Document:

Exhibit
10.1

 

THIRD
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT

 

THIS
THIRD AMENDED AND RESTATED CREDIT FACILITY AGREEMENT (this “Agreement”), dated as of August 31, 2020, by
and among Flux Power, Inc., a California corporation (“Borrower”), Esenjay Investments, LLC, Cleveland Capital,
L.P., Otto Candies, Jr., Paul Candies, Brett Candies, Winn Interest, Ltd., and Tabone Family Partnership (as assignee to the interests,
rights and obligations of Helen M. Tabone*)(collectively, the “Other Lenders”), and additional parties who
may subsequently become a party to this Agreement as a lender pursuant to Section 15 hereof (“Additional Lenders,”
and together with Esenjay and Other Lenders, the “Lenders”).

 

WHEREAS,
Borrower and Esenjay entered into that certain Credit Facility Agreement, dated as of March 22, 2018 (“Effective Date”),
as amended and restated pursuant to that certain Amended and Restated Credit Facility Agreement dated March 28, 2019, as further
amended and restated by that certain Second Amended and Restated Credit Facility Agreement dated October 10, 2019 (as amended
and restated and currently in effect, the “Original Agreement”), to provide Borrower with a line of credit
(the “LOC”) in a maximum principal amount at any time outstanding of up to Ten Million Dollars ($10,000,000);

 

WHEREAS,
the Lenders agreed to amend and restate their individual promissory notes issued under the Original Agreement to increase the
LOC from Ten Million Dollars ($10,000,000) to Twelve Million Dollars ($12,000,000) and extend the maturity date to December 31,
2020, and also to add provisions pursuant to which the outstanding amounts under the promissory notes are convertible into shares
of common stock of Flux Power Holdings, Inc., at $4.00 per share (“Conversion Provision”).

 

WHEREAS,
Esenjay is an existing Lender under the LOC and also currently a holder of an Amended and Restated Convertible Promissory Note,
dated March 9, 2020, issued by Flux Power Holdings, Inc., a Nevada corporation and the the parent of Borrower (“Flux
Power”) for the principal amount One Million Four Hundred Thousand Dollars ($1,400,000) as delivered on June 2, 2020,
of which $500,000 in principal is outstanding as of August 31, 2020 (“Esenjay Note”);

 

WHEREAS,
the Lenders, Esenjay (in its capacity as holder of the Esenjay Note) and Borrower wish to consolidate the outstanding obligations
under the Esenjay Note, principal plus accrued interest, into the Advances (as defined below) under this Agreement; and

 

WHEREAS,
the parties hereto desire to amend and restate the Original Agreement to (i) memorialize the increase in the LOC from Ten Million
Dollars ($10,000,000) to Twelve Million Dollars ($12,000,000), (ii) extend the maturity date from December 31, 2020 to September
30, 2021, (iii) memorialize the Conversion Provision under the promissory notes previously issued in connection with the LOC and
(iv) to include and consolidate the outstanding obligations under the Esenjay Note into the Advances made under this Agreement.

 

NOW,
THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, Borrower and the Lenders hereby amend and restate the Original Agreement in its entirety and
agree as follows:

 

    	1

     

    

 

 1.        Credit Facility.

 

(a)       Subject
to the sole discretion of each individual Lender, and subject to the terms and conditions of this Agreement, each of the Lenders
severally agrees to extend a LOC, in the aggregate, of up to Twelve Million Dollars ($12,000,000) (the “Advances”)
to Borrower from time to time from the Effective Date until September 30, 2021. The Advances shall be made pro rata in accordance
with each Lender’s Pro Rata Percentages (as defined below), provided, however, to the extent such Lender elects not to make
an Advance or the full amount of its right to make an Advance (each event, a “Shortfall”), the other Lenders
may elect to make up the Shortfall, if any. Borrower and each of the Lenders acknowledge and agree that Schedule A sets
forth, as of August 31, 2020, each of the Lender’s outstanding principal amount and accrued and unpaid interest under this
Agreement and the Notes (including the inclusion of the Esenjay Note to Esenjay’s outstanding principal amount under the
Note held by Esenjay). For the purpose of this Agreement, the Lender’s Pro Rata Percentage shall mean (i) the total outstanding
principal amount owed the Note (as defined below) held by the Lender divided by (ii) the aggregate amount of all outstanding principal
amount owed under the Notes then held all Lenders.

 

(b)       The
Advances shall be evidenced by separate amended and restated promissory notes of Borrower in substantially the form of Exhibits
A-1 and A-2 attached hereto dated of even date with this Agreement (except for the Note evidencing Borrowers’ prior
Advances to date, which shall be amended to reflect the increase to the amount of the Advances per this Agreement) ( each a “Note”
and collectively, the “Notes”), and completed with appropriate insertions. One Note shall be payable to the
order of each Lender in the principal amount equal to the LOC commitment or, if less, the outstanding amount of all Advances made
by such Lender, plus interest accrued thereon, as set forth below. All Advances shall be made pursuant the terms and obligations
set forth in the Note.

 

(c)       For
the purposes of the Advances, subject to the limitations, terms and conditions set forth in the Notes, Borrower may, from time
to time, prior to the Due Date (as defined in the Note), draw down, repay, and re-borrow on the Note, by giving notice to the
Lenders of the amount to be requested to be drawn down.

 

(d)       In
order to secure Borrower’s performance under the Note, Borrower and the Lenders entered into an Amended and Restated Security
Agreement, dated March 28, 2019, as amended on October 10, 2019, and as further amended and restated pursuant to that certain
Second Amended and Restated Security Agreement dated as of the date hereof and entered into concurrently with this Agreement (as
amended and restated, the “Security Agreement”), the terms of which are incorporated herein by this reference.
Such Security Agreement shall reflect the increase to the amount of the Advances per this Agreement, and include the obligations
under the Esenjay Note which are being included as Advances under this Agreement and reflected in the Notes.

 

(e)       All
Advances shall be used by Borrower for the purchase of inventory and related operational support expenses.

 

(f)       The
Note and the Security Agreement, together with all of the other agreements, documents, and instruments heretofore or hereafter
executed in connection therewith or with the Loan to be made under this Agreement, as the same may be amended, supplemented or
modified from time to time, shall collectively be referred to herein as the “Loan Documents.”

 

(g)       The
parties and Flux Power agree to the Conversion Provision set forth in the Note.

 

2.       Interest
Rate and Fees. Interest and fees shall accrue and be payable on the Loan as set forth in the Note.

 

3.       Assignment
and Inclusion of Esenjay Note. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
Flux Power hereby grants, assigns, transfers and sets over to the Borrower all of its right, title and interest in and to the
Esenjay Note; and Esenjay agrees and consents to such assignment. The Lenders and Borrower hereby consent to the inclusion of
all of the outstanding obligations under the Esenjay Note onto the Note. Upon the execution of the Note held by Esenjay, Esenjay
fully releases and discharges Flux Power under the Esenjay Note.

 

    	2

     

    

 

4.       Representations
and Warranties of Borrower. Borrower represents and warrants to the Lenders that:

 

(a)       Corporate
Existence and Power.

 

(i)       Borrower
is a corporation duly organized, validly existing and in good standing under the laws of the State of California.

 

(ii)       Borrower
has the power and authority to own its properties and assets and to carry out its business as now being conducted.

 

(iii)       Borrower
has the power and authority to execute, deliver and perform the Loan Documents to which it is a party, to borrow and guaranty
money in accordance with the terms thereof, to execute, deliver and perform its obligations under the Note and the other Loan
Documents to which it is a party and any other documents made by it as contemplated hereby, and to grant to the Lenders liens
and security interests in the Collateral (as defined in the Security Agreement) as hereby contemplated.

 

(b)       Authorization
and Approvals. All corporate action on the part of Borrower, its board of directors, and shareholders necessary for the (a)
authorization, execution, delivery and performance by it of the Loan Documents to which it is a party, and (b) the performance
of its obligations under the Loan Documents, has been taken or will be taken prior to this Agreement. This Agreement and the other
Loan Documents, when executed and delivered by Borrower, shall constitute the valid and binding obligations of Borrower, enforceable
in accordance with their respective terms.

 

(c)       Pre-existing
business relationship; Experience. Borrower has a pre-existing business relationship with the Lenders and has such knowledge
and experience in financial and business matters: (a) to be capable of evaluating the merits and risks of the LOC, (b) to make
an informed decision relating thereto, and (c) to protect its own interests in connection with the transaction contemplated by
this Agreement.

 

(d)       Compliance
with Laws, Etc. The execution and delivery of this Agreement and the Note hereunder does not and will not violate any requirement
of law or any contractual obligation of Borrower.

 

(e)       Defaults.
Borrower is not currently in default of any contractual obligation that would have a material adverse effect on Borrower’s
business, assets or financial condition.

 

(f)       Litigation.
There is no litigation, arbitration or other proceedings taking place, pending or to the knowledge of Borrower threatened against
Borrower or any of its assets which questions the validity of this Agreement or the right of Borrower to enter into it or to consummate
the transactions contemplated hereby.

 

    	3

     

    

 

5.       Representations
and Warranties of Each of the Lenders. Each of the Lenders severally represents and warrants to Borrower that:

 

(a)       Requisite
Power and Authority. The Lender has all of the requisite power, authority, and capacity to execute, deliver, and comply with
the terms of this Agreement, and such execution, delivery, and compliance does not conflict with, or constitute a default under,
any instruments governing the Lender, any law, regulation or order, or any agreement to which the Lender is a party or by which
the Lender may be bound. All action on the Lender’s part necessary for the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the performance of all obligations of the Lender hereunder has been
taken. This Agreement has been duly executed and delivered by the Lender.

 

(b)       Pre-existing
business relationship; Experience. The Lender has a pre-existing business relationship with Borrower and has such knowledge
and experience in financial and business matters: (a) to be capable of evaluating the merits and risks of the loan to Borrower,
(b) to make an informed decision relating thereto, and (c) to protect its own interests in connection with the transaction contemplated
by this Agreement.

 

6.       Notices.
Any notice, request, instruction, or other document to be given hereunder by any party hereto to any other party will be in writing
and will be given by delivery in person, by facsimile transmission, by email or other electronic communication, by overnight courier
or by registered or certified mail, postage prepaid (and will be deemed given when delivered if delivered by hand, when transmission
confirmation is received if delivered by facsimile, three (3) days after mailing if mailed by United States mail, and one (1)
business day after deposited with an overnight courier service if delivered by overnight courier), as follows:

 

	 	If
    to Borrower:	Flux
    Power, Inc.	 
	 	 	Attn:
    President	 
	 	 	2685
    S. Melrose Drive	 
	 	 	Vista,
    CA 92081	 
	 	 	rdutt@fluxpwr.com	 
	 	 	 	 
	 	If
    to Lender:	Esenjay
    Investments, LLC	 
	 	 	Attn:
    Howard Williams	 
	 	 	500
    N. Water, Suite 1100S	 
	 	 	Corpus
    Christi, TX 78471	 
	 	 	Williams@epc-cc.com	 
	 	 	 	 
	 	 	Cleveland
    Capital, L.P.	 
	 	 	Attn:
    Wade Massad	 
	 	 	1250
    Linda Street, Suite 304	 
	 	 	Rocky
    River, OH 44116	 

 

or
at such other address of which any party may, from time to time, advise the other party by notice in writing given in accordance
with the foregoing. The date of receipt of any such notice shall be deemed to be the date of delivery or facsimile (with confirmation)
thereof.

 

7.       Entire
Agreement. This Agreement, the Loan Documents, and the other agreements entered into in connection herewith supersede all
prior negotiations and agreements (whether written or oral) and constitute the entire understanding among the parties hereto.

 

8.       Successors.
This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and
assigns.

 

9.       Headings.
The section headings contained in this Agreement are for convenience only and shall not control or affect the meaning or construction
of any of the provisions of this Agreement.

 

    	4

     

    

 

10.       Governing
Law. This Agreement shall be construed and enforced in accordance with the laws of the State of California without reference
to principles of conflict of law and, in the event of any litigation or other dispute in connection with this Agreement or any
of the exhibits attached hereto, the venue and jurisdiction of which shall be in Los Angeles County, California.

 

11.       Delay,
Etc. No delay or omission to exercise any right, power or remedy accruing to any party hereto shall impair any such right,
power or remedy of such party nor be construed to be a waiver of any such right, power or remedy, nor constitute any course of
dealing or performance hereunder.

 

12.       Costs
and Attorneys’ Fees. If any action, suit, arbitration proceeding or other proceeding is instituted arising out of this
Agreement, the prevailing party shall recover all of such party’s costs, including, without limitation, the court costs
and reasonable attorneys’ fees incurred therein, including any and all appeals or petitions therefrom.

 

13.       Waiver
and Amendment. Any of the terms and provisions of this Agreement may be waived at any time by the party that is entitled to
the benefit thereof, but only by a written instrument executed by such party. This Agreement may be amended only by an agreement
in writing executed by the parties hereto, provided however, the admission of an “Additional Lender” shall not require
any consent or approval from the Lenders, and Schedule A may be amended by the Company from time to time to provide for
Additional Lenders who join as a party to this Agreement with no consent or approval required from the Lenders. Upon the admission
of a new Additional Lender, the Company shall provide the existing Lenders with notice of new Additional Lender and updated Schedule
A with the new adjusted Lender Percentages.

 

14.       Consent
to Amendment and Restatement; Effect of Amendment and Restatement. The Lenders hereby consent to all amendments and modifications
made to the Loan Documents and LOC prior to the date hereof as of the date such amendment and modification was made. In addition,
the Lenders, as of the date of this Agreement, hereby consent to the amendment and restatement of the Original Agreement pursuant
to the terms of this Agreement and the amendment or amendment and restatement of the other Loan Documents. Upon the execution
by all parties to this Agreement, the Original Agreement shall be amended and restated in its entirety by this Agreement, and
the Original Agreement shall thereafter be of no further force and effect and shall be deemed replaced and superseded in all respects
by this Agreement.

 

15.       Additional
Lenders. Notwithstanding anything to the contrary contained herein, a party may become a Lender under this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and thereafter shall be deemed a “Lender”
for all purposes hereunder.

 

16.       Counterparts;
Electronic Transmission. This Agreement may be executed in one or more counterparts (any of which may be delivered by fax
or electronic mail transmission), each of which will for all purposes be deemed to be an original and all of which will constitute
the same instrument.

 

    	5

     

    

 

IN
WITNESS WHEREOF, the undersigned parties hereto have duly executed this Agreement effective as of the date first above written.

 

	 	BORROWER:
	 	 	 
	 	Flux
    Power, Inc.,
	 	a California corporation 
	 	 	 
	 	By:	/s/
    Ronald F. Dutt
	 	 	Ronald
    F. Dutt, Chief Executive Officer
	 	 	 
	 	Solely
    for purpose of Acknowledment and Consent to Section 1(g) and Section 3 only
	 	 	 
	 	Flux
    Power Holdings, Inc.*
	 	a
    Nevada corporation
	 	 	 
	 	By:	/s/
    Ronald F. Dutt
	 	 	Ronald
    F. Dutt, Chief Executive Officer
	 	 	 
	 	LENDERS:
	 	 	 
	 	Esenjay
    Investments, LLC
	 	 	 
	 	By:	/s/ Michael
    Johnson 
	 	Name	Michael
    Johnson
	 	Title	 
	 	 	 
	 	Cleveland
    Capital, L.P.
	 	 	 
	 	By:	/s/ Wade
    Massad 
	 	Name	Wade
    Massad
	 	Title	 
	 	 	 
	 	/s/
    Otto Candies, Jr.
	 	Otto
    Candies, Jr.
	 	 	 
	 	/s/
    Paul Candies
	 	Paul
    Candies
	 	 	 
	 	/s/
    Brett Candies
	 	Brett
    Candies
	 	 	 
	 	Winn
    Interest, Ltd.
	 	 	 
	 	By:	/s/ Tom
    Winn 
	 	Name	Tom
                                         Winn

	 	Title	 
	 	 	 
	 	Tabone
        Family Partnership (assignee of all rights

        and
        obligations of Helen M. Tabone)*

	 
	 	 	 
		By:	/s/
                                         Jean Pedley

	 	Name	Jean
    Pedley
	 	Title	 
	 	 	 
	 	/s/
    Helen M. Tabone*
	 	Helen
    M. Tabone*

 

*By
executing this Agreement, Helen M. Tabone and Tabone Family Partnership (“Tabone Parties”) hereby represent, warrant
and confirm to the Borrower that all of the rights, interests and obligations of Helen M. Tabone under the Loan Documents have
been assigned, transferred to and assumed by Tabone Family Partnership. As such, the Tabone Parties confirm to the Borrower that
as of the date of the Agreement, Helen M. Tabone is not a “Lender” and the Tabone Family Partnership is a “Lender”
under this Agreement.

 

    	6

     

    

 

	 	ADDITIONAL LENDER*
	 	 
	 	 
	 	Print Name
	 	 	 
	 	By:	       
	 	Name:	
	 	Title:	
	 	Address:	
	 	Date:	

 

*Pursuant
to Section 15 of the Third Amended and Restated Credit Facility Agreement dated August 31, 2020.

 

    	7

     

    

 

SCHEDULE
A

Outstanding
Obligations as of August 31, 2020

 

	Lenders	 	Principal Amount(1)	 	 	Accrued and Unpaid Interest(1)	 
	Esenjay Investments, LLC	 	$	883,746	 	 	$	84,934	 
	 	 	 	 	 	 	 	 	 
	Cleveland Capital, L.P.	 	$	1,719,656	 	 	$	44,424	 
	 	 	 	 	 	 	 	 	 
	Otto Candies Jr.	 	$	107,319	 	 	$	8,272	 
	 	 	 	 	 	 	 	 	 
	Paul Candies	 	$	174,021	 	 	$	4,496	 
	 	 	 	 	 	 	 	 	 
	Brett Candies	 	$	174,021	 	 	$	4,496	 
	 	 	 	 	 	 	 	 	 
	Winn Interest, Ltd.	 	$	1,320,929	 	 	$	34,124	 
	 	 	 	 	 	 	 	 	 
	Tabone Family Partnership	 	$	16,737	 	 	$	2,266	 

 

	(1)	Consists
    of (i) $3,896,429 in principal outstanding under the LOC, plus $ 118,741 in accrued and unpaid interest, and (ii) $500,000
    in principal outstanding under the Esenjay Note, plus $64,271 in accrued and unpaid interest.

 

    	 

     

    

 

EXHIBIT
A-1

 

FORM
OF AMENDED AND RESTATED SECURED PROMISSORY NOTE

 

    	 

     

    

 

EXHIBIT
A-2

 

FORM
OF SECOND AMENDED AND RESTATED SECURED PROMISSORY NOTE

 

Esenjay
Investments, LLCExhibit
10.2

 

SECOND
AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS
SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as of August 31, 2020, is by and
among Flux Power, Inc., a California corporation (the “Company”), Esenjay Investments, LLC, Cleveland Capital,
L.P., Otto Candies, Jr., Paul Candies, Brett Candies, Winn Interest, Ltd., and Tabone Family Partnership (as assignee to the interests,
rights and obligations of Helen M. Tabone*), and additional parties that join this Agreement as a secured party pursuant to Section
17(k) (each a “Secured Party,” and collectively, the “Secured Parties”), and Esenjay Investments,
LLC, in its capacity as the “Collateral Agent” (as defined in Section 1 herein below).

 

RECITALS

 

WHEREAS,
the Company and the Secured Parties entered into an Amended and Restated Credit Facility Agreement dated March 28, 2019, which
subsequently was amended and restated pursuant to that certain Third Amended and Restated Credit Facility Agreement dated as of
the date hereof and entered into concurrently with this Agreement (which may be amended from time to time, the “Credit
Facility Agreement”) pursuant to which the Secured Parties have agreed to provide the Company a line of credit (the
“LOC”);

 

WHEREAS,
the Company and Esenjay Investments, LLC (“Esenjay”) originally executed that certain Guaranty and Security
Agreement dated as of March 22, 2018, which was subsequently amended and restated pursuant to that certain Amended and Restated
Security Agreement dated March 28, 2019, to add additional secured parties and collateral agent, and then subsequently was amended
from time to time (as amended, “Original Security Agreement”);

 

WHEREAS,
in connection with the Credit Facility Agreement, the Company issued each Secured Party a secured promissory note which has been
amended and restated in its entirety (as amended and restated, and which may be further amended from time to time, each a “Note”
and together “Notes”) evidencing the Company’s obligation to repay the Secured Parties certain funds
on the terms and conditions as set forth in the Notes; and

 

WHEREAS,
in order to induce each Secured Party to provide advances under the LOC, the Company has agreed to execute and deliver to the
Secured Parties this Agreement for the benefit of the Secured Parties and to grant to them a priority security interest in certain
property of the Company to secure the prompt payment, performance and discharge in full of all of the Company’s obligations
under the Notes.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.       Certain
Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used
but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “proceeds”) shall
have the respective meanings given such terms in Article 9 of the UCC.

 

(a)       “Collateral”
means the collateral in which the Secured Parties are granted a security interest by this Agreement and which shall include the
following, whether presently owned or existing or hereafter acquired or coming into existence, and all additions and accessions
thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection
therewith:

 

(i)       All
Goods of the Company, including, without limitation, all machinery, equipment, computers, motor vehicles, trucks, tanks, boats,
ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every
kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other
items used and useful in connection with the Company’s businesses and all improvements thereto (collectively, the “Equipment”);
and

 

    	 	1	 

    	 	 	 

    

 

(ii)       All
Inventory of the Company; and

 

(iii)       All
of the Company’s contract rights and general intangibles, including, without limitation, all partnership interests, stock
or other securities, licenses, distribution and other agreements, computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax refunds (collectively, the “General Intangibles”);
and

 

(iv)       All
Receivables of the Company including all insurance proceeds, and rights to refunds or indemnification whatsoever owing, together
with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment,
motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each
Receivable, including any right of stoppage in transit; and

 

(v)       All
of the Company’s documents, instruments and chattel paper, files, records, books of account, business papers, computer programs
and the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(iv) above; and

 

(vi)       All
intellectual property, including but not limited to the following:

 

(1)       Software
Intellectual Property:

 

a.       all
software programs (including all source code, object code and all related applications and data files), whether now owned, upgraded,
enhanced, licensed or leased or hereafter acquired by the Company, above;

 

b.       all
computers and electronic data processing hardware and firmware associated therewith;

 

c.       all
documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such software, hardware
and firmware described in the preceding clauses (a) and (b); and

 

d.       all
rights with respect to all of the foregoing, including, without limitation, any and all upgrades, modifications, copyrights, licenses,
options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications and substitutions, replacements, additions, or model conversions of any of the foregoing.

 

    	 	2	 

    	 	 	 

    

 

(2)       Copyrights:

 

a.       all
copyrights, registrations and applications for registration, issued or filed, including any reissues, extensions or renewals thereof,
by or with the United States Copyright Office or any similar office or agency of the United States, any state thereof, or any
other country or political subdivision thereof, or otherwise, including all rights in and to the material constituting the subject
matter thereof; and

 

b.       any
rights in any material which is copyrightable or which is protected by common law, United States copyright laws or similar laws
or any law of any State.

 

(3)       Copyright
License:

 

a.       any
agreement, written or oral, providing for a grant by the Company of any right in any Copyright.

 

(4)       Patents:

 

a.       all
letters patent of the United States or any other country or any political subdivision thereof, and all reissues and extensions
thereof; and

 

b.       all
applications for letters patent of the United States and all divisions, continuations and continuations-in-part thereof or any
other country or any political subdivision.

 

(5)       Patent
License:

 

a.       all
agreements, whether written or oral, providing for the grant by the Company of any right to manufacture, use or sell any invention
covered by a Patent.

 

(6)       Trademarks:

 

a.       all
trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political
subdivision thereof; and

 

b.       all
reissues, extensions or renewals thereof.

 

(7)       Trademark
License:

 

a.       any
agreement, written or oral, providing for the grant by the Company of any right to use any Trademark.

 

    	 	3	 

    	 	 	 

    

 

(8)       Trade
Secrets:

 

a.       common
law and statutory trade secrets and all other confidential or proprietary or useful information and all know-how obtained by or
used in or contemplated at any time for use in the business of the Company (all of the foregoing being collectively called a “Trade
Secret”), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents
and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, and including the
right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for
the breach or enforcement of any such Trade Secret license.

 

(b)       “Collateral
Agent” means the designated representative of the Secured Parties for purposes of exercising rights of the Secured Parties
hereunder with respect to the Collateral and otherwise.

 

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

 

(d)       “Obligations”
means all of the Company’s obligations under this Agreement, the Credit Facility Agreement, and the respective Notes, in
each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later
decreased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or
any part of such payment is avoided or recovered directly or indirectly from the Secured Party as a preference, fraudulent transfer
or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time.

 

(e)       “Permitted
Liens” shall mean (a) liens for taxes not yet delinquent or liens for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been established; (b) liens in respect of property or assets imposed by law which
were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’
liens and other similar liens arising in the ordinary course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (c)
liens securing obligations under a capital lease if such liens do not extend to property other than the property leased under
such capital lease; (d) liens upon any equipment acquired or held by the Company or any of its subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, so long
as such lien extends only to the equipment financed, and any accessions, replacements, substitutions and proceeds (including insurance
proceeds) thereof or thereto; (e) leases or subleases and licenses or sublicenses granted in the ordinary course of the Company’s
business; and (f) asset based line of credit for short term working capital needs.

 

(f)       “UCC”
means the Uniform Commercial Code, as currently in effect in the State of California.

 

2.       Grant
of Security Interest. As an inducement for the Secured Parties to lend under their respective Notes and to secure the complete
and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, the Company hereby, unconditionally
and irrevocably, pledges, grants and hypothecates to the Secured Parties, a continuing security interest in, a continuing first
lien upon, an unqualified right to possession and disposition of and a right of set-off against, in each case to the fullest extent
permitted by law, all of the Company’s right, title and interest of whatsoever kind and nature in and to the Collateral
(the “Security Interest”); provided, however, the Secured Parties have agreed that the Security
Interest granted pursuant to this Section 2 shall be subordinate to the Permitted Liens.

 

    	 	4	 

    	 	 	 

    

 

3.       Representations,
Warranties, Covenants and Agreements of the Company. The Company represents and warrants to, and covenants and agrees with,
the Secured Parties as follows: 

 

(a)       The
Company has the requisite corporate power and authority to enter into this Agreement and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by the Company of this Agreement and the filings contemplated therein have
been duly authorized by all necessary action on the part of the Company and no further action is required by the Company. This
Agreement constitutes a legal, valid and binding obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditor’s rights generally.

 

(b)       The
Company represents and warrants that it has no place of business or offices where its respective books of account and records
are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located
other than the Company’s main facility identified in Section 14 of this Agreement;

 

(c)       The
Company is the sole owner of the Collateral (except for non-exclusive licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights or claims, and is fully authorized to grant the
Security Interest in and to pledge the Collateral. Except for the prior security interest granted in connection with the Original
Security Agreement, there is not on file in any governmental or regulatory authority, agency or recording office an effective
financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that have
been filed in favor of the Secured Party pursuant to this Agreement) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Company shall not execute and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument that is senior to the Security Interest granted under this
Agreement. 

 

(d)       No
part of the Collateral has been judged invalid or unenforceable. No written claim has been received that any Collateral or the
Company’s use of any Collateral violates the rights of any third party. There has been no adverse decision to the Company’s
claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Company’s right to
keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the
best knowledge of the Company, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority. 

 

(e)       The
Company shall at all times maintain its books of account and records relating to the Collateral at its principal place of business
and its Collateral at the locations set forth in Section 14 and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Collateral Agent at least thirty (30) days prior to such relocation (i) written notice of
such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing
statements and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Parties valid, perfected and continuing first priority liens in the Collateral. 

 

(f)       This
Agreement creates in favor of the Secured Parties a valid security interest in the Collateral securing the payment and performance
of the Obligations and, upon making the filings described in the immediately following sentence, a perfected security interest
in such Collateral. Except for the filing of financing statements on Form UCC-1 under the UCC, no authorization or approval of
or filing with or notice to any governmental authority or regulatory body is required either (i) for the grant by the Company
of, or the effectiveness of, the Security Interest granted hereby or for the execution, delivery and performance of this Agreement
by the Company or (ii) for the perfection of or exercise by the Collateral Agent of its rights and remedies hereunder. 

 

    	 	5	 

    	 	 	 

    

 

(g)       Promptly
upon execution of this Agreement, the Company will deliver to the Collateral Agent one or more executed UCC financing statements
on Form UCC-1 in the jurisdiction of California.

 

(h)       The
execution, delivery and performance of this Agreement does not conflict with or cause a breach or default, or an event that with
or without the passage of time or notice, shall constitute a breach or default, under any agreement to which the Company is a
party or by which the Company is bound. No consent (including, without limitation, from stock holders or creditors of the Company)
is required for the Company to enter into and perform its obligations hereunder.

 

(i)       The
Company shall at all times maintain the liens and Security Interest provided for hereunder as valid and perfected liens and security
interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest hereunder shall terminate
pursuant to Section 12. The Company hereby agrees to defend the same against any and all persons. The Company shall safeguard
and protect all Collateral for the account of the Secured Parties. At the request of the Collateral Agent, the Company will sign
and deliver to the Collateral Agent at any time or from time to time one or more financing statements pursuant to the UCC (or
any other applicable statute) in form reasonably satisfactory to the Collateral Agent and will pay the cost of filing the same
in all public offices wherever filing is, or is deemed by the Collateral Agent to be, necessary or desirable to effect the rights
and obligations provided for herein. Without limiting the generality of the foregoing, the Company shall pay all fees, taxes and
other amounts necessary to maintain the Collateral and the Security Interest hereunder, and the Company shall obtain and furnish
to the Collateral Agent from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required
to maintain the priority of the Security Interest hereunder. 

 

(j)       The
Company will not transfer, pledge, hypothecate, encumber, license (except for any Collateral disposed of in the ordinary course
of business), sell or otherwise dispose of any of the Collateral without the prior written consent of the Collateral Agent.

 

(k)       The
Company shall keep and preserve its Equipment, Inventory and other tangible Collateral in good condition, repair and order and
shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

 

(l)       The
Company shall, within twenty (20) days of obtaining knowledge thereof, advise the Collateral Agent promptly, in sufficient detail,
of any substantial change in the Collateral, and of the occurrence of any event which would have a material adverse effect on
the value of the Collateral or on the Secured Parties’ security interest therein.

 

(m)       The
Company shall promptly execute and deliver to the Collateral Agent such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates and assurances and take such further action as the Collateral
Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce its security
interest in the Collateral.

 

(n)       The
Company shall permit the Collateral Agent and its representatives and agents to inspect the Collateral at any time and to make
copies of records pertaining to the Collateral as may be requested by the Collateral Agent from time to time.

 

    	 	6	 

    	 	 	 

    

 

(o)       The
Company will take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.

 

(p)       The
Company shall promptly notify the Collateral Agent in sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Collateral and of any other information received by the Company that may materially
affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.

 

(q)       All
information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of the Company with respect to the
Collateral is accurate and complete in all material respects as of the date furnished.

 

4.       Collateral
Agent. 

 

(a)       Each
Secured Party hereby appoints Esenjay Investments, LLC as Collateral Agent for the benefit of the Secured Parties under this Agreement
to serve from the date hereof until the termination of this Agreement. 

 

(b)       Each
Secured Party hereby irrevocably authorizes Collateral Agent to take such action and to exercise such powers hereunder as provided
herein or as requested in writing by the Secured Parties who hold a majority in interest of outstanding principal and interest
under the Notes (the “Majority Note Holders”) in accordance with the terms hereof, together with such powers
as are reasonably incidental thereto. Collateral Agent may execute any of its duties hereunder by or through agents or employees
and shall be entitled to request and act in reliance upon the advice of counsel concerning all matters pertaining to its duties
hereunder and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance therewith. 

 

(c)       Collateral
Agent shall not be liable or responsible to any Secured Party or to the Company for any action taken or omitted to be taken by
Collateral Agent or any other such person hereunder or under any related agreement, instrument or document, except in the case
of gross negligence or willful misconduct on the part of Collateral Agent, nor shall Collateral Agent be liable or responsible
for (A) the validity, effectiveness, sufficiency, enforceability or enforcement of the Notes, this Agreement or any instrument
or document delivered hereunder or relating hereto; (B) the title of the Company to any of the Collateral or the freedom of any
of the Collateral from any prior or other liens or security interests; (C) the determination, verification or enforcement of the
Company’s compliance with any of the terms and conditions of this Agreement; (D) the failure by the Company to deliver any
instrument or document required to be delivered pursuant to the terms hereof; or (E) the receipt, disbursement, waiver, extension
or other handling of payments or proceeds made or received with respect to the Collateral, the servicing of the Collateral or
the enforcement or the collection of any amounts owing with respect to the Collateral. 

 

(d)       In
connection with this Agreement and the transactions contemplated hereby and any related document relating to any of the Collateral,
each of the Secured Parties agrees to pay to Collateral Agent, on demand, its pro rata share (based on relative Obligations) of
all fees and all expenses incurred in connection with the operation and enforcement of this Agreement, the Notes or any related
agreement to the extent that such fees or expenses have not been paid by the Company. In connection with this Agreement and each
instrument and document relating to any of the Collateral, each of the Secured Parties (on a pro rata basis based upon the outstanding
Obligations owing to the Secured Parties) and the Company hereby agree to hold Collateral Agent harmless, and to indemnify Collateral
Agent from and against any and all loss, damage, expense or liability which may be incurred by Collateral Agent under this Agreement
and the transactions contemplated hereby and any related agreement or other instrument or document, as the case may be, unless
such liability shall be caused by the willful misconduct or gross negligence of Collateral Agent. 

 

    	 	7	 

    	 	 	 

    

 

5.       Defaults.
The following events shall be “Events of Default”:

 

(a)       The
occurrence of an Event of Default (as defined in the Note) under the Note;

 

(b)       Any
representation or warranty of the Company in this Agreement shall prove to have been incorrect in any material respect when made;
and

 

(c)       The
failure by the Company to observe or perform any of its obligations hereunder for ten (10) days after receipt by the Company of
notice of such failure from a Secured Party.

 

6.       Duty
To Hold In Trust. Upon the occurrence of any Event of Default and at any time thereafter, the Company shall, upon receipt
by it of any revenue, income or other sums subject to the Security Interest, whether payable pursuant to the Notes or otherwise,
or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same
in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Collateral
Agent for application to the satisfaction of the Obligations.

 

7.       Rights
and Remedies Upon Default. Upon occurrence of any Event of Default and at any time thereafter, the Secured Parties shall have
the right to exercise all of the remedies conferred hereunder and under the Note, and the Secured Parties shall have all the rights
and remedies of a secured party under the UCC and/or any other applicable law (including the Uniform Commercial Code of any jurisdiction
in which any Collateral is then located). The Secured Parties shall have the following rights and powers:

 

(a)       The
Collateral Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance
of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and the Company
shall assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at the Company’s premises or elsewhere, and make available to the Collateral Agent, without rent, all of
the Company’s respective premises and facilities for the purpose of the Collateral Agent taking possession of, removing
or putting the Collateral in saleable or disposable form.

 

(b)       The
Collateral Agent shall have the right to operate the business of the Company using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise,
either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels
and at such time or times and at such place or places, and upon such terms and conditions as the Secured Party may deem commercially
reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon
or notice to the Company or right of redemption of the Company, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Parties may, unless prohibited by applicable law which cannot be waived,
purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.

 

8.       Applications
of Proceeds. The proceeds of any such sale, lease or other disposition of the Collateral hereunder shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation,
any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Collateral Agent and/or the Secured Parties in enforcing its rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to the satisfaction of the Obligations to each of the Secured Parties
pro rata based on the amount of the unpaid and outstanding Advances made by and due to each of the Secured Parties, and to the
payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the Company any surplus
proceeds. If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Company will be liable for the deficiency, together with interest
thereon, at the rate of fifteen percent (15%) per annum (the “Default Rate”), and the reasonable fees of any
attorneys employed by the Collateral Agent and/or the Secured Parties to collect such deficiency. 

 

    	 	8	 

    	 	 	 

    

 

9.       Costs
and Expenses. The Company agrees to pay all out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements, continuation statements, partial releases and/or termination
statements related thereto or any expenses of any searches reasonably required by the Collateral Agent. The Company shall also
pay all other claims and charges which in the reasonable opinion of the Collateral Agent might prejudice, imperil or otherwise
affect the Collateral or the Security Interest therein. The Company will also, upon demand, pay to the Collateral Agent and/or
the Secured Parties the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and
of any experts and agents, which the Collateral Agent and/or the Secured Parties may incur in connection with (i) the enforcement
of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the
Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Notes. Until so paid, any
fees payable hereunder shall be added to the principal amount of the Note and shall bear interest at the Default Rate.

 

10.       Responsibility
for Collateral. The Company assumes all liabilities and responsibility in connection with all Collateral, and the obligations
of the Company hereunder or under the Notes shall in no way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason. 

 

11.       Security
Interest Absolute. All rights of the Secured Parties and all Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement, the Note or any agreement entered into in connection
with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of,
or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from
the Notes or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of
any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any
guaranty, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle
and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any
other circumstance which might otherwise constitute any legal or equitable defense available to the Company, or a discharge of
all or any part of the Security Interest granted hereby. Until the Obligations shall have been paid and performed in full, the
rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation,
the running of the statute of limitations or bankruptcy. The Company expressly waives presentment, protest, notice of protest,
demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment
received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable
preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise
due to any party other than the Secured Parties, then, in any such event, the Company’s obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. The
Company waives all right to require the Secured Parties to proceed against any other person or to apply any Collateral which the
Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. The Company waives any defense arising
by reason of the application of the statute of limitations to any obligation secured hereby.

 

    	 	9	 

    	 	 	 

    

 

12.       Term
of Agreement. This Agreement and the Security Interest shall terminate on the date on which all payments under the Notes have
been made in full and all other Obligations have been paid or discharged. Upon such termination, the Secured Parties, at the request
and at the expense of the Company, will join in executing any termination statement with respect to any financing statement executed
and filed pursuant to this Agreement. 

 

13.       Power
of Attorney; Further Assurances.

 

(a)       The
Company authorizes the Collateral Agent, and does hereby make, constitute and appoint it, and its respective officers, agents,
successors or assigns with full power of substitution, as the Company’s true and lawful attorney-in-fact, with power, in
its own name or in the name of the Company, to, after the occurrence and during the continuance of an Event of Default, (i) endorse
any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession of the Collateral Agent; (ii) to sign and endorse
any UCC financing statement or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against
the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral;
and (v) generally, to do, at the option of the Collateral Agent, and at the Company’s expense, at any time, or from time
to time, all acts and things which the Collateral Agent deems necessary to protect, preserve and realize upon the Collateral and
the Security Interest granted therein in order to effect the intent of this Agreement, Credit Facility Agreement, and the Notes,
all as fully and effectually as the Company might or could do; and the Company hereby ratifies all that said attorney-in-fact
shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable
for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.

 

(b)       On
a continuing basis, the Company will make, execute, acknowledge, deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction, all such instruments, and take all such action as may reasonably be deemed necessary
or advisable, or as reasonably requested by the Collateral Agent, to perfect the Security Interest granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Collateral Agent the grant or perfection
of a security interest in all of the Collateral.

 

(c)       The
Company hereby irrevocably appoints the Collateral Agent as the Company’s attorney-in-fact, with full authority in the place
and stead of the Company and in the name of the Company, for the sole purpose of taking any action and executing any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the filing
of one or more financing or continuation statements, relative to any of the Collateral without the signature of the Company where
permitted by law.

 

    	 	10	 

    	 	 	 

    

 

14.       Notices.
All notices, requests, demands and other communications hereunder shall be in writing, with copies to all the other parties hereto,
and shall be deemed to have been duly given when (i) if delivered by hand, upon receipt, (ii) if sent by email or other electronic
communication, (iii) if sent by facsimile, upon receipt of proof of sending thereof, (iv) if sent by nationally recognized overnight
delivery service (receipt requested), the next business day, or (v) if mailed by first-class registered or certified mail, return
receipt requested, postage prepaid, four (4) days after posting in the U.S. mails, in each case if delivered to the following
addresses:

 

	 	If
    to the Company:	Flux
    Power, Inc.
	 	 	2685
    S Melrose Drive
	 	 	Vista,
    CA 92081
	 	 	Telephone:
    877-505-3589
	 	 	rdutt@fluxpwr.com
	 	 	 
	 	If
    to the Secured Parties:	Esenjay
    Investments, LLC
	 	 	Attn:
    Howard Williams
	 	 	500
    N. Water, Suite 1100S
	 	 	Corpus
    Christi, TX 78471
	 	 	Williams@epc-cc.com
	 	 	 
	 	If
    to the Collateral Agent: 	Esenjay
    Investments, LLC
	 	 	Attn:
    Howard Williams
	 	 	500
    N. Water, Suite 1100S
	 	 	Corpus
    Christi, TX 78471
	 	 	Williams@epc-cc.com

 

15.       Other
Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the
guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Secured Parties shall have
the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without
in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.

 

16.       Consent
to Amendment and Restatement; Effect of Amendment and Restatement. The Secured Parties hereby consent to the amendment and
restatement of the Original Security Agreement pursuant to the terms of this Agreement and the amendment or amendment and restatement
of the other Loan Documents (as that term is defined in the Credit Facility Agreement). Upon the execution by all parties to this
Agreement, the Original Security Agreement shall be amended and restated in its entirety by this Agreement, and the Original Security
Agreement shall thereafter be of no further force and effect and shall be deemed replaced and superseded in all respects by this
Agreement.

 

17.       Miscellaneous.

 

(a)       No
course of dealing between the Company and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Parties, any right, power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.

 

(b)       All
of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Note or
by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

 

(c)       This
Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and is intended to supersede
all prior negotiations, understandings and agreements with respect thereto. Except as specifically set forth in this Agreement,
no provision of this Agreement may be modified or amended except by a written agreement specifically referring to this Agreement
and signed by the parties hereto.

 

    	 	11	 

    	 	 	 

    

 

(d)       In
the event that any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed
as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this Agreement is held to be invalid, prohibited or unenforceable
in any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity, prohibition
or unenforceability without invalidating the remaining portion of such provision or the other provisions of this Agreement and
without affecting the validity or enforceability of such provision or the other provisions of this Agreement in any other jurisdiction.

 

(e)       No
waiver of any breach or default or any right under this Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default or right, whether of
the same or similar nature or otherwise.

 

(f)       This
Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and assigns.

 

(g)       Each
party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this Agreement.

 

(h)       This
Agreement shall be construed in accordance with the laws of California, except to the extent the validity, perfection or enforcement
of a security interest hereunder in respect of any particular Collateral which are governed by a jurisdiction other than California,
in which case such law shall govern. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of any state
or federal court sitting in Los Angeles County, California over any action or proceeding arising out of or relating to this Agreement,
and the parties hereto hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined
in such state or federal court. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The parties hereto
further waive any objection to venue in the State of California and any objection to an action or proceeding in the State of California
on the basis of forum non conveniens.

 

(i)       THE
COMPANY AND THE SECURED PARTIES (BY THEIR ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE COMPANY
AND THE SECURED PARTIES ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT TO THE PARTIES TO ENTER INTO THIS AGREEMENT. To the extent the foregoing waiver of a jury
trial is held to be unenforceable under applicable California law, the parties hereby agree to refer, for a complete and final
adjudication, any and all issues of fact or law involved in any litigation or proceeding (including, but not limited to, all discovery
and law and motion matters, pretrial motions, trial matters and post-trial motions), brought to resolve any dispute between the
parties hereto (whether based on contract, tort or otherwise) arising out of or otherwise related to this Agreement to a judicial
referee who shall be appointed under a general reference pursuant to California Code of Civil Procedure Section 638, which referee’s
decision will stand as the decision of the court. Such judgment will be entered on the referee’s statement of judgment in
the same manner as if the action had been tried by the court. The parties shall select a single neutral referee, who shall be
a retired state or federal judge with at least five years of judicial experience in civil matters; provided that in the event
the parties cannot agree upon a referee, the referee will be appointed by the court.

 

(j)       This
Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

 

(k)       Notwithstanding
anything to the contrary contained herein, a party may become a “Secured Party” under this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and thereafter shall be deemed a “Secured Party”
for all purposes hereunder.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

    	 	12	 

    	 	 	 

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Second Amended and Restated Security Agreement to be duly executed on the
day and year first above written.

 

	 	COMPANY:
	 	 
	 	Flux
    Power, Inc.,
	 	a
    California corporation 
	 	 	 
	 	By:	/s/
    Ronald F. Dutt
	 	 	Ronald
    F. Dutt, Chief Executive Officer
	 	 	 
	 	SECURED
    PARTIES: 
	 	 
	 	Esenjay
    Investments, LLC
	 	 	 
	 	By:	/s/ Michael
    Johnson
	 	Name	Michael
    Johnson
	 	Title	 
	 	 	 
	 	Cleveland
    Capital, L.P.
	 	 	 
	 	By:	/s/ Wade
    Massad
	 	Name	Wade
    Massad
	 	Title	 
	 	 
	 	/s/
    Otto Candies, Jr.
	 	Otto
    Candies, Jr.
	 	 
	 	/s/
    Paul Candies
	 	Paul
    Candies
	 	 
	 	/s/
    Brett Candies 
	 	Brett
    Candies

 

Signature
Page to Second Amended and Restated Security Agreement

 

    	 	13	 

    	 	 	 

    

 

	 	Winn
    Interest, Ltd.
	 	 	 
	 	By:	/s/ Tom
    Winn                        
	 	Name	Tom
    Winn
	 	Title	 
	 	 	 
	 	Tabone
    Family Partnership (assignee of all rights and obligations of Helen M. Tabone)*
	 	 	 
	 	By:	/s/
                                         Jean Pedley

	 	Name	Jean
    Pedley
	 	Title	 
	 	 	 
	 	/s/
    Helen M. Tabone*
	 	Helen
    M. Tabone*

 

*By
executing this Agreement, Helen M. Tabone and Tabone Family Partnership (“Tabone Parties”) hereby represent, warrant
and confirm to the Company that all of the rights, interests and obligations of Helen M. Tabone under the Loan Documents have
been assigned, transferred to and assumed by Tabone Family Partnership. As such, the Tabone Parties confirm to the Company that
as of the date of the Agreement, Helen M. Tabone is not a “Secured Party” and the Tabone Family Partnership is a “Secured
Party” under this Agreement.

 

Signature
Page to Second Amended and Restated Security Agreement

 

    	 	14

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