Document:

Blueprint

  Exhibit 10.4

 

SECURED PROMISSORY NOTE

 

	

$7,000,000

	

Vista,
California

	
 

	

March
28, 2019

 

FOR
VALUE RECEIVED, Flux Power, Inc., a California corporation
(“Borrower”), hereby
unconditionally promises to pay to Cleveland Capital, L.P.
(“Holder”), the principal
amount of Seven Million Dollars ($7,000,000) or such lesser
principal amount (“Principal Amount”) as
Holder may have advanced to Borrower pursuant to that certain
Amended and Restated Credit Facility Agreement, dated March 28,
2019, by and between Borrower and Holder (the “Credit Facility
Agreement”), together with interest thereon in
accordance with the terms hereof, from the date hereof until the
date on which this Note is paid in full.

 

This
Note is made and delivered by Borrower to Holder pursuant to the
terms of the Credit Facility Agreement. Under the Credit Facility
Agreement, Holder, at its sole discretion and along with other
Lenders (as defined in the Credit Facility Agreement), agreed to
advance funds up to a maximum of Seven Million Dollars ($7,000,000)
to Borrower, from time to time, to be used by Borrower to purchase
inventory and related operational support expenses. All capitalized
terms used and not defined herein shall have the meanings ascribed
to them in the Credit Facility Agreement.

 

THE
OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY AN AMENDED AND
RESTATED SECURITY AGREEMENT (THE “SECURITY AGREEMENT”)
DATED AS OF THE DATE HEREOF AND EXECUTED BY THE BORROWER FOR THE
BENEFIT OF HOLDER AND THE OTHER LENDERS. ADDITIONAL RIGHTS OF THE
HOLDER AND THE OTHER LENDERS ARE SET FORTH IN THE SECURITY
AGREEMENT.

 

1. Advances.
So long as there is no Event of Default (as defined below in
Section 4), Holder shall at its sole discretion provide Advances
hereunder so long as the total of all unpaid Advances at the time
of such request does not exceed Seven Million Dollars ($7,000,000)
(the “Maximum
Amount”). If, at any time
or for any reason, the amount of Advances pursuant to the Notes
owed by Borrower to Lenders exceeds the Maximum Amount, Borrower
shall immediately pay to Lenders, based on such Lender’s Pro
Rata Percentage, in cash, the amount of such excess. For the
purpose of this Note, “Pro Rata Percentage” shall mean
such Lender’s interest in the LOC equal to the amount of all
Advances made by such Lender divided by the aggregate amount of all
Advances made by Lenders.

 

2. Terms of the Secured Promissory
Note.

 

(a) Interest Rate. Interest on the
then outstanding Principal Amount of this Note shall accrue at a
rate per annum equal to fifteen percent (15%), beginning on the
date of each Advance (the “Advance Date”).
All interest shall be calculated on the basis of the actual daily
balances of Principal Amount outstanding for the exact number of
days elapsed, using a year of three hundred sixty (360)
days.

 

(b) Maturity Date. Except as
otherwise provided herein, the entire Principal Amount of this
Note, together with all accrued but unpaid interest payable
thereon, shall be due and payable in full on the earlier of: (i)
December 31, 2019, unless extended pursuant to the terms of this
Note (the “Maturity
Date”) or (ii) when such amounts are declared due and
payable by Holder upon or after the occurrence of an Event of
Default (as defined below).

 

 

 

 

3. Voluntary Prepayment. Advances
may be prepaid, in whole or in part, at any time prior to the
Maturity Date without penalty. 

 

4. Events of Default. Upon the
occurrence of any of the following events (“Event of Default”), the
Company shall be deemed to be in default hereunder:

 

(a)           
failure by the Company to pay when due any of the principal or
accrued and unpaid interest hereunder or under the Security
Agreement; or

 

(b)           
the Company (i) applies for or consents to the appointment of a
receiver, trustee, custodian or liquidator of itself or any part of
its property, (ii) becomes subject to the appointment of a
receiver, trustee, custodian or liquidator of itself or any part of
its property if such appointment is not terminated or dismissed
within thirty (30) days, (iii) makes an assignment for the benefit
of creditors, (iv) is adjudicated as bankrupt or insolvent, (v)
institutes any proceedings under the United States Bankruptcy Code
or any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law affecting the rights
of creditors generally, or files a petition or answer seeking
reorganization or an arrangement with creditors to take advantage
of any insolvency law, or files an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition
filed against it, or (vi) becomes subject to any proceedings under
the United States Bankruptcy Code or any other federal or state
bankruptcy, reorganization, receivership, insolvency or other
similar law affecting the rights of creditors generally, which
proceeding is not dismissed within thirty (30) days of filing, or
has an order for relief entered against it in any proceeding under
the United States Bankruptcy Code.

 

If an
Event of Default occurs, all indebtedness under this Note shall
become immediately due and payable, and the Company shall
immediately pay to Holder all such amounts. Holder shall, following
and during the continuance of an Event of Default, also have any
other rights which Holder may have pursuant to applicable
law.

 

5.   
Amendment and
Waiver. Neither party may assign this Note nor any right or
interest arising out of this Note, in whole or in part, without
consent of the other party. Any term of this Note may be amended
and the observance of any term of this Note may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and
Holder.

 

6.   
Place of Payment.
Payments of principal and interest and all notices and other
communications to Holder hereunder or with respect hereto are to be
delivered to Holder at the address identified in the Credit
Facility Agreement or to such other address as specified by Holder
by prior written notice to the Company, including any transferee of
this Note.

 

7.   
Costs of
Collection. In the event that the Company fails to pay when
due (including, without limitation upon acceleration in connection
with an Event of Default) the full amount of principal and/or
interest hereunder, the Company shall indemnify and hold harmless
Holder of any portion of this Note from and against all reasonable
costs and expenses incurred in connection with the enforcement of
this provision or collection of such principal and interest,
including, without limitation, reasonable attorneys’ fees and
expenses.

 

8.   
Waivers. The
Company hereby waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this
Note.

 

 

 

 

              
9.  Mutilated, Destroyed, Lost and Stolen
Note. In case the Note shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Note of like date, tenor
and denomination and deliver the same in exchange and substitution
for and upon surrender and cancellation of the mutilated Note, or
in lieu of a lost, stolen or destroyed Note, upon receipt of
evidence satisfactory to the Company of the loss, theft or
destruction of such Note.

 

10. Interest Savings Clause. In the
event any interest is paid on this Note which is deemed to be in
excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the then legal
maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.

 

11. Governing Law. THIS NOTE AND
THE RIGHTS AND DUTIES OF THE COMPANY AND HOLDER HEREOF SHALL BE
GOVERNED BY, CONSTRUED IN AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED AND TO
BE PERFORMED ENTIRELY WITHIN THAT STATE.

 

IN
WITNESS WHEREOF, the Company has executed and delivered this Note
on March 28, 2019.

 

	
 

	
 

COMPANY:

 

Flux
Power, Inc.

 

 

By:                                                                

Name: Ronald
Dutt                               

Title:
Chief Executive
OfficerBlueprint

  Exhibit
10.5

FORM OF SECURED PROMISSORY NOTE

 

	
$7,000,000

	
 Vista, California

 _________,
2019

 

FOR
VALUE RECEIVED, Flux Power, Inc., a California corporation
(“Borrower”), hereby
unconditionally promises to pay to
___________________(“Holder”), the principal
amount of Seven Million Dollars ($7,000,000) or such lesser
principal amount (“Principal Amount”) as
Holder may have advanced to Borrower pursuant to that certain
Amended and Restated Credit Facility Agreement, dated March 28,
2019, by and between Borrower and Holder (the “Credit Facility
Agreement”), together with interest thereon in
accordance with the terms hereof, from the date hereof until the
date on which this Note is paid in full.

 

This
Note is made and delivered by Borrower to Holder pursuant to the
terms of the Credit Facility Agreement. Under the Credit Facility
Agreement, Holder, at its sole discretion and along with other
Lenders (as defined in the Credit Facility Agreement), agreed to
advance funds up to a maximum of Seven Million Dollars ($7,000,000)
to Borrower, from time to time, to be used by Borrower to purchase
inventory and related operational support expenses. All capitalized
terms used and not defined herein shall have the meanings ascribed
to them in the Credit Facility Agreement.

 

THE
OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY AN AMENDED AND
RESTATED SECURITY AGREEMENT (THE “SECURITY AGREEMENT”)
DATED AS OF THE DATE HEREOF AND EXECUTED BY THE BORROWER FOR THE
BENEFIT OF HOLDER AND THE OTHER LENDERS. ADDITIONAL RIGHTS OF THE
HOLDER AND THE OTHER LENDERS ARE SET FORTH IN THE SECURITY
AGREEMENT.

 

1. Advances.
So long as there is no Event of Default (as defined below in
Section 4), Holder shall at its sole discretion provide Advances
hereunder so long as the total of all unpaid Advances at the time
of such request does not exceed Seven Million Dollars ($7,000,000)
(the “Maximum
Amount”). If, at any time
or for any reason, the amount of Advances pursuant to the Notes
owed by Borrower to Lenders exceeds the Maximum Amount, Borrower
shall immediately pay to Lenders, based on such Lender’s Pro
Rata Percentage, in cash, the amount of such excess. For the
purpose of this Note, “Pro Rata Percentage” shall mean
such Lender’s interest in the LOC equal to the amount of all
Advances made by such Lender divided by the aggregate amount of all
Advances made by Lenders.

 

2. Terms
of the Secured Promissory Note.

 

(a) Interest Rate. Interest on the
then outstanding Principal Amount of this Note shall accrue at a
rate per annum equal to fifteen percent (15%), beginning on the
date of each Advance (the “Advance Date”).
All interest shall be calculated on the basis of the actual daily
balances of Principal Amount outstanding for the exact number of
days elapsed, using a year of three hundred sixty (360)
days.

 

(b) Maturity Date. Except as
otherwise provided herein, the entire Principal Amount of this
Note, together with all accrued but unpaid interest payable
thereon, shall be due and payable in full on the earlier of: (i)
December 31, 2019, unless extended pursuant to the terms of this
Note (the “Maturity
Date”) or (ii) when such amounts are declared due and
payable by Holder upon or after the occurrence of an Event of
Default (as defined below).

 

3. Voluntary Prepayment. Advances
may be prepaid, in whole or in part, at any time prior to the
Maturity Date without penalty. 

 

4. Events of Default. Upon the
occurrence of any of the following events (“Event of Default”), the
Company shall be deemed to be in default hereunder:

 

(a)           

failure by the
Company to pay when due any of the principal or accrued and unpaid
interest hereunder or under the Security Agreement; or

 

(b)           

the Company (i)
applies for or consents to the appointment of a receiver, trustee,
custodian or liquidator of itself or any part of its property, (ii)
becomes subject to the appointment of a receiver, trustee,
custodian or liquidator of itself or any part of its property if
such appointment is not terminated or dismissed within thirty (30)
days, (iii) makes an assignment for the benefit of creditors, (iv)
is adjudicated as bankrupt or insolvent, (v) institutes any
proceedings under the United States Bankruptcy Code or any other
federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally, or files a petition or answer seeking reorganization or
an arrangement with creditors to take advantage of any insolvency
law, or files an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it,
or (vi) becomes subject to any proceedings under the United States
Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law
affecting the rights of creditors generally, which proceeding is
not dismissed within thirty (30) days of filing, or has an order
for relief entered against it in any proceeding under the United
States Bankruptcy Code.

 

If an
Event of Default occurs, all indebtedness under this Note shall
become immediately due and payable, and the Company shall
immediately pay to Holder all such amounts. Holder shall, following
and during the continuance of an Event of Default, also have any
other rights which Holder may have pursuant to applicable
law.

 

 

 

 

5.           

Amendment and Waiver. Neither
party may assign this Note nor any right or interest arising out of
this Note, in whole or in part, without consent of the other party.
Any term of this Note may be amended and the observance of any term
of this Note may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the
written consent of the Company and Holder.

 

6.           

Place of Payment. Payments of
principal and interest and all notices and other communications to
Holder hereunder or with respect hereto are to be delivered to
Holder at the address identified in the Credit Facility Agreement
or to such other address as specified by Holder by prior written
notice to the Company, including any transferee of this
Note.

 

7.           

Costs of Collection. In the
event that the Company fails to pay when due (including, without
limitation upon acceleration in connection with an Event of
Default) the full amount of principal and/or interest hereunder,
the Company shall indemnify and hold harmless Holder of any portion
of this Note from and against all reasonable costs and expenses
incurred in connection with the enforcement of this provision or
collection of such principal and interest, including, without
limitation, reasonable attorneys’ fees and
expenses.

 

8.           

Waivers. The Company hereby
waives presentment, demand, notice, protest and all other demands
and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note.

 

9.           

Mutilated, Destroyed, Lost and Stolen
Note. In case the Note shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Note of like date, tenor
and denomination and deliver the same in exchange and substitution
for and upon surrender and cancellation of the mutilated Note, or
in lieu of a lost, stolen or destroyed Note, upon receipt of
evidence satisfactory to the Company of the loss, theft or
destruction of such Note.

 

10.           

Interest Savings Clause. In the
event any interest is paid on this Note which is deemed to be in
excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the then legal
maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.

 

11.           

Governing Law. THIS NOTE AND
THE RIGHTS AND DUTIES OF THE COMPANY AND HOLDER HEREOF SHALL BE
GOVERNED BY, CONSTRUED IN AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED AND TO
BE PERFORMED ENTIRELY WITHIN THAT STATE.

 

IN
WITNESS WHEREOF, the Company has executed and delivered this Note
on ____________, 2019.

 

	
 

	
 COMPANY:

 

Flux
Power, Inc.

 

 

By:                                                                

Name: Ronald
Dutt        

Title:
Chief Executive
Officer

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