EX-10.1 2 ex10-1.htm EXHIBIT 10.1

Exhibit 10.1

 

INSTRUCTIONS TO PROSPECTIVE INVESTORS

OF

FLUX POWER HOLDINGS, INC.,

a Nevada corporation

 

After you have reviewed the Subscription Agreement ("Subscription Agreement"),
and you wish to complete the proposed transaction, take the following actions
with respect to the documents set forth below (the "Transaction Documents"):

 

 

1.

Please sign the Subscription Agreement.

 

 

2.

Please complete the Investor Suitability Questionnaire.

 

 

--------------------------------------------------------------------------------

 

FLUX POWER HOLDINGS, INC.

SUBSCRIPTION AGREEMENT

 

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated August 15, 2016, is
entered into by and between Flux Power Holdings, Inc., a Nevada corporation (the
“Company”), and the person or entity executing the Agreement (the “Investor”).
In this Agreement, the pronoun “it” means “he, “she,” or “it,” as appropriate.

 

A.   The Company originally offered to selected “accredited investors” up to
77,500,000 shares of the Company’s Common Stock, par value $0.001 (“Shares”) for
an aggregate amount of $3,100,000, or $0.04 per Share;

 

B.    In July 28, 2016, 2016, the Board decided that it was in the best interest
of the Company and its shareholders to increase the offering to up to
100,000,000 Shares for aggregate amount of $4,000,000, or $0.04 per Share (the
“Offering”), subject to the terms, conditions, acknowledgements,
representations, and warranties stated herein; however, the Company reserves the
right to accept subscriptions for lesser amounts as well as the right to reject
in whole or in part subscriptions received during the Offering.

 

C.    The Company and the Investor are executing and delivering this Agreement
in reliance upon the exemption from registration afforded by Section 4(a)(2) of
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act.

 

D.    As part of this Offering, Esenjay Investments LLC (“Esenjay”), a
controlling shareholder of the Company which owns approximately 66% of the
Company’s issued and outstanding common stock and our primary credit line
holder, has purchased 33,750,000 Shares of common stock in exchange for
forgiveness of debt owed to Esenjay by the Company’s wholly-owned subsidiary,
Flux Power, Inc., in the amount of $1,350,000 (“Outstanding Debt”). In addition,
Esenjay has also purchased 6,250,000 shares of common stock for the aggregate
amount of $250,000.

 

E.     As an additional part of this Offering Esenjay has agreed to purchase an
aggregate of 10,000,000 Shares in exchange for forgiveness of debt owed to
Esenjay in the amount of $400,000.

 

F.     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investor agree as
follows:

 

ARTICLE I
DEFINITIONS

 

1.     Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:

 

“Aggregate Purchase Price” means the product of the aggregate number of Shares
subscribed by the Investor under this Agreement and purchase price of $0.04 per
Share.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Business Day” means any day other than Saturday, Sunday, any day which shall be
a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

1

--------------------------------------------------------------------------------

 

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

 

“Common Stock” means common stock of the Company, par value $0.001.

 

“Disclosure Materials” means the SEC Documents and this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Investor” has the meaning set forth in the Preamble.

 

“Investor Suitability Questionnaire” means the Investor Suitability
Questionnaire, in substantially set forth herein as “Exhibit A” as completed and
executed by the Investor.

 

“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company or
(ii) material and adverse impairment of the Company’s ability to perform its
obligations under any of the Transaction Documents.

 

“Regulation D” has the meaning set forth in the Preamble.

 

“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Documents” has the meanings set forth in Section 3.4.

 

“Securities Act” has the meaning set forth in the Recitals.

 

“Shares” means shares of the Company’s Common Stock.

 

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, including but not limited to the Investor Suitability
Questionnaire.

 

ARTICLE II
PURCHASE AND SALE

 

2.     Offering and Purchase of the Shares.

 

2.1    Offering. The Company is offering to sell up to 100,000,000 Shares for
aggregate amount of $4,000,000 (“Offering Amount”), or $0.04 per Share (the
“Offering”). The Company has the sole discretion to increase the Offering
Amount. The minimum investment amount in this Offering per Investor is $25,000,
however, the Company reserves the right to accept subscriptions for lesser
amounts as well as the right to reject in whole or in part subscriptions
received during the Offering.

 

2.2     Subscription. The Investor hereby irrevocably subscribes to purchase
from the Company, upon the terms and conditions stated in this Agreement, that
aggregate number of Shares for the Aggregate Purchase Price set forth on such
Investor’s signature page to this Agreement.

 

2

--------------------------------------------------------------------------------

 

2.3    Investor Deliverables. Promptly upon execution of this Agreement, the
Investor agrees to deliver to Company (a) an executed Agreement, (b) a completed
Investor Suitability Questionnaire, attached hereto as Exhibit A to the Company
(“Investor Suitability Questionnaire”), and (c) the Cancellation of Debt for
Shares, attached hereto as Exhibit B as payment of the Aggregate Purchase Price
set forth on such Investor’s signature page to this Agreement (collectively,
referred to as the “Investor Deliverables”).

 

2.4    Acceptance or Rejection of Subscription. The Investor understands and
agrees that the Company reserves the right, in its sole discretion, to reject
this subscription, in whole or in part if (a) the Investor is not an "accredited
investor" or otherwise fails to meet the investor suitability requirements as
set forth in the Investor Suitability Questionnaire, (b) fails to deliver
payment of the Aggregate Purchase Price, or (c) fails to deliver a completed
Investor Deliverables, until there has been notice of acceptance of the
Investor’s subscription. In the event of rejection of this subscription, the
Investor’s funds (without interest) or, in the event of a partial rejection a
check in the amount of the rejected portion, will be promptly issued to the
Investor.

 

2.5    Closing. The issuance of up to 10,000,000 Shares shall take place
promptly after the acceptance of the subscription by the Company and the Company
has received Investors Deliverables (the date on which such Shares are issued
shall be referred to herein as the “Initial Closing Date”); provided that if
Investor is purchasing the Shares subsequent to the Initial Closing Date, the
issuance of the Shares shall occur upon payment of the Aggregate Purchase Price
by Investor and acceptance of Investor’s Subscription Agreement by the Company.
The date on which the Shares are issued, whether on the Initial Closing Date or
thereafter, shall be referred to herein as the “Closing Date;” provided,
however, that no sales to subsequent Investors may be made after August 31,
2016, 5:00 pm (PST). Following the Closing Date, the Company will promptly
deliver to the Investor:

 

(a)    an "accepted" Subscription Agreement; and

 

(b)    the stock certificate representing the number of Shares purchased by the
Investor, as set forth on the Investor’s signature page to this Agreement.

 

2.5     No Escrow or Minimum Investment Amount. No escrow or minimum investment
amount will be used for the offering.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY

 

3.     Representations and Warranties of the Company. Except as disclosed in the
SEC Documents and as otherwise stated to the contrary herein, the Company hereby
represents and warrants to the Investor as of the date hereof, and, if this
Agreement is accepted by the Company in whole or in part, will be true and
correct on the Closing Date that:

 

3.1     Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement has been taken. The Company has the requisite
corporate power to enter into this Agreement and carry out and perform its
obligations under the terms of this Agreement. The Company will have the
requisite corporate power to issue and sell the Shares. This Agreement has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, 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.

 

3

--------------------------------------------------------------------------------

 

3.2     Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a Material Adverse Effect.

 

3.3    Outstanding Debt. Michael Johnson, the Company’s director, is the
director and sole member of Esenjay. As part of this Offering, Esenjay, a
controlling shareholder of the Company which owns approximately 65% of the
Company’s issued and outstanding Common Stock and our primary credit line
holder, has agreed to purchase an aggregate of 10,000,000 Shares in exchange for
forgiveness of the Outstanding Debt. Concurrently with the Initial Closing Date,
Esenjay will execute a subscription agreement in substantially the form of this
Agreement to convert its Outstanding Debt into the Shares.

 

3.4     Delivery of SEC Documents; Business. The Company has made available to
the Investor through the SEC’s EDGAR system, true and complete copies of the
Company’s most recent Annual Report on Form 10-K for the fiscal year ended June
30, 2015 and Form 10-Qs for the quarters ended September 30, 2015 and December
31, 2015, and all other reports filed by the Company pursuant to the Exchange
Act since the filing of the Form 10-Q for the quarter ended December 31, 2015,
and prior to the date hereof (collectively, the “SEC Documents”). The Company is
engaged in all material respects only in the business described in the SEC
Documents and the SEC Documents contain a complete and accurate description of
the business of the Company in all material respects.

 

3.5     No Conflict with Other Instruments. The execution, delivery and
performance of this Agreement, the issuance and sale of the Shares to be sold by
the Company under this Agreement and the consummation of the actions
contemplated by this Agreement will not (a) result in any violation of, be in
conflict with, or constitute a material default under, with or without the
passage of time or the giving of notice (i) any provision of the Company’s
Articles of Incorporation, as amended, or Bylaws, as amended (or similar
governing documents); (ii) any provision of any judgment, arbitration ruling,
decree or order to which the Company is a party or by which the Company is
bound; or (iii) any bond, debenture, note or other evidence of indebtedness, or
any material lease, contract, mortgage, indenture, deed of trust, loan
agreement, joint venture or other agreement, instrument or commitment to which
the Company is a party or by which the Company or its properties is bound; or
(b) result in the creation or imposition of any lien, encumbrance, claim,
security interest or restriction whatsoever upon any of the properties or assets
of the Company or any acceleration of indebtedness pursuant to any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is subject.

 

3.6    Capitalization. As of June 30, 2016, the authorized capital stock of the
Company consists of (a) 300,000,000 shares of Common Stock, of which (i)
209,375,137 shares are issued and outstanding, and (b) 71,564,863 shares are
reserved for issuance upon the exercise or conversion, as the case may be, of
outstanding options, warrants or other convertible securities; and (c) 5,000,000
shares of preferred stock, none of which, are outstanding or reserved for
issuance upon the exercise or conversion, as the case may be, of outstanding
options, warrants or other convertible securities. Except as disclosed in the
Company SEC Documents and set forth in the Company’s Articles of Incorporation,
as amended and contemplated in the Transaction Documents, there are no
anti-dilution or price adjustment provisions, co-sale rights, registration
rights, rights of first refusal or other similar rights contained in the terms
governing any outstanding security of the Company that will be triggered by the
issuance of the Shares.

 

4

--------------------------------------------------------------------------------

 

3.7     Valid Issuance of the Shares. The Shares will be duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and non-assessable, and shall be free and clear of
all encumbrances and restrictions (other than those created by the Investor),
except for restrictions on transfer set forth in this Agreement or imposed by
applicable securities laws.

 

3.8     Litigation. Except as set forth in the Company SEC Documents, there is
no action, suit, proceeding nor investigation pending or, to the Company’s
knowledge, currently threatened against the Company that (a) if adversely
determined would reasonably be expected to have a Material Adverse Effect or (b)
would be required to be disclosed in the Company’s Annual Report on Form 10-K
under the requirements of Item 103 of Regulation S-K. The foregoing includes,
without limitation, any action, suit, proceeding or investigation, pending or
threatened, that questions the validity of this Agreement or the right of the
Company to enter into such Agreement and perform its obligations hereunder. The
Company is not subject to any injunction, judgment, decree or order of any
court, regulatory body, arbitral panel, administrative agency or other
government body.

 

3.9    Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for notices required or permitted to be
filed with certain state and federal securities commissions, which notices will
be filed on a timely basis.

 

3.10   No Material Changes. Except as disclosed in the Company SEC Documents and
since December 31, 2015, there has not been any material change that has had a
Material Adverse Effect.

 

3.11   Investment Company. The Company is not an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940 and
will not be deemed an “investment company” as a result of the transactions
contemplated by this Agreement.

 

3.12   No General Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged or will engage in any
form of general solicitation or general advertising (within the meaning of
Regulation D promulgated under the Securities Act) in connection with the offer
or sale of the Shares.

 

3.13   Placement Agent. The Company may retained registered broker-dealers as
its placement agent (“Selling Agent(s)”). In general, any agreements entered
into with Selling Agent(s) will be on a “best efforts” basis and the fees to be
paid will be capped at 6% of the subscription attributable to the Selling
Agent(s).

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

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

 

4.1    Organization, Authority If the Investor is an entity, such Investor 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 Investor of the
Securities hereunder has been, to the extent such Investor is an entity, duly
authorized by all necessary corporate, partnership or other action on the part
of such Investor. This Agreement has been duly executed and delivered by such
Investor and constitutes the valid and binding obligation of such Investor,
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.

 

5

--------------------------------------------------------------------------------

 

4.2    Investment Representations. In connection with the sale and issuance of
the Shares, the Investor, for itself and no other Investor, makes the following
representations:

 

(a)    Investment for Own Account. The Investor is acquiring the Shares 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. The Investor has no present intention of selling,
granting any participation in, or otherwise distributing the Shares. The
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation in any of the Shares to such
person or to any third person.

 

(b)    SEC Documents; Disclosure Materials. The Investor has received, read and
fully understands the SEC Documents and the Disclosure Material. The Investor
acknowledges that the Investor is basing its decision to invest in the Shares on
the Disclosure Material and the exhibits thereto and has relied only on the
information contained in said material and has not relied upon any
representations made by any other person. The Investor recognizes that an
investment in the Shares involves substantial risks and is fully cognizant of
and understands all of the risk factors related to the purchase of the Shares,
including but not limited to, those risks set forth in the section of the SEC
Documents and Disclosure Materials entitled “RISK FACTORS.”

 

(c)     Investor Status. At the time such Investor was offered the Shares, it
was, at the date hereof it is, and on the date which it exercises any Warrants
it will be 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 Investor 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 Investor 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.

 

(d)    Representations and Reliance. The Investor understands that the Shares
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 Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein and in the Investor Suitability Questionnaire to
determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares. All information which the Investor has provided
to the Company, including but not limited to all information given herein and in
the Investor Suitability Questionnaire or otherwise, concerning itself, investor
status, address, residence, financial position and knowledge and experience of
financial and business matters are correct and complete, and that if there
should be any material change in such information the Investor will immediately
provide the Company with such information. The Investor will promptly notify the
Company of any material fact or circumstance that would cause any of the
foregoing representations to be untrue, incomplete, or misleading.

 

6

--------------------------------------------------------------------------------

 

(e)    Restricted Securities. The Investor understands that the Shares the
Investor is purchasing are characterized as “restricted securities” under the
federal securities laws inasmuch as they are being acquired from the Company 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 Investor is familiar
with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act. The Investor also acknowledges that
the Company was a former “shell company” (as defined in Rule 12b-2 under the
Exchange Act) and as such the Investor understands Rule 144 is not currently
available for the sale of the Shares and may never be so available.

 

(f)    Transfer Restrictions; Legends. The Investor understands that (i) the
Shares have not been registered under the Securities Act; (ii) the Shares 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
Investor, and that the Shares must be held by the Investor indefinitely, and
that the Investor 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 Shares will be endorsed with a legend substantially in the
following form until the earlier of (1) such date as the Shares have been
registered for resale by the Investor or (2) the date the Shares are eligible
for sale under Rule 144.

 

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. The Investor understands and acknowledges that
there is only a limited public market for our Common Shares on the OTCQB, and
which market is very volatile, and the Company has made no assurances that a
broader or more active public trading market for our Common Shares will ever
exist.

 

(h)    No Transfer. The Investor covenants not to dispose of any of the Shares
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 Investor and other than in
compliance with the applicable securities regulations laws of any state.

 

(i)    Investment Experience. Investor acknowledges that the Investor is able to
bear the economic risk of the Investor’s investment, including the complete loss
thereof. The Investor has a preexisting personal or business relationship with
the Company or one or more of its officers, directors or other persons in
control of the Company, and the Investor 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 Shares.

 

(j)    Financial Sophistication; Due Diligence. The Investor 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 Investor has, in connection with its
decision to purchase the Shares, relied only upon the representations and
warranties contained herein and the information contained in the Company’s SEC
Documents. Further, the Investor has had such opportunity to obtain additional
information and to ask questions of, and receive answers from, the Company,
concerning the terms and conditions of the investment and the business and
affairs of the Company, as the Investor considers necessary in order to form an
investment decision.

 

7

--------------------------------------------------------------------------------

 

(k)    General Solicitation. The Investor is not purchasing the Shares as a
result of any advertisement, article, notice or other communication regarding
the Shares 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 Investor was
first contacted by the Company or either of the Agents such Investor had a
pre-existing and substantial relationship with the Company or one of the Agents.
The Investor 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 Company. Other than to other parties to this Agreement,
the Investor has maintained and will continue to maintain the confidentiality of
all disclosures made to Investor in connection with this transaction, including
the existence and terms of this transaction.

 

4.3    No Investment, Tax or Legal Advice. The Investor understands that nothing
in the Company SEC Documents, this Agreement, or any other materials presented
to the Investor in connection with the purchase and sale of the Shares
constitutes legal, tax or investment advice. The Investor 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 Shares.

 

4.4     Disclosure of Information. The Investor 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 Shares. The
Investor has reviewed the documents publicly filed by the Company with the SEC
and has read and understands the risk factors disclosed therein. The Investor
has received all the information it considers necessary or appropriate for
deciding whether to purchase the Shares. The Investor is solely responsible for
conducting its own due diligence investigation of the Company.

 

4.5    Additional Acknowledgement. The Investor 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 Investor acknowledges that, if it is a client of an
investment advisor registered with the SEC, the Investor has relied on such
investment advisor in making its decision to purchase Shares pursuant hereto.

 

4.6     Subscription Rejection Right. The Investor acknowledges that the Company
reserves the right to reject any subscription, to accept any subscription in
part only, or to prorate subscriptions, to negotiate any checks or other tenders
of payment for discrepant amounts and to refund the excess to the Investor if
(a) the Investor is not an "accredited investor" or otherwise fails to meet the
investor suitability requirements as set forth in the Investor Suitability
Questionnaire, (b) fails to deliver payment of the Aggregate Purchase Price, or
(c) fails to deliver the completed Investor Deliverables substantially in the
form as reasonably acceptable to the Company.

 

4.7     No Short Position As of the date hereof, and from the date hereof
through the date of the Closing Date, the Investor acknowledges and agrees that
it does not and will not (between the date hereof and the Closing Date) engage
in any short sale of the Company’s voting stock or any other type of hedging
transaction involving the Company’s securities (including, without limitation,
depositing shares of the Company’s securities with a brokerage firm where such
securities are made available by the broker to other customers of the firm for
purposes of hedging or short selling the Company’s securities).

 

8

--------------------------------------------------------------------------------

 

ARTICLE V
ADDITIONAL COVENANTS

 

5.     Additional Covenants.

 

5.1    Confidential Information. The Investor covenants that it will maintain in
confidence the receipt and content of any information provided in connection
with this Agreement until such information (a) becomes generally publicly
available other than through a violation of this provision by the Investor or
its agents or (b) is required to be disclosed in legal proceedings (such as by
deposition, interrogatory, request for documents, subpoena, civil investigation
demand, filing with any governmental authority or similar process); provided,
however, that before making any disclosure in reliance on this Section 5.1, the
Investor will give the Company at least 15 days prior written notice (or such
shorter period as required by law) specifying the circumstances giving rise
thereto and the Investor will furnish only that portion of the non-public
information which is legally required and will exercise its best efforts to
ensure that confidential treatment will be accorded any non-public information
so furnished; provided, further, that notwithstanding, the Investor’s agreement
to keep such information confidential, the Investor makes no such
acknowledgement that any such information is material, non-public information.

 

5.2     Transfer Restrictions. The Investor covenants that the Shares will only
be disposed of pursuant to an effective registration statement under, and in
compliance with the requirements of, the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with
any transfer of Shares other than pursuant to an effective registration
statement or to the Company, or at such time that the Shares may be sold without
the requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, the Company may require the
transferor to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. The Investor agrees to the imprinting of
the restrictive legend in substantially the form set forth in Section 4.2(f).

 

ARTICLE VI
MISCELLANEOUS

 

6.     Miscellaneous.

 

6.1    Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
choice of law provisions thereof, and the federal laws of the United States.

 

6.2    Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.

 

6.3    Entire Agreement. This Agreement and the exhibits hereto, and the other
documents delivered pursuant hereto, constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any manner by any
representations, warranties, covenants, or agreements except as specifically set
forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.

 

9

--------------------------------------------------------------------------------

 

6.4    Severability. In the event any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

6.5    Amendment and Waiver. Except as otherwise provided herein, any term of
this Agreement may be amended, modified, supplemented and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a specified
period of time or indefinitely), with the written consent of the Company and the
holders of a majority of the Common Shares sold in this Offering. Any amendment
or waiver effected in accordance with this paragraph will be binding upon each
holder of any Shares purchased under this Agreement, each future holder of the
Shares, and the Company.

 

6.6    Fees and Expenses. Except as otherwise set forth herein, the Company and
the Investor shall bear their own expenses and legal fees incurred on their
behalf with respect to this Agreement and the transactions contemplated hereby.
Each party hereby agrees to indemnify and to hold harmless of and from any
liability the other party for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
indemnifying party or any of its employees or representatives are responsible.

 

6.7    Notices. All notices and other communications given or made pursuant to
this Warrant Certificate shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or (i) personal delivery to the party
to be notified, (ii) when sent, if sent by electronic mail or facsimile during
normal business hours of the recipient, and if not sent during normal business
hours, then on the recipient’s next Business Day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) Business Day after deposit with a nationally
recognized overnight courier, freight prepaid, specifying next Business Day
delivery, with written verification of receipt. All communications shall be sent
to the respective parties at the address indicated for such party in the
Purchase Agreement, or at such other address as such party may designate by 10
days advance written notice to the other party given in the foregoing manner:

 

if to the Company, to:

 

Flux Power Holdings, Inc.

985 Poinsettia Avenue

Vista, California 92081
Fax (760) 741-3535

Attn: President

 

if to the Investor, at its address on the signature page to this Agreement.

 

6.8    Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement or by any of the Agents,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein shall survive the execution of this Agreement, the
delivery to the Investor of the Shares being purchased and the payment therefor,
and a party’s reliance on such representations and warranties shall not be
affected by any investigation made by such party or any information developed
thereby.

 

6.9    Counterparts. This Agreement may be executed by facsimile signature and
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one instrument.

 

10

--------------------------------------------------------------------------------

 

SUBSCRIPTION AGREEMENT SIGNATURE PAGE

 

In addition to the foregoing, Investor hereby certifies that it (a) agrees to
all the terms and conditions of this Agreement, (b) meets the suitability
standards set forth in this Agreement, and (c) is a resident of the state and
jurisdiction indicated below.

 

Date:   August 16, 2016     

Name of Investor:

     

Esenjay Investments, LLC                

Entity Name (if any)

 

 

 

By:   /s/  Michael Johnson              
       Name:  Michael Johnson
       Title: President

 

 

Address:

 

State of Principal Residence:             

 

State of Incorporation/Organization:

 

EIN/Social Security Number:

 

Telephone No.:                      

 

 

Facsimile No.:                       

 

Email Address:        

 

Number of Shares:     10,000,000       

 

Aggregate Purchase Price :  $400,000

   

 

 

Delivery Instructions (if different than above):

 

c/o:                                                                       

 

Address:                                                             

 

Telephone No.:                                                 

 

Facsimile No. :                                                  

 

Other Special Instructions:                             

 

11

--------------------------------------------------------------------------------

 

 

SUBSCRIPTION ACCEPTED

 

Date: August 16, 2016           FLUX POWER HOLDINGS, INC.       By:  /s/ Ronald
Dutt       Name: Ronald Dutt                          

Title: Chief Executive Officer and Acting Chief Financial Officer

 

 

 

12

--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

Investor Suitability Questionnaire

 

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

Cancellation of Debt for Shares

 

 

Pursuant to the Subscription Agreement, dated August 15, 2016 by and between
Esenjay Investments LLC (“Esenjay”) and Flux Power. Inc. (“Flux Power”), Esenjay
hereby accepts 10,000,000 shares of common stock of Flux Power Holdings, Inc.
(“Shares”) in lieu of payment of the principal amount of $400,000 (“Obligation”)
owed by Flux Power under the Unrestricted and Open Line of Credit dated
September 24, 2012 and as amended (“Line of Credit”). Esenjay acknowledges and
agrees that upon receipt of the Shares, the Obligation shall be deemed
paid-in-full and completely satisfied under the Line of Credit.

 

Dated:    August 16, 2016 Esenjay Investments LLC             Esenjay
Investments, LLC                                Name:  /s/ Michael
Johnson                              Title:
President