TERMS OF EMPLOYMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EXHIBIT A

ADDITIONAL COMPENSATION

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

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

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

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

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