18. SUBSEQUENT EVENTS

On January 7, 2016, Andrew Minkow resigned as a director and as chief financial officer of the Company, effective immediately. In connection with his resignation, Mr. Minkow entered into a General Release and Severance Agreement (the “Severance Agreement”) with the Company, pursuant to which, among other things, (i) that certain employment agreement between Mr. Minkow and the Company, dated March 30, 2012 (as amended, the “Employment Agreement”), was terminated, except with respect to the provisions of the Employment Agreement relating to confidentiality and restrictive covenants that remain in effect, (ii) Mr. Minkow resigned from all of his positions with the Company, (iii) the Company retained Mr. Minkow as a consultant for a period of three months (the “Consultancy Period”) to perform such services as may be reasonably requested by the Company for $25,000 monthly retainer payments, in exchange for Mr. Minkow making himself available for up to 40 hours per week, (iv) Mr. Minkow provided a release of claims against the Company, and (v) the Company will provide Mr. Minkow with the following: (a) severance payments, in an amount equal to his base salary for a period of three months after the 60^th day following the expiration of the Consultancy Period (with the initial payment including any amounts that would have been payable to Mr. Minkow during such 60 day period, subject to Mr. Minkow’s compliance with the Severance Agreement); and (b) a lump-sum equivalent to the Company’s portion of Mr. Minkow’s premiums under the Consolidated Omnibus Budget Reconciliation Act of 1985 for 12 months on the first payroll date after the 60^th day following the date of the Severance Agreement. Any grants of equity-based incentive compensation granted to Mr. Minkow will remain subject to the terms of the Pioneer Power Solutions, Inc. 2011 Long-Term Incentive Plan and as set forth in the applicable grant documents.

In addition, in exchange for Mr. Minkow’s execution of a supplemental release agreement following the Consultancy Period, and Mr. Minkow’s compliance with the terms there under and the Severance Agreement, the Company agreed to pay Mr. Minkow an amount equal to his base salary for 6 months, payable in accordance with the Company’s standard payroll practices, following cessation of the above described severance payments.

On March 21, 2016, the Company secured a second limited duration waiver and consent letter from the Bank of Montreal with respect to its U.S. Facilities and its Canadian Facilities, pursuant to which Bank of Montreal agreed to extend its waiver of certain existing defaults until April 30, 2016 and to permit up to $5.0 million of available borrowing capacity under the Canadian Facilities to be advanced to the Company’s U.S. operations for working capital purposes, subject to the satisfaction of additional financial reporting requirements, margin criteria and other conditions.

On March 28, 2016, the Company executed a committed term sheet for a formal extension of our credit facilities from the Bank for Montreal to July 31, 2017. A formal amendment of the credit agreement is expected to be executed during the second quarter of 2016, with terms that will be consistent with those agreed upon in the committed term sheet. With the execution of the amendment to the credit agreement, portions of the credit facilities will be classified as long term indebtedness. This committed term sheet contains revised covenants and funding amounts that finance our cash requirements for anticipated operating activities, restructuring and integration plans, capital improvements and scheduled principal repayments of long-term debt.