Document:

hrmy-ex109_551.htm

 

Exhibit 10.9

 

HARMONY BIOSCIENCES HOLDINGS, INC. 

 

NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM

 

Eligible Directors (as defined below) on the board of directors (the “Board”) of Harmony Biosciences Holdings, Inc. (the “Company”) shall be eligible to receive cash and equity compensation as set forth in this Non-Employee Director Compensation Program (this “Program”).  The cash and equity compensation described in this Program shall be paid or be made, as applicable, automatically as set forth herein and without further action of the Board, to each member of the Board who is not an employee of the Company or any of its parents, affiliates or subsidiaries, and who is determined by the Board to be eligible to receive compensation under this Program (each, an “Eligible Director”), who may be eligible to receive such cash or equity compensation, unless such Eligible Director declines the receipt of such cash or equity compensation by written notice to the Company.  

This Program shall become effective upon the closing of the initial public offering of the Company’s common stock (the “Effective Date”) and shall remain in effect until it is revised or rescinded by further action of the Board.  This Program may be amended, modified or terminated by the Board at any time in its sole discretion.  No Eligible Director shall have any rights hereunder, except with respect to equity awards granted pursuant to Section 2 of this Program.  

1.Cash Compensation.   

a.Annual Retainers.  Each Eligible Director shall be eligible to receive an annual cash retainer of $45,000 for service on the Board.  

b.Additional Annual Retainers.  An Eligible Director shall be eligible to receive the following additional annual retainers, as applicable:

 (i)Chairman of the Board.  An Eligible Director serving as Non-Executive Chairman of the Board shall be eligible to receive an additional annual retainer of $40,000 for such service.

(ii)Audit Committee.  An Eligible Director serving as Chairperson of the Audit Committee shall be eligible to receive an additional annual retainer of $20,000 for such service.  An Eligible Director serving as a member of the Audit Committee (other than the Chairperson) shall be eligible to receive an additional annual retainer of $10,000 for such service.

(iii)Compensation Committee.  An Eligible Director serving as Chairperson of the Compensation Committee shall be eligible to receive an additional annual retainer of $15,000 for such service.  An Eligible Director serving as a member of the Compensation Committee (other than the Chairperson) shall be eligible to receive an additional annual retainer of $8,000 for such service.

(iv) Nominating and Corporate Governance Committee.  An Eligible Director serving as Chairperson of the Nominating and Corporate Governance Committee shall be eligible to receive an additional annual retainer of $10,000 for such service.  An Eligible Director serving as a member of the Nominating and Corporate Governance Committee (other than the Chairperson) shall be eligible to receive an additional annual retainer of $5,000 for such service.

1

 

 

c.Payment of Retainers.  The annual cash retainers described in Sections 1(a) and 1(b) shall be earned on a quarterly basis based on a calendar quarter and shall be paid by the Company in arrears not later than 30 days following the end of each calendar quarter.  In the event an Eligible Director does not serve as a director, or in the applicable positions described in Section 1(b), for an entire calendar quarter, the retainer paid to such Eligible Director shall be prorated for the portion of such calendar quarter actually served as a director, or in such position, as applicable.  

2.Equity Compensation. 

a.General.  Eligible Directors shall be granted the equity awards described below.  The awards described below shall be granted under and shall be subject to the terms and provisions of the Company’s 2020 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (such plan, as may be amended from time to time, the “Equity Plan”) and may be granted subject to the execution and delivery of award agreements, including attached exhibits, in substantially the forms approved by the Board prior to or in connection with such grants.  All applicable terms of the Equity Plan apply to this Program as if fully set forth herein, and all grants of equity awards hereby are subject in all respects to the terms of the Equity Plan.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Equity Plan.

b.Initial Awards.  

i.Each Eligible Director who is initially elected or appointed to serve on the Board after the Effective Date automatically shall be granted an Option with a value as set forth below (the “Initial Equity Award”): 

1.An Eligible Director serving as Chairperson of the Audit Committee: $230,000.

2.An Eligible Director serving as Chairperson of the Compensation Committee: $175,000.

3.An Eligible Director (other than a Chairperson of the Audit Committee, Chairperson of the Compensation Committee or the Non-Executive Chairman of the Board): $125,000.

ii.The Initial Equity Award shall be granted on the date on which such Eligible Director is appointed or elected to serve on the Board, and shall vest and become exercisable as to 1/36th of the Shares underlying the Option on each monthly anniversary of the grant date, subject to such Eligible Director’s continued service through the applicable vesting date, such that the Option is fully vested and exercisable on the third anniversary of the grant date, subject to such Eligible Director’s continued service through the applicable vesting date.  

c.Annual Awards.  

i.An Eligible Director who is serving on the Board as of the date of the annual meeting of the Company’s stockholders (the “Annual Meeting”) each calendar year beginning with calendar year 2021 shall be granted an Option with a value as set forth below (an “Annual Award” and together with the Initial Equity Award, the “Director Equity Awards”):  

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1.An Eligible Director serving as Chairperson of the Audit Committee: $230,000.

2.An Eligible Director serving as Chairperson of the Compensation Committee: $175,000.

3.An Eligible Director (other than a Chairperson of the Audit Committee, Chairperson of the Compensation Committee or the Non-Executive Chairman of the Board): $125,000.

ii.Each Annual Award shall vest and become exercisable in full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the next Annual Meeting following the grant date, subject to continued service through the applicable vesting date. 

d.Accelerated Vesting Events.  Notwithstanding the foregoing, an Eligible Director’s Director Equity Award(s) shall vest and become exercisable in full immediately prior to the occurrence of a Change in Control to the extent outstanding at such time.

e.Provisions Applicable to Awards.  With respect to any Award granted under this Program:

i.The exercise price per Share with respect to an Option shall be equal to the Fair Market Value of a Share on the applicable grant date.

ii.An Option shall have a maximum term of ten years from the applicable grant date.

iii.The number of Shares subject to an Option shall be determined by dividing the value of the Option by the per share Black-Scholes valuation as of the applicable grant date, utilizing the same assumptions that the Company uses in preparation of its financial statements.

3.Compensation Limits.  Notwithstanding anything to the contrary in this Program, all compensation payable under this Program will be subject to any limits on the maximum amount of non-employee Director compensation set forth in the Equity Plan, as in effect from time to time.

*****

3Exhibit
10.1

 

LOAN
AND SECURITY AGREEMENT

 

THIS
LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of November 9, 2020 (the “Effective Date”)
by and among (i) SILICON VALLEY BANK, a California corporation (“Bank”), (ii) FLUX POWER, INC.,
a California corporation (“Flux”), and (iii) FLUX POWER HOLDINGS, INC., a Nevada corporation (“Holdings”,
and together with Flux, individually and collectively, jointly and severally, the “Borrower”) provides the
terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:

 

1
ACCOUNTING AND OTHER TERMS

 

Accounting
terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following
GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

2
LOAN AND TERMS OF PAYMENT

 

2.1
Promise to Pay. Borrower hereby unconditionally, individually and collectively, jointly and severally, promises to pay Bank
the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance
with this Agreement.

 

2.2
Revolving Line.

 

(a)
Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank may, in its good
faith business discretion, make Advances not exceeding the Availability Amount. Amounts borrowed under the Revolving Line may
be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent
herein.

 

(b)
Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount
of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due
and payable.

 

2.3
Overadvances. If, at any time, the outstanding principal amount of any Advances exceeds the lesser of either the Revolving
Line or the Borrowing Base, Borrower shall immediately pay to Bank in cash the amount of such excess (such excess, the “Overadvance”).
Without limiting Borrower’s obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest on the outstanding
amount of any Overadvance, on demand, at a per annum rate equal to the rate that is otherwise applicable to Advances plus five
percent (5.0%).

 

2.4
Payment of Interest on the Credit Extensions.

 

(a)
Interest Rate.

 

(i)
Advances. Subject to Section 2.4(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating
per annum rate equal to the greater of either (A) Prime Rate plus two and one-half of one percent (2.50%) or (B) five and three-quarters
of one percent (5.75%), which interest shall be payable monthly in accordance with Section 2.4(d) below.

 

(b)
Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear
interest at a rate per annum which is five percent (5.0%) above the rate that is otherwise applicable thereto (the “Default
Rate”). Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without
limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable
to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.4(b) is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies
of Bank.

 

    	 

    	 

    

 

(c)
Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall
be effective on the effective date of any change to the Prime Rate and to the extent of any such change.

 

(d)
Payment; Interest Computation. Interest is payable monthly on the Payment Date of each month and shall be computed on the
basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 noon
Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the
making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that
if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such
Credit Extension.

 

2.5
Fees. Borrower shall pay to Bank:

 

(a)
Revolving Line Commitment Fee. A fully earned, non-refundable commitment fee of Fifteen Thousand Dollars ($15,000.00),
payable on the Effective Date;

 

(b)
Unused Revolving Line Facility Fee. Payable quarterly in arrears on the last day of each calendar quarter occurring prior
to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the “Unused Revolving Line Facility
Fee”) in an amount equal to one-quarter of one percent (0.25%) per annum of the average unused portion of the Revolving
Line, as determined by Bank, computed on the basis of a year with the applicable number of days as set forth in Section 2.4(d).
The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall
equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving
Line outstanding; and

 

(c)
Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due (or, if no stated due date, upon demand by Bank).

 

(d)
Fees Fully Earned. Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be
entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination
of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder. Bank may deduct
amounts owing by Borrower under the clauses of this Section 2.5 pursuant to the terms of Section 2.6(c). Bank shall provide Borrower
written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.5.

 

2.6
Payments; Application of Payments; Debit of Accounts. 

 

(a)
All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff
or counterclaim, before 12:00 noon Pacific time on the date when due. Payments of principal and/or interest received after 12:00
noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall
continue to accrue until paid.

 

(b)
Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied.
Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required
to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

 

(c)
Bank may debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest
payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.

 

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2.7
Withholding. 

 

(a)
Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by
any Governmental Authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however,
if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any
withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that
the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary
to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it
would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted
to the relevant Governmental Authority. Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating
that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding
payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings
and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained
in this Section 2.7 shall survive the termination of this Agreement.

 

3
CONDITIONS OF LOANS

 

3.1
Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial Credit Extension is subject
to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion
of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

 

(a)
duly executed signatures to the Loan Documents;

 

(b)
the Operating Documents and long-form good standing certificates of Borrower certified by the Secretary of State (or equivalent
agency) of Borrower’s jurisdiction of organization or formation and each jurisdiction in which Borrower is qualified to
conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(c)
a secretary’s certificate of Borrower with respect to such Borrower’s Operating Documents, incumbency, specimen signatures
and resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party;

 

(d)
[Intentionally omitted];

 

(e)
[Intentionally omitted];

 

(f)
certified copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted
Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

 

(g)
the Perfection Certificates of Borrower, together with the duly executed signatures thereto;

 

(h)
Intellectual Property search results and completed exhibits to the IP Agreement;

 

(i)
a landlord’s consent in favor of Bank for each of Borrower’s leased locations, by the respective landlord thereof,
together with the duly executed signatures thereto;

 

(j)
a legal opinion (authority and enforceability) of Borrower’s counsel dated as of the Effective Date together with the duly
executed signature thereto;

 

    	3

    	 

    

 

(k)
evidence satisfactory to Bank that the insurance policies and endorsements required by Section 6.7 hereof are in full force and
effect, together with appropriate evidence showing lender loss payable clauses or endorsements in favor of Bank;

 

(l)
the completion of the Initial Audit;

 

(m)
with respect to the initial Advance, a completed Borrowing Base Report (and any schedules related thereto and including any other
information requested by Bank with respect to Borrower’s Accounts);

 

(n)
payment of the fees and Bank Expenses then due as specified in Section 2.5 hereof;

 

(o)
a subordination agreement by Tabone Family Partnership, Esenjay Investments, LLC, Cleveland Capital, L.P., Otto Candies Jr., Winn
Interests, LTD, Paul Candies and Brett Candies in favor of and satisfactory to Bank, together with the duly executed signatures
thereto and copies of the underlying documents evidencing Borrower’s Indebtedness with such Persons.

 

3.2
Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following conditions precedent:

 

(a)
timely receipt of the Credit Extension request and any materials and documents required by Section 3.4;

 

(b)
the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date
of the proposed Credit Extension and on the Funding Date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall
have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation
and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all
material respects; provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date; and

 

(c)
Bank determines to its satisfaction that there has not been any material impairment in the general affairs, management, results
of operation, financial condition or the prospect of repayment of the Obligations, nor any material adverse deviation by Borrower
from the most recent business plan of Borrower presented to and accepted by Bank.

 

3.3
Covenant to Deliver.

 

(a)
Except as otherwise provided in Section 3.3(b), Borrower agrees to deliver to Bank each item required to be delivered to Bank
under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made
prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver
such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.

 

(b)
Unless otherwise provided in writing, within thirty (30) days after the Effective Date, (i) Bank shall have received, in
form and substance satisfactory to Bank, the additional insured endorsement to the liability insurance policy in favor of Bank,
and (ii) Borrower shall take all actions necessary, including, without limitation, making any necessary assignment filings with
the United States Patent and Trademark Office to evidence the assignment of Patent D692,373, S/29/367,346 titled “Battery
(design patent)” to and in the name of Borrower. 

 

3.4
Procedures for Borrowing.

 

(a)
Advances. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in
this Agreement, to obtain an Advance, Borrower (via an individual duly authorized by an Administrator) shall notify Bank (which
notice shall be irrevocable) by electronic mail by 12:00 noon Pacific time on the Funding Date of the Advance. Such notice shall
be made by Borrower through Bank’s online banking program; provided, however, if Borrower is not utilizing
Bank’s online banking program, then such notice shall be in a written format acceptable to Bank that is executed by an Authorized
Signer. Bank shall have received satisfactory evidence that the Board has approved that such Authorized Signer may provide such
notices and request Advances. In connection with any such notification, Borrower must promptly deliver to Bank by electronic mail
or through Bank’s online banking program such reports and information, including without limitation, sales journals, cash
receipts journals, accounts receivable aging reports, as Bank may request in its sole discretion. Bank shall credit proceeds of
an Advance to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from an Authorized
Signer or without instructions if the Advances are necessary to meet Obligations which have become due.

 

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4
CREATION OF SECURITY INTEREST

 

4.1
Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations,
a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired
or arising, and all proceeds and products thereof.

 

Borrower
acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless
of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to
be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to Permitted Liens that are permitted pursuant to the
terms of this Agreement to have superior priority to Bank’s Lien in this Agreement).

 

If
this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity
obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations)
and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at the sole cost and expense
of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations
(other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated,
Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall
provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least
one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one
hundred ten percent (110.0%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees,
and costs due or to become due in connection therewith (as estimated by Bank in its business judgment), to secure all of the Obligations
relating to such Letters of Credit.

 

4.2
Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and
shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens
that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement).
If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.

 

4.3
Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to
Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice
that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar
effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.

 

4.4
Senior Permitted Liens. Until the earlier of the termination or the lapse of the financing statements filed with the California
Secretary of State in connection with the security interests granted to Geneva Capital, LLC as evidenced by UCC-1 Financing Statement
No.: 197709343407 and JP Morgan Chase Bank, N.A. as evidenced by UCC-1 Financing Statement No. U200003823927; provided that, under
no circumstances shall Borrower permit the Lien of JP Morgan Chase Bank, N.A. evidenced by UCC-1 Financing Statement No. U200003823927
to secure more than One Million Dollars ($1,000,000) in the aggregate (collectively, “Priority Liens”), such Priority
Liens shall have superior priority to Bank’s Lien in this Agreement.

 

    	5

    	 

    

 

5
REPRESENTATIONS AND WARRANTIES

 

Borrower
represents and warrants as follows:

 

5.1
Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered Organization
in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which
the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could
not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement,
Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection Certificate” (the
“Perfection Certificate”). Borrower represents and warrants to Bank that (a) Borrower’s exact legal name
is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type
and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s
mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past
five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned
by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of
its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information
in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).
If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence
and provide Bank with Borrower’s organizational identification number.

 

The
execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under
or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction,
decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property
or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval
from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and
effect), or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration
of, any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.

 

5.2
Collateral. Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports
to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at
or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described
in the Perfection Certificate delivered to Bank in connection herewith and which Borrower has taken such actions as are necessary
to give Bank a perfected security interest therein, pursuant to the terms of Section 6.8(b). The Accounts are bona fide, existing
obligations of the Account Debtors.

 

The
Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection
Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 7.2.

 

All
Inventory is in all material respects of good and marketable quality, free from material defects.

 

Borrower
is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted
to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public,
and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns
or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual
Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or
unenforceable, in whole or in part. To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual
Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material
adverse effect on Borrower’s business.

 

    	6

    	 

    

 

Except
as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.

 

5.3
Accounts Receivable; Inventory. 

 

(a)
For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall
be an Eligible Account.

 

(b)
All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible
Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrower’s
Books are genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each
Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower
has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts in
any Borrowing Base Report. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments,
and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable
in accordance with their terms.

 

(c)
For any item of Inventory consisting of Eligible Inventory in any Borrowing Base Report, such Inventory (i) consists of finished
goods, in good, new, and salable condition, which is not perishable, returned, consigned, obsolete, not sellable, damaged, or
defective, and is not comprised of demonstrative or custom inventory, works in progress, raw materials, packaging or shipping
materials, or supplies; (ii) meets all applicable governmental standards; (iii) has been manufactured in compliance with the Fair
Labor Standards Act; (iv) is not subject to any Liens, except Permitted Liens consisting of customary Liens in favor of any landlord,
warehouseman, broker, common carrier or other bailee where such Person executed (A) as to any landlord a landlord waiver, leasehold
mortgage, estoppel agreement, or the lease contains a waiver in form and substance reasonably satisfactory to Bank, as applicable,
and (B) as to any broker, warehouseman, common carrier or bailee, a bailee wavier in favor of Bank; (v) is owned solely by Borrower
and subject to a perfected first priority Lien granted in favor of Bank under this Agreement; (vi) is not leased or on consignment
to Borrower or on consignment by Borrower; (vii) is insured in accordance with the terms of this Agreement; (viii) is not subject
to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third party from which Borrower has received
notice of a dispute in respect of any such agreement; (ix) is of the type usually sold in the ordinary course of Borrower’s
business; and (x) is located in the United States at the locations identified by Borrower in the Perfection Certificate where
it maintains Inventory (or at any location permitted under Section 7.2).

 

5.4
Litigation. There are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing
by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Fifty Thousand Dollars
($50,000.00).

 

5.5
Financial Statements; Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries
delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition
since the date of the most recent financial statements submitted to Bank.

 

5.6
Solvency. The fair salable value of Borrower’s consolidated assets (including goodwill minus disposition costs) exceeds
the fair value of Borrower’s liabilities; Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

 

    	7

    	 

    

 

5.7
Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities
in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower (a) has
complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation
of which could reasonably be expected to have a material adverse effect on its business. None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with,
and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently
conducted.

 

5.8
Subsidiaries; Investments. Borrower does not own any stock, partnership, or other ownership interest or other equity securities
except for Permitted Investments.

 

5.9
Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower
has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except (a)
to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted,
so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made
therefor, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed Five
Thousand Dollars ($5,000.00).

 

To
the extent Borrower defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and
any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the Governmental
Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien.” Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could
result in additional taxes becoming due and payable by Borrower in excess of Five Thousand Dollars ($5,000.00). Borrower has paid
all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

5.10
Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital, and to fund its general
business requirements and not for personal, family, household or agricultural purposes.

 

5.11
Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement
given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written
certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank
that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as
facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected
or forecasted results).

 

5.12
Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to
Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification,
knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.

 

6
AFFIRMATIVE COVENANTS

 

Borrower
shall do all of the following:

 

    	8

    	 

    

 

6.1
Government Compliance. 

 

(a)
Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation
and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, in all material
respects, with all laws, ordinances and regulations to which it is subject.

 

(b)
Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents
to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies
of any such obtained Governmental Approvals to Bank.

 

6.2
Financial Statements, Reports, Certificates. Provide Bank with the following:

 

(a)
a Borrowing Base Report (including an accounts receivable ledger report and any schedules related thereto and including any other
information requested by Bank with respect to Borrower’s Accounts) (i) with each request for an Advance; and (ii) monthly,
within seven (7) days after the end of each month;

 

(b)
within thirty (30) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly
accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, (C) monthly reconciliations of
accounts receivable agings (aged by invoice date), transaction reports, Deferred Revenue report, detailed debtor listing and general
ledger, and (D) monthly perpetual inventory reports for Inventory valued on a first-in, first-out basis at the lower of cost or
market (in accordance with GAAP) or such other inventory reports as are requested by Bank in its good faith business judgment;

 

(c)
as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and
consolidating balance sheet, statement of cash flows and income statement covering Borrower’s and each of its Subsidiary’s
operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “Monthly Financial
Statements”);

 

(d)
within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed
Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance
with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants
set forth in this Agreement and such other information as Bank may reasonably request, including, without limitation, a statement
that at the end of such month there were no held checks;

 

(e)
within thirty (30) days after the end of each fiscal year of Borrower, and contemporaneously with any updates or amendments thereto,
(A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming
fiscal year of Borrower, and (B) annual financial projections for the following fiscal year (on a quarterly basis), in each case
as approved by the Board, together with any related business forecasts used in the preparation of such annual financial projections;

 

(f)
as soon as available, and in any event within one hundred eighty (180) days following the end of Borrower’s fiscal year,
audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm reasonably acceptable to Bank;

 

(g)
in the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) days of filing,
copies of all periodic and other reports, proxy statements and other materials filed by Borrower and/or any Guarantor with the
SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange,
or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the
extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered,
shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s
website on the internet at Borrower’s website address; provided, however, Borrower shall promptly notify Bank
in writing (which may be by electronic mail) of the posting of any such documents;

 

    	9

    	 

    

 

(h)
within five (5) Business Days of delivery, copies of all statements, reports and notices made available to Borrower’s security
holders or to any holders of Subordinated Debt;

 

(i)
prompt written notice of any changes to the beneficial ownership information set out in the Perfection Certificate. Borrower understands
and acknowledges that Bank relies on such true, accurate and up-to-date beneficial ownership information to meet Bank’s
regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers;

 

(j)
prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result
in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000.00)
or more; and

 

(k)
promptly, from time to time, such other information regarding Borrower or compliance with the terms of any Loan Documents as reasonably
requested by Bank.

 

6.3
Accounts Receivable.

 

(a)
Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections,
as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to
execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts,
nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights
therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of all contracts,
orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence
of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to
Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and
property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all
credit memos.

 

(b)
Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to Accounts. Borrower may forgive (completely
or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as
(i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length
transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and
is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances
will not exceed the lesser of the Revolving Line or the Borrowing Base.

 

(c)
Collection of Accounts. Borrower shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox
account, or such other “blocked account” as specified by Bank (either such account, the “Cash Collateral
Account”). Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all
payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Bank’s right to maintain a reserve pursuant
to Section 6.3(d), all amounts received in the Cash Collateral Account shall be applied to immediately reduce the Obligations
under the Revolving Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply
such amounts). Borrower hereby authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines
are proceeds of the Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve
Borrower of its obligations hereunder).

 

(d)
Reserves. Notwithstanding any terms in this Agreement to the contrary, at times when an Event of Default exists, Bank may
hold any proceeds of the Accounts and any amounts in the Cash Collateral Account that are not applied to the Obligations pursuant
to Section 6.3(c) above as a reserve to be applied to any Obligations regardless of whether such Obligations are then due and
payable.

 

(e)
Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower,
Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the
appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted
return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory
in trust for Bank, and immediately notify Bank of the return of the Inventory.

 

    	10

    	 

    

 

(f)
Verifications; Confirmations; Credit Quality; Notifications. Bank may, from time to time, (i) verify and confirm directly
with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower
or Bank or such other name as Bank may choose, and notify any Account Debtor of Bank’s security interest in such Account
and/or (ii) conduct a credit check of any Account Debtor to approve any such Account Debtor’s credit. In addition, Bank
may notify Account Debtors to make payments in respect of Accounts directly to Bank.

 

(g)
No Liability. Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any
kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account
in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations
under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its
own gross negligence or willful misconduct.

 

6.4
Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition
of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt
by Borrower, to be applied to the Obligations (a) prior to an Event of Default, pursuant to the terms of Section 6.3(c) hereof,
and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided
that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds
of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm’s length transaction for an
aggregate purchase price of Twenty Five Thousand Dollars ($25,000.00) or less (for all such transactions in any fiscal year).
Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower’s other funds or property, but will
hold such proceeds separate and apart from such other funds and property and in an express trust for Bank. Nothing in this Section
6.4 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

 

6.5
Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and
timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to
the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and
pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their
terms.

 

6.6
Access to Collateral; Books and Records. In addition to the Initial Audit, at reasonable times, on one (1) Business Day’s
notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank or its agents, representatives
or third party contractors, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books,
inspect the Inventory and other tangible assets of Borrower, perform appraisals of the Inventory of Borrower, and to conduct field
examinations. Each of the foregoing inspections, audits, exams and appraisals shall be conducted no more often than once every
twelve (12) months (or more frequently as Bank in its sole discretion determines that conditions warrant), unless an Event of
Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine
is necessary. The foregoing inspections, audits, exams and appraisals (including, without limitation, the Initial Audit) shall
be conducted at Borrower’s expense and the charge therefor shall be One Thousand Dollars ($1,000.00) per person per day
(or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket
expenses. In the event Borrower and Bank schedule an audit more than eight (8) days in advance, and Borrower cancels or seeks
to or reschedules the audit with less than eight (8) days written notice to Bank, then (without limiting any of Bank’s rights
or remedies) Borrower shall pay Bank a fee of Two Thousand Dollars ($2,000.00) plus any out-of-pocket expenses incurred by Bank
to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.

 

    	11

    	 

    

 

6.7
Insurance. 

 

(a)
Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and
location and as Bank may reasonably request. Insurance policies shall be in a form, with financially sound and reputable insurance
companies that are not Affiliates of Borrower, and in amounts that are satisfactory to Bank. All property policies shall have
a lender’s loss payable endorsement showing Bank as an additional lender loss payee. All liability policies shall show,
or have endorsements showing, Bank as an additional insured. Bank shall be named as lender loss payee and/or additional insured
with respect to any such insurance providing coverage in respect of any Collateral.

 

(b)
Ensure that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations.

 

(c)
At Bank’s request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each
provider of any such insurance required under this Section 6.7 shall agree, by endorsement upon the policy or policies issued
by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any
such policy or policies shall be materially altered or canceled. If Borrower fails to obtain insurance as required under this
Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems
prudent.

 

6.8
Accounts.

 

(a)
Maintain its and all of its Subsidiaries’ operating and other deposit accounts, the Cash Collateral Account and securities/investment
accounts with Bank and Bank’s Affiliates, with all excess cash maintained with Bank and Bank’s Affiliates; provided
that, notwithstanding the foregoing, Borrower shall have thirty (30) days after the Effective Date to transition its existing
accounts to Bank and Bank’s Affiliates. Any Guarantor shall maintain all depository, operating and securities/investment
accounts with Bank and Bank’s Affiliates. Borrower agrees to conduct all other primary banking with Bank for services such
as Letters of Credit and business credit cards.

 

(b)
In addition to and without limiting the restrictions in (a), Borrower shall provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates. For
each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with
the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of
the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes, and other employee wage
and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such.

 

6.9
Financial Covenants.

 

Maintain
at all times, subject to periodic reporting, unless otherwise noted:

 

(a)
Tangible Net Worth. A Tangible Net Worth, measured as of the last day of each month indicated below, of at least the corresponding
amount listed below, in each case increasing by fifty percent (50%) of positive quarterly net income, fifty percent (50%) of the
proceeds from issuances of equity after the Effective Date and fifty percent (50%) of the principal amount of Subordinated Debt
issued or incurred after the Effective Date:

 

	Monthly
    Period Ending	 	Tangible
    Net Worth	 
	September
    30, 2020	 	$	7,500,000.00	 
	October
    31, 2020 through and including December 31, 2020	 	$	6,250,000.00	 
	January
    31, 2021 through and including March 31, 2021	 	$	5,250,000.00	 
	April
    30, 2021 through the Revolving Line Maturity Date	 	$	4,250,000.00	 

 

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6.10
Protection and Registration of Intellectual Property Rights. 

 

(a)
(i) Protect, defend and maintain the validity and enforceability of its Intellectual Property; (ii) promptly advise Bank in writing
of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of
its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.

 

(b)
If Borrower (i) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any pending application
for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any Patent or the registration of any Trademark,
then Borrower shall immediately provide written notice thereof to Bank and shall execute such intellectual property security agreements
and other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain
a first priority perfected security interest in favor of Bank in such property. If Borrower decides to register any Copyrights
or mask works in the United States Copyright Office, Borrower shall: (x) provide Bank with at least fifteen (15) Business Days
prior written notice of Borrower’s intent to register such Copyrights or mask works together with a copy of the application
it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property
security agreement and such other documents and take such other actions as Bank may request in its good faith business judgment
to perfect and maintain a first priority perfected security interest in favor of Bank in the Copyrights or mask works intended
to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the
United States Copyright Office contemporaneously with filing the Copyright or mask work application(s) with the United States
Copyright Office. Borrower shall promptly provide to Bank copies of all applications that it files for Patents or for the registration
of Trademarks, Copyrights or mask works, together with evidence of the recording of the intellectual property security agreement
required for Bank to perfect and maintain a first priority perfected security interest in such property.

 

(c)
Provide written notice to Bank within ten (10) Business Days of entering or becoming bound by any Restricted License (other than
over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain
the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral”
and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any
such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of
a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement
and the other Loan Documents.

 

6.11
Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank,
without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent
that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against
Bank with respect to any Collateral or relating to Borrower.

 

6.12
Online Banking.

 

(a)
Utilize Bank’s online banking platform for all matters requested by Bank which shall include, without limitation (and without
request by Bank for the following matters), uploading information pertaining to Accounts and Account Debtors, requesting approval
for exceptions, requesting Credit Extensions, and uploading financial statements and other reports required to be delivered by
this Agreement (including, without limitation, those described in Section 6.2 of this Agreement).

 

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(b)
Comply with the terms of Bank’s Online Banking Agreement as in effect from time to time and ensure that all persons utilizing
Bank’s online banking platform are duly authorized to do so by an Administrator. Bank shall be entitled to assume the authenticity,
accuracy and completeness of any information, instruction or request for a Credit Extension submitted via Bank’s online
banking platform and to further assume that any submissions or requests made via Bank’s online banking platform have been
duly authorized by an Administrator.

 

6.13
Formation or Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenants contained in Sections
7.3 and 7.7 hereof, at the time that Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires any direct
or indirect Subsidiary after the Effective Date (including, without limitation, pursuant to a Division), Borrower and such Guarantor
shall (a) cause such new Subsidiary to provide to Bank a joinder to this Agreement to become a co-borrower hereunder or a Guaranty
to become a Guarantor hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and
substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in
and to the assets of such newly formed or acquired Subsidiary), (b) provide to Bank appropriate certificates and powers and financing
statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory
to Bank; and (c) provide to Bank all other documentation in form and substance satisfactory to Bank, including one or more opinions
of counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable
documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 6.13 shall
be a Loan Document.

 

6.14
Physical Inventories. Cause physical inventories to be undertaken, at the expense of Borrower, once in each fiscal year of
Borrower consistent with past practices, conducted by such inventory takers as are satisfactory to Bank and following such methodology
as is consistent with the methodology used in the immediately preceding inventory or as otherwise may be satisfactory to Bank.
Bank, at the expense of Borrower, may participate in and/or observe each scheduled physical count of Inventory which is undertaken
on behalf of Borrower. Borrower, within ten (10) Business Days following the completion of such inventory, shall provide Bank
with a reconciliation of the results of such inventory (as well as of any other physical inventory undertaken by Borrower at Bank’s
request) and shall post such results to Borrower’s stock ledgers and general ledgers, as applicable. If any Event of Default
has occurred and is continuing, Borrower shall permit Bank, in its discretion, to cause additional physical inventories to be
taken, each at Borrower’s expense.

 

6.15
Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue
Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within five (5) Business Days
after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be
expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its
Subsidiaries.

 

7
NEGATIVE COVENANTS

 

Borrower
shall not do any of the following without Bank’s prior written consent:

 

7.1
Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (including, without limitation, pursuant to a
Division) (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its
business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment
that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course
of business of Borrower; (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or issuance of
any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrower’s use or transfer of money
or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; (f) of non-exclusive
licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (g) of Accounts owing
from Caterpillar, Inc. and/or its subsidiaries or affiliates to JPMORGAN CHASE BANK, N.A. in an amount not to exceed One Million
Dollars ($1,000,000) during the term of this Agreement pursuant to a certain factoring arrangement in effect as of the Effective
Date or (ii) of Accounts owing from Crown V-Force and/or its subsidiaries or affiliates to BANK OF AMERICA, N.A. pursuant to a
certain factoring arrangement in effect as of the Effective Date.

 

    	14

    	 

    

 

7.2
Changes in Business, Management, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage
in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related
thereto; (b) liquidate or dissolve; (c) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed
by Borrower within five (5) Business Days after such Key Person’s departure from Borrower; or (d) permit or suffer any Change
in Control.

 

Borrower
shall not, without at least thirty (30) Business Days prior written notice to Bank: (1) add any new offices or business locations,
including warehouses (unless such new offices or business locations contain less than Ten Thousand Dollars ($10,000.00) in Borrower’s
assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Ten Thousand
Dollars ($10,000.00) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate,
(2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5)
change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to add any new offices
or business locations, including warehouses, containing in excess of Ten Thousand Dollars ($10,000.00) of Borrower’s assets
or property, then Borrower will first receive the written consent of Bank, and the landlord of any such new offices or business
locations, including warehouses, shall execute and deliver a landlord consent in form and substance satisfactory to Bank. If Borrower
intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Ten Thousand Dollars ($10,000.00)
to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location
to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee
shall execute and deliver a bailee agreement in form and substance satisfactory to Bank.

 

7.3
Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person,
or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another
Person (including, without limitation, by the formation of any Subsidiary or pursuant to a Division). A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

 

7.4
Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

 

7.5
Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral
not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of
prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering
any of Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof
and the definition of “Permitted Liens” herein.

 

7.6
Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.

 

7.7
Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital
stock; or (b) directly or indirectly make any Investment (including, without limitation, by the formation of any Subsidiary) other
than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8
Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate
of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.

 

    	15

    	 

    

 

7.9
Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to
the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments
thereon, or adversely affect the subordination thereof to Obligations owed to Bank.

 

7.10
Compliance. Become an “investment company” or a company controlled by an “investment company”, under
the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of
any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law
or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or
permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and
deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

8
EVENTS OF DEFAULT

 

Any
one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

8.1
Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b)
pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business
Day cure period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to make
or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during
the cure period);

 

8.2
Covenant Default. (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8,
6.9, 6.10, 6.12, 6.13, or 6.15 or violates any covenant in Section 7; or

 

(b)
Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained
in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other
term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely
to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty
(30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this
section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;

 

8.3
Material Adverse Change. A Material Adverse Change occurs;

 

8.4
Attachment; Levy; Restraint on Business. 

 

(a)
(i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the
control of Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed against any of Borrower’s assets
by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence
thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall
be made during any ten (10) day cure period; or

 

    	16

    	 

    

 

(b)
(i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver,
or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business;

 

8.5
Insolvency. (a) Borrower or any of its Subsidiaries is unable to pay its debts (including trade debts) as they become due
or otherwise becomes insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency
Proceeding is begun against Borrower or any of its Subsidiaries and is not dismissed or stayed within forty-five (45) days (but
no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding
is dismissed);

 

8.6
Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties,
(a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount individually or in the aggregate in excess of Fifty Thousand Dollars ($50,000.00); or (b) any breach
or default by Borrower or Guarantor, the result of which could have a material adverse effect on Borrower’s or any Guarantor’s
business;

 

8.7
Judgments; Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount,
individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000.00) (not covered by independent third-party insurance
as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority,
and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or
after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any
such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding
of such fine, penalty, judgment, order or decree);

 

8.8
Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now
or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or
any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

 

8.9
Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked
or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner
the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations
shall for any reason be subordinated or shall not have the priority contemplated by this Agreement or any applicable subordination
or intercreditor agreement; or

 

8.10
Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse
manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates
a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental
Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) causes, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely
affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.

 

9
BANK’S RIGHTS AND REMEDIES

 

9.1
Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand,
do any or all of the following:

 

(a)
declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations
are immediately due and payable without any action by Bank);

 

    	17

    	 

    

 

(b)
stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between
Borrower and Bank;

 

(c)
demand that Borrower (i) deposit cash with Bank in an amount equal to at least (A) one hundred five percent (105.0%) of the Dollar
Equivalent of the aggregate face amount of all Letters of Credit denominated in Dollars remaining undrawn, and (B) one hundred
ten percent (110.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in a Foreign Currency
remaining undrawn (plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated
by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral
security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters
of Credit;

 

(d)
terminate any FX Contracts;

 

(e)
verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust
disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify
any Person owing Borrower money of Bank’s security interest in such funds. Borrower shall collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with
proper endorsements for deposit;

 

(f)
make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest
in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred.
Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

 

(g)
apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) amount held by Bank owing to or for the credit
or the account of Borrower;

 

(h)
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is
hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents,
Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and
all franchise agreements inure to Bank’s benefit;

 

(i)
place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order,
or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(j)
demand and receive possession of Borrower’s Books; and

 

(k)
exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided
under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

9.2
Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact to: (a) exercisable following
the occurrence of an Event of Default, (i) sign Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (ii) demand, collect, sue, and give releases to any Account Debtor for monies due, settle and adjust
disputes and claims about the Accounts directly with Account Debtors, and compromise, prosecute, or defend any action, claim,
case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Bank’s or
Borrower’s name, as Bank chooses); (iii) make, settle, and adjust all claims under Borrower’s insurance policies;
(iv) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same; (v) transfer the Collateral into the name of Bank
or a third party as the Code permits; and (vi) receive, open and dispose of mail addressed to Borrower; and (b) regardless of
whether an Event of Default has occurred, (i) endorse Borrower’s name on any checks, payment instruments, or other forms
of payment or security; and (ii) notify all Account Debtors to pay Bank directly. Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s
security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied
in full and the Loan Documents have been terminated. Bank’s foregoing appointment as Borrower’s attorney in fact,
and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid
and performed and the Loan Documents have been terminated.

 

    	18

    	 

    

 

9.3
Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon
or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may
be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are
Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured
by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time
it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in
the future or Bank’s waiver of any Event of Default.

 

9.4
Application of Payments and Proceeds. Bank shall have the right to apply in any order any funds in its possession, whether
from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of
the Collateral, or otherwise, to the Obligations. Bank shall pay any surplus to Borrower by credit to the Designated Deposit Account
or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, directly or indirectly,
enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option,
exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction
of the Obligations until the actual receipt by Bank of cash therefor.

 

9.5
Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping
of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.

 

9.6
No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand
strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting
the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies
under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by
law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising
any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default
is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7
Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper,
and guarantees held by Bank on which Borrower is liable.

 

9.8
Borrower Liability. Any Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints each
other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each
Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which
Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions. Each
Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, including, without limitation,
the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California
Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require
Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any
other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including
the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any
other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law
or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek
contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter
primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security
for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement
or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section
9.8 shall be null and void. If any payment is made to a Borrower in contravention of this Section 9.8, such Borrower shall hold
such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether
matured or unmatured.

 

    	19

    	 

    

 

10
NOTICES

 

All
notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document
must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt
and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written
notice thereof in accordance with the terms of this Section 10.

 

	 	If
    to Borrower:	Flux
    Power, Inc.
	 	 	2685
    South Melrose Drive
	 	 	Vista,
    California 92081
	 	 	Attn:
    Ronald F. Dutt
	 	 	Email:
    rdutt@fluxpower.com
	 	 	Website
    URL: www.fluxpower.com
	 	 	 
	 	If
    to Bank:	Silicon
    Valley Bank
	 	 	1200
    17th St. Suite 1600
	 	 	Denver,
    Colorado 80202
	 	 	Attn:
    Joshua Wagner
	 	 	Email:
    jwagner@svb.com
	 	 	 
	 	with
    a copy to:	Morrison
    and Foerster LLP
	 	 	200
    Clarendon Street, Floor 20
	 	 	Boston,
    Massachusetts 20116
	 	 	Attn:
    Charles W. Stavros
	 	 	Email:
    cstavros@mofo.com

 

11
CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND
JUDICIAL REFERENCE

 

Except
as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara
County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank
from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for
the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance
to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have
based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such
legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints,
and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be
made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in
accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of
Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

    	20

    	 

    

 

TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT,
TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver
of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any
nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or,
if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with
California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within
the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties
hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with
the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power,
among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all
records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional
relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply
to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted
in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall
be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable
to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge
shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement
of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right
of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private
judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

This
Section 11 shall survive the termination of this Agreement.

 

12
GENERAL PROVISIONS

 

12.1
Termination Prior to Maturity Date; Survival. All covenants, representations and warranties made in this Agreement shall continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied. So long as Borrower
has satisfied the Obligations (other than inchoate indemnity obligations, and any other obligations which, by their terms, are
to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized
in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date
by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Those obligations that are
expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding
this Agreement’s termination.

 

12.2
Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party.
Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which
may be granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell,
transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights,
and benefits under this Agreement and the other Loan Documents.

 

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12.3
Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys,
or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against:
(i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank
Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to,
or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims
and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

This
Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity
is given shall have run.

 

12.4
Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.

 

12.5
Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability
of any provision.

 

12.6
Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with
the agreement of the parties.

 

12.7
Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge
or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly
set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of
the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct
shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted
shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance,
whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan
Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents
merge into the Loan Documents.

 

12.8
Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

12.9
Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for
its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such
Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees
or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain
any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination
or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers
of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than
those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Bank’s
possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation
of this Agreement) after disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not know that the third
party is prohibited from disclosing the information.

 

    	22

    	 

    

 

Bank
Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other
uses not expressly prohibited in writing by Borrower. The provisions of the immediately preceding sentence shall survive the termination
of this Agreement.

 

12.10
Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating
to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs
and expenses incurred, in addition to any other relief to which it may be entitled.

 

12.11
Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words
of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form,
each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a
paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without
limitation, any state law based on the Uniform Electronic Transactions Act.

 

12.12
Right of Setoff. Borrower hereby grants to Bank a Lien and a right of setoff as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of Bank or any entity under the control of Bank (including a subsidiary of Bank) or in transit
to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice,
Bank may setoff the same or any part thereof and apply the same to any liability or Obligation of Borrower even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE
ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.13
Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

12.14
Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation
and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties
caused the uncertainty to exist.

 

12.15
Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.
The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties
or incidents different from those of parties to an arm’s-length contract.

 

12.16
Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies
under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors
and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c)
give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

 

13
DEFINITIONS

 

13.1
Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive,
the word “or” is not exclusive, the words “includes” and “including” are not limiting, and
the singular includes the plural. As used in this Agreement, the following capitalized terms have the following meanings:

 

“Account”
is, as to any Person, any “account” of such Person as “account” is defined in the Code with such
additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing
to such Person.

 

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“Account
Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter
be made.

 

“Accounts
Receivable Reserves” mean such Reserves as may be established from time to time by Bank in its good faith judgment with
respect to the determination of the collectability in the ordinary course of Eligible Accounts, including, without limitation,
dilution.

 

“Administrator”
is an individual that is named:

 

(a)
as an “Administrator” in the “SVB Online Services” form completed by Borrower with the authority to determine
who will be authorized to use SVB Online Services (as defined in Bank’s Online Banking Agreement as in effect from time
to time) on behalf of Borrower; and

 

(b)
as an Authorized Signer of Borrower in an approval by the Board.

 

“Advance”
or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving Line.

 

“Affiliate”
is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls
or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person’s managers and members. For purposes of the
definition of Eligible Accounts, Affiliate shall include a Specified Affiliate.

 

“Agreement”
is defined in the preamble hereof.

 

“Authorized
Signer” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents,
including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.

 

“Availability
Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b)
the outstanding principal balance of any Advances.

 

“Availability
Reserves” are, without duplication of any other Reserves or items to the extent such Reserves or items are otherwise
addressed or excluded through eligibility criteria, such reserves as Bank from time to time determines in its reasonable discretion
as being appropriate (a) to reflect the impediments to Bank’s ability to realize upon the Collateral, (b) to reflect claims
and liabilities that Bank reasonably determines will need to be satisfied in connection with the realization upon the Collateral,
(c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base,
or the assets, business, financial performance or financial conditions of Borrower and/or any Guarantor, or (d) to reflect that
a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include,
in Bank’s good faith judgment (but are not limited to), reserves based on: (i) rent; (ii) customs duties, and other costs
to release Inventory which is being imported into the United States; (iii) outstanding taxes and other governmental charges, including,
without limitation, ad valorem, real estate, personal property, sales, claims of the Pension Benefit Guaranty Corporation and
other taxes which may have priority over the interests of Bank in the Collateral; (iv) salaries, wages and benefits due to employees
of any Loan Party, (v) Customer Credit Liabilities, (vi) Customer Deposits, (vii) reserves for reasonably anticipated changes
in the appraised value of Eligible Inventory between appraisals, (viii) warehousemen’s or bailee’s charges and other
Liens which may have priority over the interests of Bank in the Collateral, (ix) amounts due to vendors on account of consigned
goods, and (x) royalties payable in respect of licensed merchandise.

 

“Bank”
is defined in the preamble hereof.

 

“Bank
Entities” is defined in Section 12.9.

 

“Bank
Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses)
for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation,
those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.

 

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“Bank
Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided
to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash
management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified
in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).

 

“Bank
Services Agreement” is defined in the definition of Bank Services.

 

“Board”
is Borrower’s board of directors.

 

“Borrower”
is defined in the preamble hereof.

 

“Borrower’s
Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding
Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs
or storage or any equipment containing such information.

 

“Borrowing
Base” is (a) eighty percent (80%) of Eligible Accounts plus (b) the lesser of (i) fifty percent (50%) of the value of
Borrower’s Eligible Inventory (valued at the lower of cost or wholesale fair market value) or (ii) One Million Two Hundred
Thousand Dollars ($1,200,000.00); provided, that in any event amounts requested and/or outstanding under this clause
(b) shall at no time exceed thirty percent (30%) of the total amounts requested and/or outstanding hereunder), in each case as
determined by Bank from Borrower’s most recent Borrowing Base Report (and as may subsequently be updated by Bank based upon
information received by Bank including, without limitation, Accounts that are paid and/or billed following the date of the Borrowing
Base Report); provided, however, that Bank has the right to decrease the foregoing amount and/or percentages in
its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect
the Collateral or its value.

 

“Borrowing
Base Report” is that certain report of the value of certain Collateral in the form specified by Bank to Borrower from
time to time.

 

“Borrowing
Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and,
if required under the terms of such Person’s Operating Documents, stockholders) and delivered by such Person to Bank approving
the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed
by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations
under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate
is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution,
delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized
to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such
Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate
unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.

 

“Business
Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.

 

“Cash
Collateral Account” is defined in Section 6.3(c).

 

“Cash
Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any
agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper
maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1)
year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents
of the kinds described in clauses (a) through (c) of this definition.

 

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“Change
in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become,
the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
forty-nine percent (49%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully
diluted basis) other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private
equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business
Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b)
during any period of twelve (12) consecutive months, a majority of the members of
the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members
of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or
equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election
or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board
or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board or equivalent governing body; or (c) at any time, Borrower shall
cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100.0%) of each class of outstanding
capital stock of each subsidiary of Borrower free and clear of all Liens (except Liens created by this Agreement).

 

“Claims”
is defined in Section 12.3.

 

“Code”
is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided,
that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently
in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided
further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority
of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such provisions.

 

“Collateral”
is any and all properties, rights and assets of Borrower described on Exhibit A.

 

“Collateral
Account” is any Deposit Account, Securities Account, or Commodity Account.

 

“Commodity
Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter
be made.

 

“Compliance
Certificate” is that certain certificate in the form attached hereto as Exhibit B.

 

“Contingent
Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness,
lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed,
endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate,
currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect
a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any
guarantee or other support arrangement.

 

    	26

    	 

    

 

“Control
Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit
Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

 

“Copyrights”
are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship
and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

“Credit
Extension” is any Advance, any Overadvance, or any other extension of credit by Bank for Borrower’s benefit.

 

“Currency”
is coined money and such other banknotes or other paper money as are authorized by law and circulate as a medium of exchange.

 

“Customer
Credit Liabilities” are at any time, the aggregate remaining value at such time of (a) outstanding gift certificates
and gift cards of Borrower entitling the holder thereof to use all or a portion of the certificate or gift card to pay all or
a portion of the purchase price for any Inventory, (b) outstanding merchandise credits of Borrower, and (c) liabilities in connection
with frequent shopping programs of Borrower.

 

“Customer
Deposits” means (a) layaway obligations of Borrower, and (b) deposits made by customers with respect to the purchase
of goods or the performance of services.

 

“Default”
means any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.

 

“Default
Rate” is defined in Section 2.4(b).

 

“Deferred
Revenue” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.

 

“Deposit
Account” is any “deposit account” as defined in the Code with such additions to such term as may
hereafter be made.

 

“Designated
Deposit Account” is the account number ending [_________] (last three digits) maintained by Borrower with Bank (provided,
however, if no such account number is included, then the Designated Deposit Account shall be any deposit account of Borrower
maintained with Bank as chosen by Bank).

 

“Division”
means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with
the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as
contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware
law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company,
partnership or other entity.

 

“Dollars,”
“dollars” or use of the sign “$” means only lawful money of the United States and not any other
currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted
into lawful money of the United States.

 

“Dollar
Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect
to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time
on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer
to the country issuing such Foreign Currency.

 

“Effective
Date” is defined in the preamble hereof.

 

    	27

    	 

    

 

“Eligible
Accounts” means Accounts owing to Borrower which arise in the ordinary course of Borrower’s business that meet
all Borrower’s representations and warranties in Section 5.3, that have been, at the option of Bank, confirmed in accordance
with Section 6.3(f) of this Agreement, and are due and owing from Account Debtors deemed creditworthy by Bank in its sole discretion.
Bank reserves the right, at any time after the Effective Date, in its sole discretion in each instance, to either (i) adjust any
of the criteria set forth below and to establish new criteria or (ii) deem any Accounts owing from a particular Account Debtor
or Account Debtors to not meet the criteria to be Eligible Accounts. Unless Bank otherwise agrees in writing, Eligible Accounts
shall not include:

 

(a)
Accounts (i) for which the Account Debtor is Borrower’s Affiliate, officer, employee, investor, or agent, or (ii) that are
intercompany Accounts;

 

(b)
Accounts that the Account Debtor has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;

 

(c)
Accounts with credit balances over ninety (90) days from invoice date;

 

(d)
Accounts owing from an Account Debtor if fifty percent (50%) or more of the Accounts owing from such Account Debtor have not been
paid within ninety (90) days of invoice date;

 

(e)
Accounts owing from an Account Debtor (i) which does not have its principal place of business in the United States or Canada (ii)
whose billing address (as set forth in the applicable invoice for such Account) is not in the United States or Canada, unless
in the case of both (i) and (ii) such Accounts are otherwise approved by Bank in writing;

 

(f)
Accounts billed from and/or payable to Borrower outside of the United States (sometimes called foreign invoiced accounts);

 

(g)
Accounts in which Bank does not have a first priority, perfected security interest under all applicable laws;

 

(h)
Accounts billed and/or payable in a Currency other than Dollars;

 

(i)
Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor
(as creditor, lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits
or credit accounts);

 

(j)
Accounts with or in respect of accruals for marketing allowances, incentive rebates, price protection, cooperative advertising
and other similar marketing credits, unless otherwise approved by Bank in writing;

 

(k)
Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality
thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment
of Claims Act of 1940, as amended;

 

(l)
Accounts with customer deposits and/or with respect to which Borrower has received an upfront payment, to the extent of such customer
deposit and/or upfront payment;

 

(m)
Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”,
“sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;

 

(n)
Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called
memo billings or pre-billings);

 

    	28

    	 

    

 

(o)
Accounts subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according
to completion or fulfillment requirements (sometimes called contracts accounts receivable, progress billings, milestone billings,
or fulfillment contracts);

 

(p)
Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction
of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage billings);

 

(q)
Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;

 

(r)
Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless
Bank, Borrower, and the Account Debtor have entered into an agreement acceptable to Bank wherein the Account Debtor acknowledges
that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “bill and hold” accounts);

 

(s)
Accounts for which the Account Debtor has not been invoiced;

 

(t)
Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s
business;

 

(u)
Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond ninety (90) days (including Accounts
with a due date that is more than ninety (90) days from invoice date);

 

(v)
Accounts arising from chargebacks, debit memos or other payment deductions taken by an Account Debtor;

 

(w)
Accounts arising from product returns and/or exchanges (sometimes called “warranty” or “RMA” accounts);

 

(x)
Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or
if the Account Debtor is subject to an Insolvency Proceeding (whether voluntary or involuntary), or becomes insolvent, or goes
out of business;

 

(y)
Accounts owing from an Account Debtor, whose total obligations to Borrower exceed twenty-five percent (25.0%) of all Accounts,
for the amounts that exceed that percentage, unless Bank approves in writing;

 

(z)
Accounts for which Bank in its good faith business judgment determines collection to be doubtful, including, without limitation,
accounts represented by “refreshed” or “recycled” invoices; and

 

(aa)
Accounts owing from (i) Caterpillar, Inc. and/or its subsidiaries or affiliates or (ii) Crown V-Force and/or its
subsidiaries or affiliates.

 

“Eligible
Inventory” means Inventory that meets all of Borrower’s representations and warranties in Section 5.3 and is otherwise
acceptable to Bank in all respects.

 

“Equipment”
is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes
without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of
the foregoing.

 

    	29

    	 

    

 

“ERISA”
is the Employee Retirement Income Security Act of 1974, and its regulations.

 

“Event
of Default” is defined in Section 8.

 

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

 

“Foreign
Currency” means lawful money of a country other than the United States.

 

“Funding
Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.

 

“FX
Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase
from or sell to Bank a specific amount of Foreign Currency on a specified date.

 

“GAAP”
is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination.

 

“General
Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and
other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal
property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies
(including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“Governmental
Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

 

“Governmental
Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

“Guarantor”
is any Person providing a Guaranty in favor of Bank.

 

“Guaranty”
is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise
supplemented.

 

“Indebtedness”
is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations
for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital
lease obligations, and (d) Contingent Obligations.

 

“Indemnified
Person” is defined in Section 12.3.

 

“Initial
Audit” is Bank’s (or its representatives) inspection, field examination and appraisal (as applicable) of Borrower’s
Accounts, the Collateral, and Borrower’s Books, with results satisfactory to Bank in its sole and absolute discretion.

 

“Insolvency
Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors,
or proceedings seeking reorganization, arrangement, or other relief.

 

    	30

    	 

    

 

“Intellectual
Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:

 

(a)
its Copyrights, Trademarks and Patents;

 

(b)
any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how
and operating manuals;

 

(c)
any and all source code;

 

(d)
any and all design rights which may be available to such Person;

 

(e)
any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified
above; and

 

(f)
all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

 

“Inventory”
is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody
or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Inventory
Reserves” are such reserves as may be established from time to time by Bank in its good faith judgment with respect
to the determination of the salability, at retail or at wholesale, as applicable, of the Eligible Inventory, which reflect such
other factors as affect the market value of the Eligible Inventory or which reflect claims and liabilities that Bank reasonably
determines will need to be satisfied in connection with the realization upon the Inventory. Without limiting the generality of
the foregoing, Inventory Reserves may, in Bank’s reasonable discretion, include (but are not limited to) reserves based
on:

 

(g)
Shrink;

 

(h)
changes in Inventory character;

 

(i)
changes in Inventory composition;

 

(j)
changes in Inventory mix;

 

(k)
mark-downs (both permanent and point of sale);

 

(l)
retail mark-ons and mark-ups inconsistent with prior period practice and performance, industry standards, current business plans
or advertising calendar and planned advertising events; and

 

(m)
out-of-date, aged, expired or slow-moving Inventory.

 

“Investment”
is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.

 

“IP
Agreement” is that certain Intellectual Property Security Agreement between Borrower and Bank dated as of the Effective
Date, as may be amended, modified or restated from time to time.

 

“Key
Person” is each of Borrower’s (a) Chief Executive Officer, who is Ronald F. Dutt as of the Effective Date,
and (b) Chief Financial Officer, who is Charles A. Scheiwe as of the Effective Date.

 

    	31

    	 

    

 

“Letter
of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application,
guarantee, indemnity, or similar agreement.

 

“Lien”
is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily
incurred or arising by operation of law or otherwise against any property.

 

“Loan
Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents
related to this Agreement, the IP Agreement, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties
executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for
the benefit of Bank, all as amended, restated, or otherwise modified.

 

“Material
Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or
in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise)
of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.

 

“Monthly
Financial Statements” is defined in Section 6.2(c).

 

“Obligations”
are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Unused Revolving Line
Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise,
including, without limitation, all obligations relating to Bank Services and interest accruing after Insolvency Proceedings begin
and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents.

 

“Operating
Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or
equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior
to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability
company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

 

“Overadvance”
is defined in Section 2.3.

 

“Patents”
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.

 

“Payment
Date” is with respect to Advances, the last calendar day of each month.

 

“Perfection
Certificate” is defined in Section 5.1.

 

“Permitted
Indebtedness” is:

 

(a)
Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;

 

(b)
Indebtedness existing on the Effective Date which is shown on the Perfection Certificate;

 

(c)
Subordinated Debt;

 

(d)
unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(e)
Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

 

    	32

    	 

    

 

(f)
Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;

 

(g)
unsecured Indebtedness provided that outstanding balances does not exceed One Hundred Thousand Dollars ($100,000) in the aggregate;

 

(h)
Indebtedness representing deferred compensation to employees incurred in the ordinary course of business and consistent with Borrower’s
past practice; and

 

(i)
extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above;
provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome
terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted
Investments” are:

 

(a)
Investments (including, without limitation, Subsidiaries) existing on the Effective Date which are shown on the Perfection Certificate;

 

(b)
Investments consisting of Cash Equivalents;

 

(c)
Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;

 

(d)
Investments accepted in connection with Transfers permitted by Section 7.1;

 

(e)
Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary
course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower
or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by the Board;

 

(f)
Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course
of business; and

 

(g)
Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this paragraph (g) shall not apply to Investments
of Borrower in any Subsidiary.

 

“Permitted
Liens” are:

 

(a)
(i) Liens existing on the Effective Date which are shown on the Perfection Certificate, (ii) subject to Section 4.4, the Priority
Liens, or (iii) Liens arising under this Agreement or the other Loan Documents;

 

(b)
Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested
in good faith and for which Borrower maintains adequate reserves on Borrower’s Books, provided that no notice of any such
Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)
purchase money Liens and capital leases securing no more than One Hundred Thousand Dollars ($100,000.00) in the aggregate amount
outstanding (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment, or (ii) existing
on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

 

(d)
Liens of materialmen, carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary
course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed
One Hundred Thousand Dollars ($100,000.00) and which are not delinquent or remain payable without penalty or which are being contested
in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;

 

    	33

    	 

    

 

(e)
Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like
obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(f)
Liens incurred in the extension, renewal or refinancing of the Indebtedness secured by Liens described in (a) through (c), but
any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness may not increase;

 

(g)
leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another
Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses
of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring
to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses
do not prohibit granting Bank a security interest therein;

 

(h)
non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business; and

 

(i)
Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections
8.4 and 8.7.

 

“Person”
is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated
organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or
government agency.

 

“Prime
Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal
or any successor publication thereto as the “prime rate” then in effect; provided that, in the event such rate
of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further
that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable
for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank
as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended
to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in
the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Prior
Lender” is defined in Section 3.1(e).

 

“Priority
Liens” is defined in Section 4.4.

 

“Registered
Organization” is any “registered organization” as defined in the Code with such additions to such term as
may hereafter be made.

 

“Requirement
of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Reserves”
means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business
judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a)
to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or
may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or
(iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority
thereof), including, without limitation, Availability Reserves, Inventory Reserves, and Accounts Receivable Reserves; or (b) to
reflect Bank’s reasonable belief that any collateral report or financial information furnished by or on behalf of Borrower
or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of
any state of facts which Bank determines constitutes an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default.

 

    	34

    	 

    

 

“Responsible
Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.

 

“Restricted
License” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits
or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or
any other property, or (b) for which a default under or termination of could interfere with Bank’s right to sell any Collateral.

 

“Revolving
Line” is an aggregate principal amount not to exceed Four Million Dollars ($4,000,000.00) outstanding at any time.

 

“Revolving
Line Maturity Date” is November 8, 2021 (364 days after the Effective Date).

 

“SEC”
shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.

 

“Securities
Account” is any “securities account” as defined in the Code with such additions to such term as may
hereafter be made.

 

“Shrink”
means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.

 

“Specified
Affiliate” is any Person (a) more than ten percent (10.0%) of whose aggregate issued and outstanding equity or ownership
securities or interests, voting, non-voting or both, are owned or held directly or indirectly, beneficially or of record, by Borrower,
and/or (b) whose equity or ownership securities or interests representing more than ten percent (10.0%) of such Person’s
total outstanding combined voting power are owned or held directly or indirectly, beneficially or of record, by Borrower.

 

“Subordinated
Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to
Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered
into between Bank and the other creditor), on terms acceptable to Bank, which includes the indebtedness under that certain Third
Amended and Restated Credit Facility Agreement dated August 31, 2020 by and among Flux Power, Inc., and lenders thereunder (the
“Subordinated Lenders”), as amended from time to time in accordance with the applicable subordination agreement.

 

“Subsidiary”
is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary
herein shall be a reference to a Subsidiary of Borrower or Guarantor.

 

“Tangible
Net Worth” is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts attributable
to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, Patents, Trademarks, Copyrights, and research
and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from
its officers or other Affiliates, and (iv) reserves not already deducted from assets, minus (b) Total Liabilities, plus (c) Subordinated
Debt.

 

“Total
Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated
balance sheet, including all Indebtedness.

 

“Trademarks”
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same
and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“Transfer”
is defined in Section 7.1.

 

“Unused
Revolving Line Facility Fee” is defined in Section 2.5(b).

 

[Signature
page follows.]

 

    	35

    	 

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

	 	BORROWER:
	 	 
	 	FLUX
    POWER, INC.
	 	 	 
	 	By	/s/
    Ronald F. Dutt
	 	Name:	Ronald
    F. Dutt
	 	Title:	Chief
                                         Executive Officer and President 

	 	 	 
	 	FLUX
    POWER HOLDINGS, INC.
	 	 	 
	 	By	/s/
    Ronald F. Dutt
	 	Name:	Ronald
    F. Dutt
	 	Title:	Chief
                                         Executive Officer and President 

	 	 	 
	 	BANK:
	 	 	 
	 	SILICON
    VALLEY BANK
	 	 	 
	 	By	/s/
    Joshua Wagner
	 	Name:	Joshua
    Wagner
	 	Title:	Vice
    President

 

Signature
Page to Loan and Security Agreement

 

    	 

    	 

    

 

EXHIBIT
A - COLLATERAL DESCRIPTION

 

The
Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

 

All
goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases,
license agreements, franchise agreements, General Intangibles, Intellectual Property, commercial tort claims, documents, instruments
(including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, certificates of deposit,
fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other
investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located;
and

 

all
Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions
for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds
of any or all of the foregoing.

 

    	 

    	 

    

 

EXHIBIT
B

 

COMPLIANCE
CERTIFICATE

 

	TO:	SILICON
    VALLEY BANK	Date:	 
	FROM:	FLUX
    POWER, INC.	 	 
	 	FLUX
    POWER HOLDINGS, INC.	 	 

 

The
undersigned authorized officer of Flux Power, Inc. (“Flux”) and Flux Power Holdings, Inc. (“Holdings”,
and together with Flux, the “Borrower”) certifies that under the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period
ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations
and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided,
however, that such materiality qualifier shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower,
and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant
to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification
to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in
accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.
The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is
delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

Please
indicate compliance status by circling Yes/No under “Complies” column.

 

	Reporting
    Covenants	 	Required	 	Complies
	 	 	 	 	 
	Monthly
    financial statements with Compliance Certificate	 	Monthly
    within 30 days	 	Yes  
    No
	Annual
    financial statements (CPA Audited)	 	FYE
    within 180 days	 	Yes
      No
	10-Q,
    10-K and 8-K	 	Within
                                         5 days after filing with SEC
	 	Yes
      No
	A/R
    & A/P Agings, transaction reports, Deferred Revenue report, detailed debtor listing, general ledger, and perpetual inventory
    reports for Inventory valued on a first-in, first-out basis at the lower of cost or market (in accordance with GAAP) or such
    other inventory reports as are requested by Bank	 	Monthly
    within 30 days	 	Yes
      No
	Borrowing
                                         Base Reports(including an accounts receivable ledger report and any schedules related
                                         thereto and

         

        including
        any other information requested by Bank with respect to Borrower’s Accounts)
	 	(i)
                                         with each request for an Advance; and

        (ii)
        monthly within 7 days of month end
	 	Yes
      No
	Board
    approved projections	 	FYE
                                         within 30 days and as amended/updated
	 	Yes
      No
	 	 	 	 	 
	The
                                         following Intellectual Property was registered after the Effective Date (if no registrations,
                                         state “None”)

                                                                                                        

 

	Financial
    Covenant	 	Required	 	Actual	 	Complies
	 	 	 	 	 	 	 
	Maintain
    as indicated:	 	 	 	 	 	 
	Minimum
    Tangible Net Worth (monthly)	 	See
    Section 6.9(a)	 	$____________	 	Yes
      No

 

The
following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the
date of this Certificate.

 

The
following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

 

	 

 

	Flux
    Power, Inc.	 	BANK
    USE ONLY
	Flux
    Power Holdings, Inc.	 	 
	 	 	 	Received
    by:	 
	 	 	 	 	authorized
    signer

	 	 	 	 	 
	By:	 	 	Date:	                                                                  
	Name:	 	 	 	 
	Title:	 	 	Verified:	 
	 	 	 	 	authorized
    signer
	 	 	 	 	 
	 	 	 	Date:	 
	 	 	 	 	 
	 	 	 	Compliance
    Status: Yes    No

 

    	 

    	 

    

 

Schedule
1 to Compliance Certificate

 

[Financial
Covenants of Borrower]

 

In
the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.

 

Dated:
____________________

 

I.
Tangible Net Worth (Section 6.9(a))

 

Required:
Tangible Net Worth, measured as of the last day of each month indicated below, of at least the corresponding amount listed below,
in each case increasing by fifty percent (50%) of positive quarterly net income, fifty percent (50%) of the proceeds from issuances
of equity after the Effective Date and fifty percent (50%) of the principal amount of Subordinated Debt issued or incurred after
the Effective Date:

 

	Monthly
    Period Ending	 	Tangible
    Net Worth	 
	September
    30, 2020	 	$	7,500,000.00	 
	October
    31, 2020 through and including December 31, 2020	 	$	6,250,000.00	 
	January
    31, 2021 through and including March 31, 2021	 	$	5,250,000.00	 
	April
    30, 2021 through the Revolving Line Maturity Date	 	$	4,250,000.00	 

 

Actual:

 

	 	A.	Aggregate
    value of total assets of Borrower and its Subsidiaries	$
    _____
	 	 	 	 
	 	B.	Aggregate
    value of goodwill of Borrower and its Subsidiaries	$
    _____
	 	 	 	 
	 	C.	Aggregate
    value of intangible assets of Borrower and its Subsidiaries, including unamortized debt discount and expense, Patents, Trademarks,
    Copyrights, and research and development expenses except prepaid expenses	$
    _____
	 	 	 	 
	 	D.	Aggregate
    value of any reserves not already deducted from assets	$
    _____
	 	 	 	 
	 	E.	Aggregate
    value of liabilities of Borrower and its Subsidiaries (including all Indebtedness).	$
    _____
	 	 	 	 
	 	F.	Subordinated
    Debt	$
    _____
	 	 	 	 
	 	G.	Tangible
    Net Worth (line A minus line b minus line C minus line D minus line E plus line F)	$
    _____

 

Is
line G equal to or greater than [__________________________]?

 

___________
No, not in compliance                                         
_________ Yes, in compliance

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00316-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00316-of-00352.parquet"}]]