer and supplier of low-voltage, dry-type transformers for commercial and industrial applications. The company delivers its products through its nationwide network of warehouse sales representatives and growing direct sales channel with original equipment manufacturers (OEM) and in private label manufacturing. All design, engineering, sales, executive management and related support functions are performed by Jefferson’s 35 employees at its headquarters in Franklin, Wisconsin. In addition, all of Jefferson’s manufacturing activities are concentrated at its recently acquired facility in Reynosa, Mexico that employs approximately 120 workers. Jefferson also maintains a centralized warehouse location in Pharr, Texas, near its Mexico plant, enhancing Jefferson’s ease of distribution to over 20 stocking locations and direct customers across the U.S.

Nathan Mazurek, Chairman and CEO of Pioneer, commented, “In terms of product portfolio, geographic presence and channels of distribution, the acquisition of Jefferson puts Pioneer in a very strong position as a balanced, high quality manufacturer and supplier in our industry. The transaction exemplifies our growth strategy to acquire companies with strengths in complementary market niches not already served by us, while also allowing us to quickly expand the scale and scope of our product line and distribution channels. We anticipate this collaboration will have an immediate positive impact on both companies’ profitability and growth prospects.”

Mr. Mazurek continued, “We are also delighted to welcome Mr. Klink to our Board of Directors. He brings with him a wealth of experience and in-depth industry knowledge that will be greatly beneficial to advancing Pioneer’s long term vision. We look forward to working with him and the whole Jefferson team.”

About Pioneer Power Solutions, Inc.

Through its subsidiaries, Pioneer has been engaged in the design, development and manufacturing of liquid-filled power, distribution and specialty electric transformers for over 50 years. Pioneer serves customers in a variety of industries with particular emphasis on the electric utility, industrial and commercial markets in Canada and the United States. To learn more about Pioneer, please visit our website at www.pioneerpowersolutions.com.

About Jefferson Electric, Inc.

Jefferson has been a pioneer and innovator of magnetic products since 1915, enjoying a rich tradition of supplying the automotive, lighting, elevator, communication, transportation, power quality, government and industrial markets. That tradition continues today with high quality dry-type transformers and lighting ballasts for commercial, industrial and OEM customers. To find out more about Jefferson c, please visit www.jeffersonelectric.com.

Forward-looking Statements:

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) fluctuations in foreign currency exchange rates; (ii) the loss of significant customers; (iii) increases in the prices of raw materials; (iv) development of new products and service offerings; (v) the company’s ability to integrate acquisitions; (vi) the effectiveness, profitability, and marketability of the company’s current and prospective products and services; (vii) the impact of current, pending, or future legislation and regulation on the company’s industry; and (viii) the impact of competitive products, services, pricing or technological changes. More detailed information about the company and the risk factors that may affect the realization of forward-looking statements is set forth in the company’s filings with the Securities and Exchange Commission, including the company’s Form 10-K filed with the SEC on April 15, 2010. Investors and security holders are urged to read this document free of charge on the SEC’s web site at www.sec.gov. The company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

Contact:

Howard Gostfrand

American Capital Ventures

305.918.7000

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