Document:

RIGHTS CERTIFICATE #:	NUMBER OF RIGHTS

 

 

THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING
ARE SET FORTH IN THE COMPANY’S PROSPECTUS

DATED [●], 2012 (THE “PROSPECTUS”)
AND ARE INCORPORATED HEREIN BY REFERENCE.

COPIES OF THE PROSPECTUS ARE AVAILABLE UPON
REQUEST FROM MASLON EDELMAN BORMAN & BRAND, LLP, COUNSEL TO THE COMPANY.

 

Western
Capital Resources, Inc.

Incorporated under the laws of the State
of Minnesota

 

NON-TRANSFERABLE SUBSCRIPTION RIGHTS CERTIFICATE

 

Evidencing Non-Transferable Subscription
Rights to Purchase Shares of Common Stock of Western Capital Resources, Inc.

 

Subscription Price: $[●] per Share

 

THE SUBSCRIPTION RIGHTS WILL EXPIRE IF NOT
EXERCISED ON OR BEFORE 5:00 P.M., MINNEAPOLIS TIME,

ON [●], 2012, UNLESS EXTENDED BY THE
COMPANY

 

REGISTERED

OWNER:

 

THIS CERTIFIES THAT the registered owner whose name is
inscribed hereon is the owner of the number of non-transferable subscription rights (“Rights”) set forth above.
Each whole Right entitles the holder thereof to subscribe for and purchase one share of common stock of Western Capital
Resources, Inc., a Minnesota corporation, at a subscription price of $[●] per share (the “Basic Subscription
Privilege”), pursuant to a rights offering (the “Rights Offering”), on the terms and subject to the
conditions set forth in the Prospectus and the “Instructions as to Use of Western Capital Resources, Inc. Subscription
Rights Certificates” accompanying this Subscription Rights Certificate. If any shares of common stock available for
purchase in the Rights Offering are not purchased by other holders of Rights pursuant to the exercise of their Basic
Subscription Privilege (the “Excess Shares”), any holder of Rights that exercises its Basic Subscription
Privilege in full may subscribe for a number of Excess Shares pursuant to the terms and conditions of the Rights Offering,
subject to proration, as described in the Prospectus (the “Over- Subscription Privilege”). The Rights represented
by this Subscription Rights Certificate may be exercised by (1) completing Form 1 and any other appropriate forms on the
reverse side hereof and (2) returning this Subscription Rights Certificate together with other applicable
subscription documents and full payment of the subscription price for each share of common stock subscribed for all in
accordance with the “Instructions as to Use of Western Capital Resources, Inc. Subscription Rights Certificates”
accompanying this Subscription Rights Certificate.

 

	This Subscription Rights Certificate is not valid unless countersigned by the subscription agent and registered by the registrar:	 	COUNTERSIGNED AND REGISTERED—

CORPORATE STOCK TRANSFER, INC.

(Denver, Colorado), Transfer Agent and Registrar.
	 	 	 
	Witness below the signatures of the duly authorized officers of Western Capital Resources, Inc.	 	 
	 	 	 
	Dated: [●], 2012	 	 
	 	 	AUTHORIZED SIGNATURE

 

	 	 	 
	 	 	 
	Chief Executive Officer and President	 	Chief Financial Officer and
	and Principal Executive Officer	 	Principal Financial and Accounting Officer

 

    	 

    	 	

    
 

DELIVERY OPTIONS FOR SUBSCRIPTION RIGHTS
CERTIFICATE

 

Note:
Delivery other than in the manner or to the addresses listed below will not constitute valid delivery:

 

Corporate Stock Transfer, Inc.

3200 Cherry Creek
South Drive, Suite 430

Denver, Colorado 80209

 

PLEASE PRINT ALL INFORMATION CLEARLY AND
LEGIBLY.

 

FORM 1-EXERCISE OF SUBSCRIPTION RIGHTS

 

To subscribe for shares pursuant to your Basic Subscription
Right, complete lines (a) and (c) below, sign under Form 3 below, and have your signature guaranteed under Form 4. To subscribe
for shares pursuant to your Over-Subscription Right, please also complete line (b) below.

 

(a) EXERCISE OF BASIC SUBSCRIPTION RIGHT:

 

	I apply for _____________ shares x	$[●] per share	=  $  	 
	(no. of new shares)	(subscription price)  	 	(amount enclosed)

 

(b) EXERCISE OF OVER-SUBSCRIPTION RIGHT:

 

If you have exercised your Basic Subscription Rights in full
and wish to subscribe for additional shares:

 

	I apply for _____________ shares x	$[●] per share	=  $  	 
	(no. of new shares)	(subscription price)  	 	(amount enclosed)

 

	(c) TOTAL AMOUNT OF PAYMENT ENCLOSED
    	 	=  $  	 

 

IMPORTANT: Check or bank draft payable to “Corporate
Stock Transfer, Inc., as Subscription Agent.”

 

FORM 2-DELIVERY TO DIFFERENT ADDRESS

 

If you wish for the certificate representing the common stock
you purchase pursuant to your Rights to be delivered to an address different from that shown on the face of this Subscription Rights
Certificate, please enter the alternate address below:

 

	 	 
	 	 

 

FORM 3-SIGNATURE

 

TO SUBSCRIBE: I acknowledge that I have received the Prospectus
for this Rights Offering and I hereby irrevocably subscribe for the number of shares indicated above on the terms and conditions
specified in the Prospectus.

 

	Signature(s): 	 	 	 
	 	 	 	 

 

IMPORTANT: The signature(s) above must correspond with
the name(s) as printed on the reverse of this Subscription Rights Certificate in every particular, without alteration.

 

FORM 4-SIGNATURE GUARANTEE

 

This Form must be completed if you have completed Form 2.

 

	Signature Guaranteed:	 
	 	(Name of Bank or Firm)
	 	 
	By:	 
	 	 (Signature of Officer)

 

IMPORTANT: The signature(s) should be guaranteed by an
eligible guarantor institution (bank, stock broker, savings & loan association or credit union) with membership in an approved
signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15.

 

FOR INSTRUCTIONS ON THE USE OF SUBSCRIPTION RIGHTS CERTIFICATES,
CONSULT MASLON EDELMAN BORMAN & BRAND, LLP, COUNSEL TO THE COMPANY, AT (612) 672-8305 (ATTENTION PAUL D. CHESTOVICH, ESQ.).Secondary Revolving Promissory Note for
Operating Capital

 

	Date:	 	October 1, 2011
	 	 	 
	Borrower:	 	Flux Power, Inc.
	 	 	 
	Borrower's Address:	 	2240 Auto Park Way
	 	 	Escondido, CA 92029
	 	 	 
	Lender:	 	Esenjay Investments, LLC
	 	 	 
	Place for Payment:	 	500 N. Water, Suite 1100S
	 	 	Corpus Christi, TX 78471
	 	 	 
	Principal Amount:	 	$1,000,000.00
	 	 	 
	Annual Interest Rate:	 	Eight percent (8%)
	 	 	 
	Primary Use of Funds:	 	To be used as bridge capital for operating expenses.
	 	 	 
	Maturity Date:	 	Upon receipt of new capital from the next round of financing but not later than May 30, 2012

 

Annual Interest Rate on Matured, Unpaid Amounts:

 

18% or the highest rate allowed by law,
whichever is less

 

Terms of Payment (principal and interest):

 

The Principal Amount may be prepaid
in whole or in part at any time, or from time to time, without notice, penalty, or premium. The Principal Amount and all accrued
interest shall be due and payable on the Maturity Date. Partial prepayments of principal shall be applied to installments of principal
in reverse order of maturity.

 

Security for Payment: This note is secured by the general
assets of Flux Power Inc.

 

Notwithstanding any provision
herein to the contrary, it is expressly understood that this note is a revolving note, and Payee may in his discretion, but shall
not be obligated to, advance funds pursuant to this note from time to time until 90 days from the Maturity Date, after which no
advances shall be made under this note. A notation made by Payee in his records regarding this note hereunder shall reflect each
advance and each payment of principal. The aggregate unpaid amount of advances reflected by the notation shall be deemed rebuttably
presumptive evidence of the principal amount owing under this note, which amount the undersigned unconditionally promises to pay
to the order of Payee under the terms hereof. The minimum amount of any advance shall be $50,000.00. The advances and repayments
of principal under this note are not limited to $1,000,000.00 of principal, but to $1,000,000.00 of principal at any one time outstanding.

 

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Borrower promises to pay to the
order of Lender the Principal Amount plus interest at the Annual Interest Rate. This note is payable at the Place for Payment and
according to the Terms of Payment. All unpaid amounts are due by the Maturity Date. After maturity, Borrower promises to pay any
unpaid principal balance plus interest at the Annual Interest Rate on Matured, Unpaid Amounts.

 

If Borrower defaults in the payment
of this note or in the performance of any obligation in any instrument securing or collateral to this note, or if Lender in good
faith deems himself insecure, Lender may declare the unpaid principal balance and earned interest on the note immediately due.
Borrower and each surety, endorser, and guarantor waive all demand for payment, presentation for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, protest, and notice of protest, to the extent permitted by law.

 

Borrower also promises to pay
reasonable attorney's fees and court and other costs if this note is placed in the hands of an attorney to collect or enforce the
note. These expenses will bear interest from the date of advance at the Annual Interest Rate on Matured, Unpaid Amounts. Borrower
will pay Lender these expenses and interest on demand at the Place for Payment. These expenses and interest will become part of
the note and will be secured by any security for payment.

 

Interest on the debt evidenced
by this note will not exceed the maximum rate or amount of nonusurious interest that may be contracted for, taken, reserved, charged,
or received under law. Any interest in excess of that maximum amount will be credited on the Principal Amount or, if the Principal
Amount has been paid, refunded. On any acceleration or required or permitted prepayment, any excess interest will be canceled automatically
as of the acceleration or prepayment or, if the excess interest has already been paid, credited on the Principal Amount or, if
the Principal Amount has been paid, refunded. This provision overrides any conflicting provisions in this note and all other instruments
concerning the debt.

 

Each Borrower is jointly and
severally responsible for all obligations represented by this note.

 

When the context requires, singular
nouns and pronouns include the plural.

 

	Esenjay Investments, LLC	 	Flux Power, Inc.
	 	 	 	 
	By:	/s/Michael E. Johnson	 	By:	/s/Chris Anthony
	 	 	 
	Name: Michael Johnson	 	Chris Anthony
	 	 	 
	Title:	 	CEO and President

 

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Agreement to Amend Revolving
Note to Extend Maturity Date

Between

Flux Power Inc. and Esenjay
Investments 

 

This Amendment
(“Amendment”) for the Secondary Revolving Promissory Note for Operating Capital Loan (“Secondary Note”)
by and between Flux Power Inc., ("Flux”, “Borrower” and/or “Corporation")
with a principal address of 2240 Auto Pkwy Escondido CA 92029 and Esenjay Investments LLC, ("Purchaser")
with a principal address in Corpus Christi, TX and shall be effective on October 19, 2011 (the
“Amendment Effective Date”).

 

Whereas, the parties desire by this
Amendment to amend the Secondary Note. All references to articles and sections and use of defined terms
herein shall have the same meanings and effect as stated in the Secondary Note unless otherwise stated in this Amendment.

 

AGREEMENT. The Parties agree to the following:

 

		1.	Amendment to Secondary Note. To amend the Secondary Note to extend the maturity date of
the note from May 30, 2012 to September 30, 2013 and remove the stipulation of repayment upon next round of financing. The language
below will replace the maturity date language in the Secondary Note in its entirety:

 

“Maturity Date:                       September
30, 2013”

 

IN WITNESS HEREOF, the parties hereto have executed this Amendment
as of the Effective Date written above.

 

	Esenjay Investments LLC	 	Flux Power Inc.
	 	 	 	 	 
	Signature:	/s/Howard Williams	 	Signature:	/s/Chris Anthony
	 	Howard Williams, Treasurer	 	 	Chris Anthony, CEO
	 	 	 	 	 
	Date:	10/20/2011	 	Date:	10/19/2011

  

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