LOCK-UP AGREEMENT
Exhibit
10.4
December
2, 2009
Ladies
and Gentlemen:
The
undersigned is the owner of certain shares of common stock, $.001 par value per
share, of Pioneer Power Solutions, Inc., a Delaware corporation (the “Company”), that were
received pursuant to that certain Share Exchange Agreement, of even date
herewith, between the Company, the undersigned and Pioneer Transformers Ltd., a
Canadian corporation (the “Exchange Shares”).
The undersigned understands that in connection with the Share Exchange
Agreement, the Company has entered into a securities purchase agreement, of even
date herewith (the “Purchase Agreement”),
pursuant to which the Company will issue and sell to the investors set forth
therein (the “Investors”) the
Shares (as defined in the Purchase Agreement) in exchange for proceeds of at
least $5,000,000 (the “Funding
Transaction”). The undersigned understands that the Company and the
Investors will proceed with the Funding Transaction in reliance on this Letter
Agreement.
1. In
recognition of the benefit that the Funding Transaction will confer upon the
undersigned, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees, for the
benefit of the Company and the Investors, that during the period beginning on
the closing of the Funding Transaction and ending eighteen (18) months after
such date (the “Lockup
Period”), the undersigned will not, without the prior written consent of
the Investors, (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 Exchange Shares or any securities into or
for which the Exchange Shares may be converted, exercised or exchanged, whether
as a result of the Funding Transaction, 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 Exchange Shares, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of any of the
Exchange Shares; and
2. Notwithstanding
the foregoing, the undersigned (and any transferee of the undersigned) may
transfer any of the Exchange Shares (i) as a bona fide gift or gifts, provided
that prior to such transfer the donee or donees thereof agree in writing to be
bound by the restrictions set forth herein, (ii) to any trust, partnership,
corporation or other entity formed for the direct or indirect benefit of the
undersigned or the immediate family of the undersigned, 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 herein,
and provided further that any such transfer shall not involve a disposition for
value, (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 executes an agreement stating that the transferee is
receiving and holding any of the Exchange Shares subject to the provisions of
this agreement or (iv) in connection with privately negotiated transactions,
provided that any such transferee agrees, in writing, to be bound by the
restrictions set forth herein. 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
undersigned hereby consents to the placing of legends and/or stop transfer
orders with the transfer agent with respect to any Exchange Shares.
3. This
agreement shall be governed by and construed in accordance with the laws of the
State of New York.
4. This
agreement will become a binding agreement among the undersigned as of the date
hereof. This agreement (and the agreements reflected herein) may be terminated
or modified only by the mutual agreement of the Company, the Investors holding a
majority of the Shares, and the undersigned, and if not sooner terminated, will
terminate upon the expiration date of the Lockup Period.
Very
truly yours,
_____________________________
Print
Name:
Address:
______________________________________
Number of
Exchange Shares owned: ________________
Certificate
Numbers: _____________________________
