Document:

TERMS OF EMPLOYMENT

 

This Employment Agreement (the "Agreement")
is made effective on this 12th day of January, 2012 (the "Effective Date") by and among Flux Power, Inc, a
California based Corporation (the “Company”) located at 2240 Auto Park Way, Escondido, CA 92029 and Steve Jackson (“Employee
and/or I”), with a home address of 5105 Benton Place San Diego, CA 92116.

 

As a condition of employment
with Company, Employee and Company agree to the following Terms of Employment:

 

		1.	Employment, Duties
and Acceptance

		A.	Appointment. Company hereby employs Employee as the Chief Financial
Officer (“CFO”) and Chief Operation Officer (“COO”) whom shall report to the CEO and Board of Directors
and render exclusive and full-time services in an executive capacity to Company and to any subsidiary of Company and to devote
Employee’s best efforts to the affairs of the Company and to perform such duties as respectively defined below.

 

CFO—
Responsible for the financial management of the Company including
but not limited to managing financial risks, financial planning, record keeping and reporting. 

 

COO—Responsible for the
daily operation of the Company including but not limited to the proper management of resources, oversee the making and distribution
of products and services to customers, implement process and systems to support company goals and manage conduct.

 

		B.	Acceptance. Employee hereby accepts such employment and agrees
to render such services. Employee agrees to render such services at Company's offices, but Employee will travel on temporary trips
to such other place or places as may be required from time to time to perform the duties hereunder.

 

		2.	Compensation

		A.	As compensation for all services to be rendered pursuant to this Agreement to or at the request
of Company, Company agrees to compensate Employee a salary at the rate of one hundred forty two thousand dollars ($142,000) per
annum (“Salary”). Additionally, salary shall be adjusted and granted in the event:

 

		I.	The Company achieves booking/Sales milestones as described in
the table below within a fiscal quarter, Salary will be directly tied and adjusted up and down accordingly as follows:

 

	Quarterly
 Sales
 Milestones	 	 	Compensation	 
	 	 	 	 	 
	$	3	M	 	$	164,500	 
	$	5	M	 	$	188,000	 
	$	10	M	 	$	211,500	 
	$	15	M	 	$	235,000	 

 

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		a.	Sales are defined as gross revenue less returns, and bad debt allowance (“Sales”).

		b.	The Salary for the Employee shall always be calculated based on the Company’s Sales in the
previous quarter. The following is provided as an example of the Employee’s Salary based on the table above and as used in
practice: if the Company Quarterly Sales Milestone of $5M is achieved in the first quarter the Salary for employee for the forgoing
second quarter shall be based on $188,000 salary annually. In the event the Company Quarterly Sales Milestone of $3M is achieved
in the second quarter of the same year the Salary for the Employee for the forgoing third quarter shall be based on $164,500 salary
annually.

		c.	     

		B.	ADDITIONAL COMPENSATION

			Additional compensation may include, but is not limited to, equity compensation, vacation time,
medical coverage, and bonus structure, as attached hereto as Exhibit A.

 

		3.	EMPLOYMENT AT WILL

Employee agrees that unless specifically
stated in writing and signed by an authorized officer of the Company, subject to controlling law, any employment granted to Employee
is at will and for an indefinite term, and that such employment may be terminated at any time (subject to such requirements as
to notice as may be applicable) either by Employee or by the Company for any or no reason whatsoever, and Employee hereby waive
and disclaim any express or implied covenants to the contrary. In accepting employment by Company, Employee agrees not to rely
on any statements or representations, whether orally or in writing, by any officers, employees or agents of Company concerning
the duration or term of employment, grounds and procedures for discharge or termination of employment, or any other terms and conditions
of employment except those specifically stated in writing and signed by an authorized officer of Company. Employee further agrees
and understands that the provisions of any employee handbooks, personnel manuals and any and all other written statements of or
regarding personnel policies, practices or procedures that are or may be issued by Company or any official or department thereof
from time to time do not and shall not constitute a contract of employment and create no vested rights; that any such provisions
may be changed, revised, modified, suspended, cancelled, or eliminated by Company at an time without notice; and that they constitute
guidelines only and may be disregarded either in individual or Company wide situations when in the sole opinion and judgment of
Company circumstances so require.

 

		4.	PROBATION PERIOD

An Employee's first ninety (90)
days of employment are on a trial basis and are considered a continuation of the employment selection process. The ninety (90)
day probationary period (“Probation Period”) provides the Company an opportunity to observe and evaluate the capacity
of the Employee, which includes the Employee’s ability to satisfactorily perform the essential functions of his or her job;
and to observe and evaluate the employee’s work habits and conduct, including attendance and the Employee’s relationship
with coworkers and superiors. During this probationary period, the Company may terminate employment immediately, with or without
cause and with or without notice. This 90 day probationary period is not a term of employment and is not intended, nor does it,
impact the at will nature of the relationship between the Company and the Employee.

 

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		5.	CONFIDENTIAL INFORMATION

		A.	Company Information. Employee agrees at all times during the term of employment and thereafter,
to hold in strictest confidence, and not to use, except for the benefit of Company, or to disclose to any person, firm or corporation
without written authorization of Company, the Confidential Information of Company. Employee understands that “Confidential
Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited
to research, product plans, products, services, customer lists and customers (including, but not limited to customers of the Company
on whom Employee call or with whom Employee became acquainted during the term of my employment), software, developments, inventions,
processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, financial or other
business information disclosed to me by Company either directly or indirectly in writing, orally or by drawings or observation
of parts or equipment. Company acknowledges that Confidential Information does not include any of the foregoing items that have
become publicly known and made generally available through no wrongful act of Employee or of others who were under confidentiality
obligations as to the item or items involved.

 

		B.	Former Employer Information. Employee agrees not to improperly use or disclose any patent,
copyright, proprietary information or trade secrets of any former or concurrent employer or other person or entity and will not
bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person
or entity unless consented to in writing by such employer, person, or entity.

 

		C.	Third Party Information. Employee agrees and recognizes that Company has received and in
the future will receive from third parties their confidential or proprietary information (such as, but not limited to, software
programs provided by license) subject to a duty on Company’s part to maintain the confidentiality of such information and
to use it only for certain limited purposes. Employee agrees to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for
Company consistent with Company’s agreement with such third party. I agree to comply with Company’s policies and procedures,
as applicable from time to time, with respect to such information.

 

		6.	INVENTIONS

		A.	Inventions Retained. I agree not to use, incorporate or disclose any proprietary information
or inventions which belong to me and relate to the Company’s proposed business, products or research and development and
which are not assigned to the Company hereunder and belong to me prior to executing this agreement.

 

		B.	Assignment of Inventions. I hereby assign and transfer to the Company all my rights, title
and interest in and to all improvements, discoveries, designs, inventions, trade secrets, improvement works, documents and other
data (whether or not copyrightable or patentable), made, conceived or first reduced to practice by me, (the “Innovations”)
whether solely or jointly with others, during my period of employment with the Company which relate to the actual work I have performed
or may perform for the Company. This Assignment Agreement does not require me to assign to the Company any Invention for which
no equipment, supplies, facility, or trade secret information of Company was used and that was developed entirely on my own time,
and does not relate to the business of Company or to Company’s actual or demonstrably anticipated research or development,
or does not result from any work performed by my for Company.

 

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		C.	Maintenance of Records. I agree to assist Company, or its designee, at Company’s expense,
in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, or other intellectual property
rights relating thereto in any all countries, including the disclosure to Company of all pertinent information and data with respect
thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which Company shall deem
necessary in order to apply for and obtain such rights and in order to assign and convey to Company, its successors, assigns, and
nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto. I agree that the obligation to execute or cause to be executed, when it
is in my power to do so, and such instrument or papers shall continue after the termination of my employment. If Company is unable
to secure my signature due to mental or physical incapacity or if I am otherwise unavailable or unable to sign or to apply for
or pursue any application for any United States or foreign patents or for copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint Company and its duly authorized
officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications
and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations
thereon with the same legal force and effect as if executed by me.

 

		7.	CONFLICTING EMPLOYMENT

I agree that, during the term
of my employment with Company, I will not engage in any other employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage
in any other activities that conflict with my obligations to Company. At no time shall I develop an/or cause others to develop
technologies that directly relate to and/or compete with Flux’s products

 

		8.	RETURNING COMPANY DOCUMENT

I agree that, at the time I leave
the employ of Company, I will deliver to Company (and will not keep in possession, recreate or deliver to anyone else) any and
all devices, records, data, notes, reports, proposals, lists, correspondence, specifications drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned items developed by me pursuant to employment with
Company or otherwise belonging to Company, its successors or assigns.

 

		9.	NOTIFICATION OF NEW EMPLOYER

Upon termination of my employment
for any reason, I hereby grant consent to notification by the Company to any subsequent employer about rights and obligations under
the Agreement.

 

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		10.	SOLICITATION OF EMPLOYEES

I agree that for a period of
twelve (12) months immediately following the termination of my employment with Company for any reason, whether with or without
cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of Company’s employees to leave
their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of Company,
either for me or for any other person or entity.

 

		11.	OTHER POLICIES

I agree to comply with all Company
policies, rules and procedures that are generally applicable to Company employees.

 

		12.	EQUITABLE RELIEF

I agree that it would be impossible
or inadequate to measure and calculate Company’s damages from any breach of the covenants set forth in Sections 4, 5, and
7 herein. Accordingly, I agree that upon breech of any of such Sections, Company will have available, in addition to any other
right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this Agreement. I further agree that no bond or other surety
shall be required in order to obtain such relief and I hereby consent to the issuance of such injunction and to any order of specific
performance.

 

		13.	ARBITRATION

Except for equitable relief pursuant
to Section 9 above, any dispute between the parties arising out of the Agreement shall be resolved through arbitration by a single
arbitrator acting under the auspices and rules and regulations of the American Arbitration Association, located in San Diego, California,
and in such event the decision of the arbitrator shall be binding upon the parties and enforceable in a court of competent jurisdiction.
The parties agree to negotiate any dispute arising out of the Agreement in good faith.

 

		14.	Severance

In the event the Employee is
terminated after the Probation Period for any reason other than for cause, Company agrees to provide employee with a severance
payout equal to six (6) months of employment.

 

		15.	GENERAL PROVISIONS

		A.	Governing Law; Consent to Personal Jurisdiction  This Agreement will be governed by the
laws of the State of California, and I hereby expressly consent to the personal jurisdiction of the state and federal courts located
therein for any lawsuit filed there by the Company arising from or relating to my employment.

		B.	Entire Agreement. This Terms of Employment sets forth the entire agreement and understanding
between the Company and me relating to the subject matter herein and merges, all prior discussions between us. No modification
of or amendment to this Terms of Employment, nor any waiver of any rights, will be effective unless in writing signed by the party
to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of the
Terms of Employment.

		C.	Severability. If one or more of the clauses in this Agreement are deemed unenforceable,
then the remaining clauses will continue in full force and effect. In the event a provision contained in any Restrictive Covenant
shall be declared by a court of competent jurisdiction to be illegal or unenforceable in whole or in part, then the offending provision
automatically shall be deemed modified to conform to the minimum requirements of law. The provision as modified, together with
all other provisions hereof, shall be given full force and effect.

 

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		D.	Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators
and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

		E.	Company. The term “Company” shall include any subsidiaries, affiliates, predecessors,
or successors of the Company.

 

		16.	Independent Representation

Each party warrants and represents
that (i) this Agreement has been prepared by the Company’s legal counsel, (ii) he/she has been advised to obtain the advise
of personal or independent counsel in the analysis of this Agreement, and (iii) that he/she has read this Agreement with care and
believes that he/she is fully aware of and understands the contents hereof and their legal effect.

 

		17.	Survival of Covenants and Provisions 

The terms and obligations
of Sections 4, 5 and 9 of this Agreement shall survive the termination of Employee's employment with the Company or any subsidiary
of the Company, and shall survive the termination of this Agreement.

 

IN WITNESS WHEREOF, the parties
as of the day and year first above written have executed this Agreement.

 

	Flux Power Inc	 	Chris Anthony

 

	By:	/s/Chris Anthony	 	By:	/s/Steve Jackson
	Officer’s signature:	 	Employee’s Signature

 

	Chris Anthony, President & CEO	 	Steve Jackson
	Officer’s Name & Title: (Please Print)	 	 
	 	 	 
	01/12/2012	 	01/12/2012
	Date:	 	Date:

 

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EXHIBIT A

 

ADDITIONAL COMPENSATION

 

Equity Compensation: It will be
recommended to the Company’s board of directors that you participate in the Company Incentive Stock Option program (“ISO”)
at the first meeting of the Company’s board of directors following your start date and that the Company grant you an option
to purchase 300,000 shares of the Company’s Common Stock at a price per share equal to the fair market value per share of
the Common Stock on the date of grant. Additionally, in the event the Company achieves bookings/sales in the amount of $40 million
by year end 2012 and subject to board approval, Company will grant you an option to purchase an additional 50,000 shares of the
Company’s Common Stock at a price per share equal to the fair market value per share of the Common Stock on the date of grant.
Both grants shall vest at a rate of 25% for every 12 months of continued employment with the Company and no shares shall vest before
such date.

 

These option grants shall be subject to
the terms and conditions of the Company’s Stock Option Plan and Stock Option Agreement, including vesting requirements. No
right to any stock is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continue vesting
or employment.

 

Medical Insurance: Health and dental
insurance (100% company paid) for employee and spouse only (effective the first of the month after a 30 day waiting period). Family
coverage can be purchased by employee.

 

Vacation Time: Personal time off
bank of 15 days in your first year, after one year service your bank will increase to 20 days.

 

Bonus Structure: To be determined
as departmental goals are instituted and job descriptions are further defined.

 

    	Page 7 of 7Flux
Power, Inc.

 

2010
Stock Plan

 

Adopted
on December 3, 2010

 

    	 

    	 

    

 

TABLE OF CONTENTS

 

	 	 	 	Page
	 	 	 	 
	SECTION 1.	 	ESTABLISHMENT AND PURPOSE	1
	 	 	 	 
	SECTION 2.	 	ADMINISTRATION	1
	(a)	 	Committees of the Board of Directors	1
	(b)	 	Authority of the Board of Directors	1
	 	 	 	 
	SECTION 3.	 	ELIGIBILITY	1
	(a)	 	General Rule	1
	(b)	 	Ten-Percent Stockholders	1
	 	 	 	 
	SECTION 4.	 	STOCK SUBJECT TO PLAN	2
	(a)	 	Basic Limitation	2
	(b)	 	Additional Shares	2
	 	 	 	 
	SECTION 5.	 	TERMS AND CONDITIONS OF AWARDS OR SALES	2
	(a)	 	Stock Grant or Purchase Agreement	2
	(b)	 	Duration of Offers and Nontransferability of Rights	2
	(c)	 	Purchase Price	2
	(d)	 	Withholding Taxes	2
	(e)	 	Transfer Restrictions and Forfeiture Conditions	3
	 	 	 	 
	SECTION 6.	 	TERMS AND CONDITIONS OF OPTIONS	3
	(a)	 	Stock Option Agreement	3
	(b)	 	Number of Shares	3
	(c)	 	Exercise Price	3
	(d)	 	Exercisability	3
	(e)	 	Basic Term	3
	(f)	 	Termination of Service (Except by Death)	3
	(g)	 	Leaves of Absence	4
	(h)	 	Death of Optionee	4
	(i)	 	Post-Exercise Restrictions on Transfer of Shares	5
	(j)	 	Pre-Exercise Restrictions on Transfer of Options or Shares	5
	(k)	 	Withholding Taxes	5
	(l)	 	No Rights as a Stockholder	5
	(m)	 	Modification, Extension and Assumption of Options	5
	(n)	 	Company’s Right to Cancel Certain Options	6
	 	 	 	 
	SECTION 7.	 	PAYMENT FOR SHARES	6
	(a)	 	General Rule	6
	(b)	 	Services Rendered	6
	(c)	 	Promissory Note	6
	(d)	 	Surrender of Stock	6
	(e)	 	Exercise/Sale	6
	(f)	 	Other Forms of Payment	7

 

    	i

    	 

    

 

	SECTION 8.	 	ADJUSTMENT OF SHARES	7
	(a)	 	General	7
	(b)	 	Mergers and Consolidations	 
	(c)	 	Reservation of Rights	8
	 	 	 	 
	SECTION 9.	 	PRE-EXERCISE INFORMATION REQUIREMENT	8
	(a)	 	Application of Requirement	8
	(b)	 	Scope of Requirement	8
	 	 	 	 
	SECTION 10.	 	MISCELLANEOUS PROVISIONS	8
	(a)	 	Securities Law Requirements	8
	(b)	 	No Retention Rights	9
	(c)	 	Treatment as Compensation	9
	(d)	 	Governing Law	9
	 	 	 	 
	SECTION 11.	 	DURATION AND AMENDMENTS	9
	(a)	 	Term of the Plan	9
	(b)	 	Right to Amend or Terminate the Plan	9
	(c)	 	Effect of Amendment or Termination	9
	 	 	 	 
	SECTION 12.	 	DEFINITIONS	10

 

    	ii

    	 

    

  

 

Flux
Power, Inc. 2010 Stock Plan

 

SECTION
1.          ESTABLISHMENT AND PURPOSE.

 

The purpose of the Plan
is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to increase such
interest, by acquiring Shares of the Company’s Stock. The Plan provides both for the direct award or sale of Shares and for
the grant of Options to purchase Shares. Options granted under the Plan may include Nonstatutory Options as well as ISOs intended
to qualify under Section 422 of the Code.

 

Capitalized terms are
defined in Section 12.

 

SECTION
2.          ADMINISTRATION.

 

(a)          Committees
of the Board of Directors. The Plan
may be administered by one or more Committees. Each Committee shall consist of one or more members of the Board of Directors who
have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as
the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the
Plan. Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the
Board of Directors has assigned a particular function.

 

(b)          Authority
of the Board of Directors. Subject to
the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary
or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Board of Directors shall
be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee.

 

SECTION
3.          ELIGIBILITY.

 

(a)          General
Rule. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Nonstatutory Options or the direct award or sale of Shares. Only Employees shall be eligible
for the grant of ISOs.

 

(b)          Ten-Percent
Stockholders. A person who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall
not be eligible for the grant of an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share
on the Date of Grant and (ii) such ISO by its terms is not exercisable after the expiration of five years from the Date of
Grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.

 

    	 

    	 

    

 

SECTION
4.          STOCK SUBJECT TO PLAN.

 

(a)          Basic
Limitation. Not more than 2,000,000 Shares may
be issued under the Plan, subject to Subsection (b) below and Section 8(a).1 All of these Shares may be
issued upon the exercise of ISOs. The number of Shares that are subject to Options or other rights outstanding at any time
under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of
the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.

 

(b)          Additional
Shares. In the event that Shares previously
issued under the Plan are reacquired by the Company, such Shares shall be added to the number of Shares then available for issuance
under the Plan. In the event that Shares that otherwise would have been issuable under the Plan are withheld by the Company in
payment of the Purchase Price, Exercise Price or withholding taxes, such Shares shall remain available for issuance under the Plan.
In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised
portion of such Option or other right shall be added to the number of Shares then available for issuance under the Plan.

 

SECTION
5.          TERMS AND CONDITIONS OF AWARDS OR SALES.

 

(a)          Stock
Grant or Purchase Agreement. Each award of Shares
under the Plan shall be evidenced by a Stock Grant Agreement between the Grantee and the Company. Each sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company.
Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and
conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock
Grant Agreement or Stock Purchase Agreement. The provisions of the various Stock Grant Agreements and Stock Purchase Agreements
entered into under the Plan need not be identical.

 

(b)          Duration
of Offers and Nontransferability of Rights. Any right
to purchase Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30
days after the grant of such right was communicated to the Purchaser by the Company. Such right shall not be transferable and shall
be exercisable only by the Purchaser to whom such right was granted.

 

(c)          Purchase
Price. The Board of Directors shall determine
the Purchase Price of Shares to be offered under the Plan at its sole discretion. The Purchase Price shall be payable in a form
described in Section 7.

 

(d)          Withholding
Taxes. As a condition to the award, purchase,
vesting or transfer of Shares, the Grantee or Purchaser shall make such arrangements as the Board of Directors may require for
the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such event.

 

 

1  Please
refer to Exhibit A for a schedule of the initial share reserve and any subsequent increases in the reserve.

 

    	2

    	 

    

 

(e)          Transfer
Restrictions and Forfeiture Conditions. Any
Shares awarded or sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable
Stock Grant Agreement or Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of
Shares generally.

 

SECTION
6.          TERMS AND CONDITIONS OF OPTIONS.

 

(a)          Stock
Option Agreement. Each grant of an Option
under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject
to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the
various Stock Option Agreements entered into under the Plan need not be identical.

 

(b)          Number
of Shares. Each Stock Option Agreement shall
specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with
Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option.

 

(c)          Exercise
Price. Each Stock Option Agreement shall specify
the Exercise Price. The Exercise Price of an Option shall not be less than 100% of the Fair Market Value of a Share on the Date
of Grant, and in the case of an ISO a higher percentage may be required by Section 3(b). Subject to the preceding sentence,
the Exercise Price shall be determined by the Board of Directors at its sole discretion. The Exercise Price shall be payable in
a form described in Section 7. This Subsection (c) shall not apply to an Option granted pursuant to an assumption of,
or substitution for, another option in a manner that complies with Section 424(a) of the Code (whether or not the Option is
an ISO).

 

(d)          Exercisability.
Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. No Option
shall be exercisable unless the Optionee (i) has delivered an executed copy of the Stock Option Agreement to the Company or
(ii) otherwise agrees to be bound by the terms of the Stock Option Agreement. The Board of Directors shall determine the exercisability
provisions of the Stock Option Agreement at its sole discretion. All of an Optionee’s Options shall become exercisable in
full if Section 8(b)(iv) applies.

 

(e)          Basic
Term. The Stock Option Agreement shall specify
the term of the Option. The term shall not exceed 10 years from the Date of Grant, and in the case of an ISO a shorter term may
be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine
when an Option is to expire.

 

(f)          Termination
of Service (Except by Death). If an Optionee’s
Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the
earliest of the following dates:

 

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(i)          The
expiration date determined pursuant to Subsection (e) above;

 

(ii)         The
date three months after the termination of the Optionee’s Service for any reason other than Disability, or such earlier or
later date as the Board of Directors may determine (but in no event earlier than 30 days after the termination of the Optionee’s
Service); or

 

(iii)        The
date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board
of Directors may determine.

 

The Optionee may exercise all or part of
the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent
that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the
termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the
termination). The balance of such Options shall lapse when the Optionee’s Service terminates. In the event that the Optionee
dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part
of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by
any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only
to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as
a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as
a result of the termination).

 

(g)          Leaves
of Absence. For purposes of Subsection (f)
above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by
the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave
or by applicable law (as determined by the Company).

 

(h)          Death
of Optionee. If an Optionee dies while the
Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:

 

(i)          The
expiration date determined pursuant to Subsection (e) above; or

 

(ii)         The
date 12 months after the Optionee’s death, or such earlier or later date as the Board of Directors may determine (but in
no event earlier than six months after the Optionee’s death).

 

All or part of the Optionee’s Options
may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators
of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation,
bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became
exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result
of the Optionee’s death). The balance of such Options shall lapse when the Optionee dies.

 

    	4

    	 

    

 

(i)          Post-Exercise
Restrictions on Transfer of Shares. Any Shares
issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally.

 

(j)          Pre-Exercise
Restrictions on Transfer of Options or Shares.
An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the
laws of descent and distribution, except as provided in the next sentence. If the applicable Stock Option Agreement so provides,
a Nonstatutory Option shall also be transferable by gift or domestic relations order to a Family Member of the Optionee. An ISO
may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.
In addition, an Option shall comply with all conditions of Rule 12h-1(f)(1) under the Exchange Act until the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. Such conditions include, without limitation,
the transferability restrictions set forth in Rule 12h-1(f)(1)(iv) and (v) under the Exchange Act, which shall apply
to an Option and, prior to exercise, to the Shares to be issued upon exercise of such Option during the period commencing on the
Date of Grant and ending on the earlier of (i) the date when the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or (ii) the date when the Company makes a determination that it will cease
to rely on the exemption afforded by Rule 12h-1(f)(1) under the Exchange Act. During such period, an Option and, prior to
exercise, the Shares to be issued upon exercise of such Option shall be restricted as to any pledge, hypothecation or other transfer
by the Optionee, including any short position, any “put equivalent position” (as defined in Rule 16a-1(h) under
the Exchange Act) or any “call equivalent position” (as defined in Rule 16a-1(b) under the Exchange Act).

 

(k)          Withholding
Taxes. As a condition to the grant or exercise
of an Option, the Optionee shall make such arrangements as the Board of Directors may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection with such grant or exercise. The Optionee shall
also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign
withholding tax obligations that may arise in connection with the vesting or transfer of Shares acquired by exercising an Option
or any similar event.

 

(l)          No
Rights as a Stockholder. An Optionee, or a
transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option
until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant
to the terms of such Option.

 

(m)          Modification,
Extension and Assumption of Options. Within
the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Options or may accept the cancellation
of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or
a different number of Shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations
under such Option.

 

    	5

    	 

    

 

(n)          Company’s
Right to Cancel Certain Options. Any other
provision of the Plan or a Stock Option Agreement notwithstanding, the Company shall have the right at any time to cancel an Option
that was not granted in compliance with Rule 701 under the Securities Act. Prior to canceling such Option, the Company shall
give the Optionee not less than 30 days’ notice in writing. If the Company elects to cancel such Option, it shall deliver
to the Optionee consideration with an aggregate Fair Market Value equal to the excess of (i) the Fair Market Value of the
Shares subject to such Option as of the time of the cancellation over (ii) the Exercise Price of such Option. The consideration
may be delivered in the form of cash or cash equivalents, in the form of Shares, or a combination of both. If the consideration
would be a negative amount, such Option may be cancelled without the delivery of any consideration.

 

SECTION
7.          PAYMENT FOR SHARES.

 

(a)          General
Rule. The entire Purchase Price or Exercise
Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased,
except as otherwise provided in this Section 7.

 

(b)          Services
Rendered. At the discretion of the Board of
Directors, Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary
prior to the award.

 

(c)          Promissory
Note. At the discretion of the Board of Directors,
all or a portion of the Purchase Price or Exercise Price (as the case may be) of Shares issued under the Plan may be paid with
a full-recourse promissory note. The Shares shall be pledged as security for payment of the principal amount of the promissory
note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum
rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors
(at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such
note.

 

(d)          Surrender
of Stock. At the discretion of the Board of
Directors, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are
already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at
their Fair Market Value as of the date when the Option is exercised.

 

(e)          Exercise/Sale.
To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, all or part of the Exercise Price and
any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities
broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company.

 

    	6

    	 

    

 

(f)          Other
Forms of Payment. To the extent that a Stock
Purchase Agreement or Stock Option Agreement so provides, the Purchase Price or Exercise Price of Shares issued under the Plan
may be paid in any other form permitted by the California Corporations Code.

 

SECTION
8.          ADJUSTMENT OF SHARES.

 

(a)          General.
In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a combination or consolidation
of the outstanding Stock into a lesser number of Shares, a reclassification, or any other increase or decrease in the number of
issued shares of Stock effected without receipt of consideration by the Company, proportionate adjustments shall automatically
be made in each of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares
covered by each outstanding Option and (iii) the Exercise Price under each outstanding Option. In the event of a declaration
of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value
of the Stock, a recapitalization, a spin-off, or a similar occurrence, the Board of Directors at its sole discretion may make appropriate
adjustments in one or more of (i) the number of Shares available for future grants under Section 4, (ii) the number
of Shares covered by each outstanding Option or (iii) the Exercise Price under each outstanding Option; provided, however,
that the Board of Directors shall in any event make such adjustments as may be required by Section 25102(o) of the California
Corporations Code.

 

(b)          Corporate
Transactions. In the event that the Company
is a party to a merger or consolidation or in the event of a sale of all or substantially all of the Company’s stock or assets,
outstanding Options and Shares acquired under the Plan shall be subject to the definitive transaction agreement, which need not
treat all outstanding Options in an identical manner. Such agreement, without the Optionees’ consent, may dispose of Options
that are not vested as of the effective date of such transaction in any manner permitted by applicable law, including (without
limitation) the cancellation of such Options without the payment of any consideration. Such agreement, without the Optionees’
consent, shall provide for one or more of the following with respect to Options that are vested as of the effective date of such
transaction:

 

(i)          The
continuation of such outstanding Options by the Company (if the Company is the surviving corporation).

 

(ii)         The
assumption of such outstanding Options by the surviving corporation or its parent in a manner that complies with Section 424(a)
of the Code (whether or not such Options are ISOs).

 

(iii)        The
substitution by the surviving corporation or its parent of new options for such outstanding Options in a manner that complies with
Section 424(a) of the Code (whether or not such Options are ISOs).

 

(iv)        The
cancellation of such Options and a payment to the Optionees equal to the excess of (A) the Fair Market Value of the Shares
subject to such Options as of the effective date of such transaction over (B) their Exercise Price. Such payment shall be
made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal
to the required amount.

 

    	7

    	 

    

 

(v)         The
cancellation of such Options without the payment of any consideration. Any exercise of such Options prior to the closing date of
such transaction may be contingent on the closing of such transaction.

 

(c)          Reservation
of Rights. Except as provided in this Section 8,
a Grantee, Purchaser or Optionee shall have no rights by reason of (i) any subdivision or consolidation of shares of stock
of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock
of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate
or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

 

SECTION
9.          PRE-EXERCISE INFORMATION REQUIREMENT.

 

(a)          Application
of Requirement. This Section 9 shall
apply only during a period that (i) commences when the Company begins to rely on the exemption described in Rule 12h-1(f)(1)
under the Exchange Act, as determined by the Company in its sole discretion, and (ii) ends on the earlier of (A) the
date when the Company ceases to rely on such exemption, as determined by the Company in its sole discretion, or (B) the date
when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. In addition,
this Section 9 shall in no event apply to an Optionee after he or she has fully exercised all of his or her Options.

 

(b)          Scope
of Requirement. The Company shall provide
to each Optionee the information described in Rule 701(e)(3), (4) and (5) under the Securities Act. Such information
shall be provided at six-month intervals, and the financial statements included in such information shall not be more than 180
days old. The foregoing notwithstanding, the Company shall not be required to provide such information unless the Optionee has
agreed in writing, on a form prescribed by the Company, to keep such information confidential.

 

SECTION
10.         MISCELLANEOUS PROVISIONS.

 

(a)          Securities
Law Requirements. Shares shall not be issued
under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of
law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws
and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may
then be traded. The Company shall not be liable for a failure to issue Shares that is attributable to such requirements.

 

    	8

    	 

    

 

(b)          No
Retention Rights. Nothing in the Plan or in
any right or Option granted under the Plan shall confer upon the Grantee, Purchaser or Optionee any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent
or Subsidiary employing or retaining the Grantee, Purchaser or Optionee) or of the Grantee, Purchaser or Optionee, which rights
are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

 

(c)          Treatment
as Compensation. Any compensation that an
individual earns or is deemed to earn under this Plan shall not be considered a part of his or her compensation for purposes of
calculating contributions, accruals or benefits under any other plan or program that is maintained or funded by the Company, a
Parent or a Subsidiary.

 

(d)          Governing
Law. The Plan and all awards, sales and grants
under the Plan shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.

 

SECTION
11.         DURATION AND AMENDMENTS.

 

(a)          Term
of the Plan. The Plan, as set forth herein,
shall become effective on the date of its adoption by the Board of Directors, subject to the approval of the Company’s stockholders.
If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any grants, exercises
or sales that have already occurred under the Plan shall be rescinded and no additional grants, exercises or sales shall thereafter
be made under the Plan. The Plan shall terminate automatically 10 years after the later of (i) the date when the Board of
Directors adopted the Plan or (ii) the date when the Board of Directors approved the most recent increase in the number of
Shares reserved under Section 4 that was also approved by the Company’s stockholders. The Plan may be terminated on
any earlier date pursuant to Subsection (b) below.

 

(b)          Right
to Amend or Terminate the Plan. The Board
of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of
the Plan shall be subject to the approval of the Company’s stockholders if it (i) increases the number of Shares available
for issuance under the Plan (except as provided in Section 8) or (ii) materially changes the class of persons who are
eligible for the grant of ISOs. Stockholder approval shall not be required for any other amendment of the Plan. If the stockholders
fail to approve an increase in the number of Shares reserved under Section 4 within 12 months after its adoption by the Board
of Directors, then any grants, exercises or sales that have already occurred in reliance on such increase shall be rescinded and
no additional grants, exercises or sales shall thereafter be made in reliance on such increase.

 

(c)          Effect
of Amendment or Termination. No Shares shall
be issued or sold under the Plan after the termination thereof, except upon exercise of an Option (or any other right to purchase
Shares) granted under the Plan prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect
any Share previously issued or any Option previously granted under the Plan.

 

    	9

    	 

    

 

SECTION
12.         DEFINITIONS.

 

(a)          “Board
of Directors” shall mean the Board of Directors of the Company, as constituted from time to time.

 

(b)          “Code”
shall mean the Internal Revenue Code of 1986, as amended.

 

(c)          “Committee”
shall mean a committee of the Board of Directors, as described in Section 2(a).

 

(d)          “Company”
shall mean Flux Power, Inc., a California corporation.

 

(e)          “Consultant”
shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding
Employees and Outside Directors.

 

(f)          “Date
of Grant” shall mean the date of grant specified in the applicable Stock Option Agreement, which date shall be the later
of (i) the date on which the Board of Directors resolved to grant the Option or (ii) the first day of the Optionee’s
Service.

 

(g)          “Disability”
shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment.

 

(h)          “Employee”
shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(i)          “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(j)          “Exercise
Price” shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board
of Directors in the applicable Stock Option Agreement.

 

(k)          “Fair
Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such
determination shall be conclusive and binding on all persons.

 

(l)          “Family
Member” shall mean (i) any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, (ii) any person sharing the Optionee’s household (other than a tenant or employee), (iii) a trust
in which persons described in Clause (i) or (ii) have more than 50% of the beneficial interest, (iv) a foundation
in which persons described in Clause (i) or (ii) or the Optionee control the management of assets and (v) any other
entity in which persons described in Clause (i) or (ii) or the Optionee own more than 50% of the voting interests.

 

    	10

    	 

    

 

(m)          “Grantee”
shall mean a person to whom the Board of Directors has awarded Shares under the Plan.

 

(n)          “ISO”
shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(o)          “Nonstatutory
Option” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

 

(p)          “Option”
shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.

 

(q)          “Optionee”
shall mean a person who holds an Option.

 

(r)          “Outside
Director” shall mean a member of the Board of Directors who is not an Employee.

 

(s)          “Parent”
shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption
of the Plan shall be considered a Parent commencing as of such date.

 

(t)          “Plan”
shall mean this Flux Power, Inc. 2010 Stock Plan.

 

(u)          “Purchase
Price” shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an
Option), as specified by the Board of Directors.

 

(v)         “Purchaser”
shall mean a person to whom the Board of Directors has offered the right to purchase Shares under the Plan (other than upon exercise
of an Option).

 

(w)          “Securities
Act” shall mean the Securities Act of 1933, as amended.

 

(x)          “Service”
shall mean service as an Employee, Outside Director or Consultant.

 

(y)          “Share”
shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).

 

(z)          “Stock”
shall mean the Common Stock of the Company.

 

(aa)         “Stock
Grant Agreement” shall mean the agreement between the Company and a Grantee who is awarded Shares under the Plan that
contains the terms, conditions and restrictions pertaining to the award of such Shares.

 

    	11

    	 

    

 

(bb)         “Stock
Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and
restrictions pertaining to the Optionee’s Option.

 

(cc)         “Stock
Purchase Agreement” shall mean the agreement between the Company and a Purchaser who purchases Shares under the Plan
that contains the terms, conditions and restrictions pertaining to the purchase of such Shares.

 

(dd)         “Subsidiary”
shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of
the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

    	12

    	 

    

 

Exhibit A

 

Schedule
of Shares Reserved for Issuance under the Plan

 

	Date of Board 
Approval	 	Date of Stockholder 
Approval	 	 	Number of
 Shares Added	 	 	Cumulative Number 
of Shares	 
	 	 	 	 	 	 	 	 	 	 
	December 3, 2010	 	December ___, 2010	 	 	Not Applicable	 	 	2,000,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

    	E-1

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