Exhibit 10.2

 

SECOND AMENDMENT TO THE AMENDED AND RESTATED

SECURED PROMISSORY NOTE

 

THIS SECOND AMENDMENT TO AMENDED AND RESTATED SECURED PROMISSORY NOTE (the
“Second Amendment”), dated as of December 31, 2019, is entered into by Flux
Power, Inc., a California corporation (“Borrower”) and Esenjay Investments, LLC
(“Holder”). Holder and Borrower, each a “Party” and collectively, the “Parties”.

 

WHEREAS, in connection with the Second Amended and Restated Credit Facility
Agreement, dated October 10, 2019, by and between the Borrower, H older, and
certain other lenders (the “Credit Facility Agreement”), Borrower and Holder are
parties to that certain Amended and Restated Secured Promissory Note, dated as
of March 28, 2019,and as amended on October 10, 2019 (the “Promissory Note”);

 

WHEREAS, the maturity date for the Promissory Note is December 31, 2019;

 

WHEREAS, the Parties desires to amend the Promissory Note to (i) increase the
maximum amount of the Advances (as defined in the Credit Facility Agreement)
from Ten Million Dollars ($10,000,000) to Twelve Million Dollars ($12,000,000),
and (ii) change the maturity date from “December 31, 2019” to “June 30, 2020”
pursuant to the terms and condition of this Second Amendment.

 

Capitalized terms used but not defined herein shall have the meaning given to
them in the Promissory Note.

 

NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements set forth below, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto
agree as follows:

 

1. Amendment to the Promissory Note. It is hereby agreed and understood that the
Promissory Note shall be amended as follows:

 

1.1 Advances. Paragraph 1 of the Promissory Note is hereby amended and restated
in its entirety to read as follows:

 

“1. Advances. So long as there is no Event of Default (as defined below in
Section 4), Holder shall at its sole discretion provide Advances hereunder so
long as the total of all unpaid Advances at the time of such request does not
exceed Twelve Million Dollars ($12,000,000) (the “Maximum Amount”). If, at any
time or for any reason, the amount of Advances pursuant to the Notes owed by
Borrower to Lenders exceeds the Maximum Amount, Borrower shall immediately pay
to Lenders, based on the Lender’s Pro Rata Percentage, in cash, the amount of
such excess. For the purpose of this Note, “Pro Rata Percentage” shall mean such
Lender’s interest in the LOC equal to the amount of all Advances made by such
Lender divided by the aggregate amount of all Advances made by the Lenders.”

 

1.2 Maturity Date. Paragraph 2(b) of the Promissory Note is hereby deleted in
its entirety and shall, be amended to read in its entirety as follows:

 

“(b) Maturity Date. Except as otherwise provided herein, the entire Principal
Amount of this Note, together with all accrued but unpaid interest payable
thereon, shall be due and payable in full on the earlier of: (i) June 30, 2020,
unless extended pursuant to the terms of this Note (the “Maturity Date”) or (ii)
when such amounts are declared due and payable by Holder upon or after the
occurrence of an Event of Default (as defined below).

 

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2. Accrued Interest to Date. As additional consideration, the Parties agreed
that all accrued and unpaid interest on the Principal Amount as of December 31,
2019 shall be converted into the Principal Amount (“Additional Principal
Amount”) and shall earn interest per the Promissory Note. The Parties hereby
acknowledge and agree that by signing this Second Amendment, the Parties hereby
amends the Credit Facility Agreement to increase the aggregate amount of the
Advances from Ten Million Dollars ($10,000,000) to Twelve Million Dollars
($12,000,000) to accommodate the Additional Principal Amount.

 

3. Conversion. The outstanding Principal Amount of the Promissory Note, as
Holder may have advanced to Borrower under the Promissory plus any accrued and
unpaid interests (the “Obligation”), may be converted “Convertible Note”), as
follows:

 

3.1 Definitions. As used in this Promissory Note, the following capitalized
terms have the following meanings:

 

(a) “Equity Securities” shall mean Flux Power Holdings, Inc. (“Issuer”) common
stock, $0.001 par value per share, that is issued and sold to investors in the
Offering.

 

(b) “Equity Securities Price” shall mean the cash price per share of the Equity
Securities paid by purchasers in the Offering.

 

(c) “Equity Securities Conversion Price” shall be equal to the Equity Securities
Price.

 

(d) “Offering” shall mean the closing of a transaction in which the Issuer sells
and issues up to $1,000,000 in Equity Securities, whether in a private or public
offering, occurring on or after December 31, 2019.

 

3.2 Conversion at the Option of the Holder. At any time upon the consummation of
the Offering and before the Maturity Date, the Holder, at Holder’s option and
upon five (5) days prior written notice to the Issuer (“Conversion Notice”), may
convert in whole or in part the outstanding Obligation into a number of shares
of the Equity Securities calculated by dividing (x) the Obligations under the
Promissory Note, by (y) an amount equal to the Equity Securities Conversion
Price. At the Issuer’s election, the issuance of such shares of the Equity
Securities upon conversion of this Note shall be contingent upon execution and
delivery by the Purchaser of all necessary documents entered into by other
purchasers of the Equity Securities, including without limitation a definitive
purchase agreement and related documents.

 

3.3 Mechanics of Conversion. As promptly as practicable after the conversion of
this Promissory Note, this Promissory Note shall be cancelled, and the Issuer
will issue and deliver to the Holder a certificate or certificates representing
the full number of shares of Equity Securities issuable upon such conversion
(and the issuance of such certificate or certificates shall be made without
charge to the Holder for any issuance in respect thereof or other cost incurred
by the Issuer in connection with such conversion and the related issuance of
shares); provided, however, if less than all of the outstanding Obligation is
converted pursuant to Section 3.2, the Company will additionally deliver to the
Holder an amended and restated Promissory Note, containing an original principal
amount equal to that portion of the then-outstanding principal amount not
converted containing the other terms and provisions of this Section 3.2 and
otherwise in form and substance reasonably satisfactory to the Holder. No
fractional shares of Equity Securities or scrip representing a fraction of a
shares of the Equity Securities will be issued upon conversion, but the number
of such shares issuable shall be rounded up to the nearest whole share.

 

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3.4 Reserved Amount. The Issuer agrees that until the repayment or conversion of
this Promissory Note in full, the Issuer will reserve from its authorized and
unissued Equity Securities a sufficient number of shares, free of preemptive
rights, to provide for the issuance of the shares of Equity Securities upon full
conversion of this Note.

 

3.5 Adjustments. If the Issuer at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise), its outstanding shares of Equity
Securities into a greater number of shares, the conversion price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Issuer at any time combines (by reverse stock split, recapitalization or
otherwise) its outstanding shares of Equity Securities into a smaller number of
shares, the conversion price in effect immediately prior to such combination
will be proportionately increased.

 

4. Representations and Warranties of the Holder. The Holder hereby represents
and warrants to the Company and the Issuer as follows

 

4.1 Organization, Authority If the Holder is an entity, such Holder is a
corporation, partnership, limited liability company or partnership, association,
joint stock company, trust, unincorporated organization or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership or
other power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Holder of the
Securities hereunder has been, to the extent such Holder is an entity, duly
authorized by all necessary corporate, partnership or other action on the part
of such Holder. This Agreement has been duly executed and delivered by such
Holder and constitutes the valid and binding obligation of such Holder,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

4.2 Investment Representations. In connection with the sale and issuance of the
Convertible Note and underlying Equity Securities (“Securities”), the Holder,
for itself and no other Holder, makes the following representations:

 

(a)  Investment for Own Account. The Holder is acquiring the Securities for its
own account, not as nominee or agent, and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (“Securities Act”). The Holder has no
present intention of selling, granting any participation in, or otherwise
distributing the Securities. The Holder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation in any of the Securities to such person or to any third person.

 

(b) SEC Documents. The Holder acknowledges and agrees that the Issuer has made
available to the Holder through the SEC’s EDGAR system, true and complete copies
of the Issuer’s most recent Annual Report on Form 10-K for the fiscal year ended
June 30, 2019, and Form 10-Q for the quarter ended September 30, 2019, and all
other reports filed by the Issuer pursuant to the Exchange Act since the filing
of the Form 10-Q for the quarter ended September 30, 2019 prior to the date
hereof (collectively, the “SEC Documents”). The Holder has received, read and
fully understands the SEC Documents. The Holder acknowledges that the Holder is
basing its decision to invest in the Securities on the SEC Documents, the
Promissory Note and the Second Amendment, and has relied only on the information
contained in said material and has not relied upon any representations made by
any other person. The Holder recognizes that an investment in the Securities
involves substantial risks and is fully cognizant of and understands all of the
risk factors related to the purchase of the Securities, including but not
limited to, those risks set forth in the section of the SEC Documents entitled
“RISK FACTORS.”

 

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(c) Accredited Holder Status. At the time such Holder was offered the
Securities, it was and, at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act or a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act. Such Holder is not a
registered broker dealer registered under Section 15(a) of the Exchange Act, or
a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an
entity engaged in the business of being a broker dealer. Such Holder is not
affiliated with any broker dealer registered under Section 15(a) of the Exchange
Act, or a member of FINRA or an entity engaged in the business of being a broker
dealer. Holder has provided the Issuer a duly completed and executed original of
the Accredited Holder Questionnaire confirming that the Holder is an “accredited
investors.”

 

(d) Representations and Reliance. Holder understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Issuer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Holder set forth herein to determine the applicability of such exemptions
and the suitability of the Holder to acquire the Securities. All information
which the Holder has provided to the Issuer in the Accredited Holder
Questionnaire concerning itself is true and accurate in all material respects,
and if there should be any material change in such information the Holder will
immediately provide the Issuer with such information. The Holder will promptly
notify the Issuer of any material fact or circumstance that would cause any of
the foregoing representations to be untrue, incomplete, or misleading.

 

(e) Restricted Securities. Holder understands that the Securities the Holder is
purchasing are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Issuer in a
transaction not involving a public offering and that under such laws and
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. The Holder is familiar
with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act. The Holder also acknowledges that the
Issuer was a former “shell company” (as defined in Rule 12b-2 under the Exchange
Act) and as such the Holder understands Rule 144 is not currently available for
the sale of the Securities and may not be so available as the Company was a
former “shell company” as defined in Rule 12b-2 under the Exchange Act..

 

(f) Transfer Restrictions; Legends. Holder understands that (i) the Securities
have not been registered under the Securities Act; (ii) the Securities are being
offered and sold pursuant to an exemption from registration, based in part upon
the Company’s reliance upon the statements and representations made by the
Holder, and that the Securities must be held by the Holder indefinitely, and
that the Holder must, therefore, bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; and (iii) each Certificate
representing the Securities will be endorsed with a legend substantially in the
following form until the earlier of (1) such date as the Securities have been
registered for resale by the Holder or (2) the date the Securities are eligible
for sale under Rule 144.

 

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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF
ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

(g) Limited Public Market. Holder understands and acknowledges that there is
only a limited public market for the Issuers Common Stock on the OTCQB, and
which market is very volatile, and the Issuer has made no assurances that a
broader or more active public trading market for its Common Stock will ever
exist.

 

(h) No Transfer. The Holder covenants not to dispose of any of the Securities
other than in conjunction with an effective registration statement under the
Securities Act or in compliance with Rule 144 or pursuant to another exemption
from registration or to an entity affiliated with the Holder and other than in
compliance with the applicable securities regulations laws of any state.

 

(i) Investment Experience. Holder acknowledges that the Holder is able to bear
the economic risk of the Holder’s investment, including the complete loss
thereof. The Holder has a preexisting personal or business relationship with the
Issuer or one or more of its officers, directors or other persons in control of
the Issuer, and the Holder has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Securities.

 

(j) Financial Sophistication; Due Diligence. The Holder has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in connection with the transactions
contemplated in this Agreement. Such Holder has, in connection with its decision
to purchase the Securities, relied only upon the representations and warranties
contained herein and the information contained in the Issuer’s SEC Documents.
Further, the Holder has had such opportunity to obtain additional information
and to ask questions of, and receive answers from, the Issuer, concerning the
terms and conditions of the investment and the business and affairs of the
Issuer, as the Holder considers necessary in order to form an investment
decision.

 

(k) General Solicitation. The Holder is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over the television or radio or presented at any seminar or any other
general solicitation or general advertisement. Prior to the time that the Holder
was first contacted by the Issuer or either of the agents such Holder had a
pre-existing and substantial relationship with the Issuer or one of the agents.
The Holder will not issue any press release or other public statement with
respect to the transactions contemplated by this Agreement without the prior
written consent of the Issuer. Other than to other parties to this Agreement,
the Holder has maintained and will continue to maintain the confidentiality of
all disclosures made to Holder in connection with this transaction, including
the existence and terms of this transaction.

 

4.3 No Investment, Tax or Legal Advice. The Holder understands that nothing in
the SEC Documents, the Promissory Note, or this Second Amendment, or any other
materials presented to the Holder in connection with the purchase and sale of
the Securities constitutes legal, tax or investment advice. The Holder has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of
Securities.

 

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4.4 Disclosure of Information. The Holder understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities. The
Holder has reviewed the documents publicly filed by the Issuer with the SEC and
has read and understands the risk factors disclosed therein. The Holder has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. The Holder is solely responsible for
conducting its own due diligence investigation of the Issuer.

 

4.5 Placement Agent. The Holder acknowledges and agrees that the Issuer may
retain registered broker-dealers as its placement agent (the “Selling
Agent(s)”). In general, any agreements entered into with the Selling Agent(s)
will be on a “best efforts” basis and the fees to be paid will be capped at
seven percent (7%) of the subscription attributable to the Selling Agent(s).

 

4.6 Additional Acknowledgement. The Holder acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, that it has independently determined to enter into the transactions
contemplated hereby, that it is not relying on any advice from or evaluation by
any other person. The Holder acknowledges that, if it is a client of an
investment advisor registered with the SEC, the Holder has relied on such
investment advisor in making its decision to purchase Securities pursuant
hereto.

 

5. Miscellaneous.

 

5.1 Except as expressly amended and modified by this Second Amendment, the
Promissory Note is and shall continue to be in full force and effect in
accordance with the terms thereof.

 

5.2 This Second Amendment may be executed by the parties hereto in counterparts,
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

 

5.3 The Second Amendment shall be construed in accordance and governed by the
internal laws of the state of California.

 

5.4 The headings contained in this Second Amendment are for ease of reference
only and shall not be considered in construing this Second Amendment.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the
Amended and Restated Secured Promissory Note to be duly executed as of the day
and year first written above.

 

 

BORROWER

 

Flux Power, Inc.,

a California corporation

      /s/ Ronald Dutt   Ronald Dutt, Chief Executive Officer

 

 

HOLDER

 

Esenjay Investments, LLC

 

    /s/ Michael Johnson   Name: Michael Johnson   Title: Chief Executive Officer

 

Agreed solely as it relates to Sections 3 and 4 of this Second Amendment.

 

Flux Power Holdings, Inc.,

a Nevada corporation

 

/s/ Ronald Dutt   Ronald Dutt, Chief Executive Officer  

 

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