Exhibit 10.1

CREDIT FACILITY AGREEMENT

 

THIS CREDIT FACILITY AGREEMENT (the “Agreement”), dated as of March 22, 2018
(the “Effective Date”), is entered into by and between Flux Power, Inc., a
California corporation (“Borrower”), and Esenjay Investments, LLC (“Lender”).

 

 

WHEREAS, Borrower has requested that Lender make available to Borrower a line of
credit (the “LOC”) in a maximum principal amount at any time outstanding of up
to Five Million Dollars ($5,000,000), the proceeds of which shall be used by
Borrower to purchase inventory and related operational support expense purposes;

 

WHEREAS, Lender has already extended $1,580,000 to Borrower for the purchase of
inventory and related operational support expenses;

 

WHEREAS, Borrower and Lender both desire to memorialize the LOC pursuant to the
terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Borrower and Lender hereby agree as follows:

 

 

1.

Credit Facility.

 

(a)     Subject to the sole discretion of Lender, and subject to the terms and
conditions of this Agreement, Lender hereby agrees to extend a LOC of up to Five
Million Dollars ($5,000,000) (the “Advances”) to Borrower from time to time from
the date hereof until terminated by the parties pursuant to the Secured
Promissory Note, dated the date hereof, in substantially the form attached
hereto as Exhibit A (the “Note”), the terms of which are incorporated herein by
this reference. The parties acknowledge that the prior $1,580,000 loan provided
by Lender to Borrower will be recorded as an Advance upon the execution of the
Note. All Advances shall be made pursuant the terms and obligations set forth in
the Note.

 

(b)     For the purposes of the Advances, subject to the limitations, terms and
conditions set forth in the Note, Borrower may, from time to time six months
after the date in which the Advance is received, prior to the Due Date (as
defined in the Note) draw down, repay, and re-borrow on the Note, by giving
notice to Lender of the amount to be requested to be drawn down.

 

(c)     In order to secure Borrower’s performance under the Note, Borrower will
provide Lender with a security interest in substantially all of the Borrower’s
tangible and intangible assets in substantially the form attached hereto as
Exhibit B (the “Security Agreement”), the terms of which are incorporated herein
by this reference.

 

(d)     All Advances shall be used by Borrower for the purchase of inventory and
related operational support expenses.

 

(e)     The Note and the Security Agreement, together with all of the other
agreements, documents, and instruments heretofore or hereafter executed in
connection therewith or with the Loan to be made under this Agreement, as the
same may be amended, supplemented or modified from time to time, shall
collectively be referred to herein as the “Loan Documents.”

 

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Exhibit 10.1

 

2.     Interest Rate and Fees. Interest and fees shall accrue and be payable on
the Loan as set forth in the Note.

 

3.     Representations and Warranties of Borrower. Borrower represents and
warrants to Lender that:

 

(a)     Corporate Existence and Power.

 

(i)     Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of California.

 

(ii)     Borrower has the power and authority to own its properties and assets
and to carry out its business as now being conducted.

 

(iii)     Borrower has the power and authority to execute, deliver and perform
the Loan Documents to which it is a party, to borrow and guaranty money in
accordance with the terms thereof, to execute, deliver and perform its
obligations under the Note and the other Loan Documents to which it is a party
and any other documents made by it as contemplated hereby, and to grant to
Lender liens and security interests in the Collateral (as defined in the
Security Agreement) as hereby contemplated.

 

(b)     Authorization and Approvals. All corporate action on the part of
Borrower, its board of directors, and shareholders necessary for the (a)
authorization, execution, delivery and performance by it of the Loan Documents
to which it is a party, and (b) the performance of its obligations under the
Loan Documents, has been taken or will be taken prior to this Agreement. This
Agreement and the other Loan Documents, when executed and delivered by Borrower
shall constitute the valid and binding obligations of Borrower, enforceable in
accordance with their respective terms.

 

(c)     Pre-existing business relationship; Experience. Borrower has a
pre-existing business relationship with Lender and has such knowledge and
experience in financial and business matters: (a) to be capable of evaluating
the merits and risks of the LOC, (b) to make an informed decision relating
thereto, and (c) to protect its own interests in connection with the transaction
contemplated by this Agreement.

 

(d)     Compliance with Laws, Etc. The execution and delivery of this Agreement
and the Note hereunder does not and will not violate any requirement of law or
any contractual obligation of Borrower.

 

(e)     Defaults. Borrower is not currently in default of any contractual
obligation that would have a material adverse effect on Borrower’s business,
assets or financial condition.

 

(f)     Litigation. There is no litigation, arbitration or other proceedings
taking place, pending or to the knowledge of Borrower threatened against
Borrower or any of its assets which questions the validity of this Agreement or
the right of Borrower to enter into it or to consummate the transactions
contemplated hereby.

 

4.     Representations and Warranties of Lender. Lender represents and warrants
to Borrower that:

 

(a)     Requisite Power and Authority. Lender has all of the requisite power,
authority, and capacity to execute, deliver, and comply with the terms of this
Agreement, and such execution, delivery, and compliance does not conflict with,
or constitute a default under, any instruments governing Lender, any law,
regulation or order, or any agreement to which Lender is a party or by which the
Lender may be bound. All action on Lender’s part necessary for the execution and
delivery of the Agreement, the consummation of the transactions contemplated
hereby, and the performance of all obligations of Lender hereunder has been
taken. This Agreement has been duly executed and delivered by Lender.

 

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Exhibit 10.1

 

(b)     Subordination. Lender acknowledges and agrees that Esenjay Investments,
LLC and Herndon Plant Oakley (“Senior Creditors”) have a senior securities
interest in the Collateral, and that the security interest in the Collateral
granted by Borrower to Lender will be subordinated to the Senior Creditors.

 

(c)     Pre-existing business relationship; Experience. Lender has a
pre-existing business relationship with Borrower and has such knowledge and
experience in financial and business matters: (a) to be capable of evaluating
the merits and risks of the loan to Borrower, (b) to make an informed decision
relating thereto, and (c) to protect its own interests in connection with the
transaction contemplated by this Agreement.

 

5.     Notices. Any notice, request, instruction, or other document to be given
hereunder by any party hereto to any other party will be in writing and will be
given by delivery in person, by facsimile transmission, by email or other
electronic communication, by overnight courier or by registered or certified
mail, postage prepaid (and will be deemed given when delivered if delivered by
hand, when transmission confirmation is received if delivered by facsimile,
three (3) days after mailing if mailed by United States mail, and one (1)
business day after deposited with an overnight courier service if delivered by
overnight courier), as follows:

 

 

If to Borrower:

Flux Power, Inc.

Attn: President

985 Poinsettia Avenue, Suite A

Vista, California 92081

rdutt@fluxpwr.com

        If to Lender:

Esenjay Investments, LLC

Attn: Howard Williams

500 N. Water, Suite 1100S

Corpus Christi, TX 78471

Williams@epc-cc.com

 

or at such other address of which any party may, from time to time, advise the
other party by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
facsimile (with confirmation) thereof.

 

6.     Entire Agreement. This Agreement, the Loan Documents, and the other
agreements entered into in connection herewith supersede all prior negotiations
and agreements (whether written or oral) and constitute the entire understanding
among the parties hereto.

 

7.     Successors. This Agreement shall inure to the benefit of and be binding
upon the parties named herein and their respective successors and assigns.

 

8.     Headings. The section headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions of this Agreement.

 

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Exhibit 10.1

 

9.     Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without reference to
principles of conflict of law and, in the event of any litigation or other
dispute in connection with this Agreement or any of the exhibits attached
hereto, the venue and jurisdiction of which shall be in Los Angeles County,
California.

 

10.     Delay, Etc. No delay or omission to exercise any right, power or remedy
accruing to any party hereto shall impair any such right, power or remedy of
such party nor be construed to be a waiver of any such right, power or remedy,
nor constitute any course of dealing or performance hereunder.

 

11.     Costs and Attorneys’ Fees. If any action, suit, arbitration proceeding
or other proceeding is instituted arising out of this Agreement, the prevailing
party shall recover all of such party’s costs, including, without limitation,
the court costs and reasonable attorneys’ fees incurred therein, including any
and all appeals or petitions therefrom.

 

12.     Waiver and Amendment. Any of the terms and provisions of this Agreement
may be waived at any time by the party that is entitled to the benefit thereof,
but only by a written instrument executed by such party. This Agreement may be
amended only by an agreement in writing executed by the parties hereto.

 

13.     Counterparts; Electronic Transmission. This Agreement may be executed in
one or more counterparts (any of which may be delivered by fax or electronic
mail transmission), each of which will for all purposes be deemed to be an
original and all of which will constitute the same instrument.

 

IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement effective as of the date first above written.

 

 

BORROWER:

 

Flux Power, Inc.,

a California corporation

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ronald F. Dutt 

 

 

 

Ronald F. Dutt, Chief Executive Officer

 

 

 

 

 

         

LENDER:

 

Esenjay Investments, LLC

                    By: /s/ Howard Williams        Howard Williams, Treasurer  

 

 

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