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SECURITY AGREEMENT
 
This Security Agreement (the “Agreement”), dated as of September 19, 2006, is
entered into by and between Solar Power, Inc. a California corporation (the
“Debtor”), and Welund Fund, Inc., a Nevada corporation (the “Secured Party”).

RECITALS

WHEREAS, Debtor and Secured Party have entered into that certain Credit Facility
Agreement dated as of the date hereof (as amended, supplemented or modified from
time to time, the “Credit Facility Agreement”), pursuant to which Debtor has
agreed to borrow from Secured Party, and Secured Party has agreed to extend to
Debtor a revolving line of credit in an amount not to exceed Two Million Dollars
($2,000,000.00) (the “Commitment”), which borrowings shall be evidenced by the
Promissory Notes, in the form attached as Exhibit A to the Credit Facility
Agreement, with all of the other agreements, documents, instruments,
certificates, reports and financing statements heretofore or hereafter executed
in connection therewith or with the Advances (as defined in the Credit Facility
Agreement) to be made under the Credit Facility Agreement, as the same may be
amended, supplemented or modified from time to time, shall collectively be
collectively referred to herein as the “Loan Documents”);

WHEREAS, as a condition precedent to the obligation of Secured Party to execute,
delivery and perform under the Credit Facility Agreement and the other Loan
Documents and to make Advances to Debtor pursuant to the Credit Facility
Agreement, Debtor is required, and has agreed, to enter into and deliver this
Agreement and to grant to Secured Party a security interest in the Collateral
(as defined herein) as security for Debtor’s obligations under the Credit
Facility Agreement; and

WHEREAS, Secured Party is willing to execute, deliver and perform under the
Credit Facility Agreement and the other Loan Documents and to make the Advances
available only upon the condition that Debtor executed and delivers to the
Secured Party this Agreement and Debtor agrees to perform and complete its
obligations under this Agreement.

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, Debtor and the Secured Party hereby agree as follows:

1.   Definitions. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Code (as defined herein). All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
 
Account Debtor. Account Debtor shall mean any Person who is or may become
obligated with respect to, or on account of, an Account, Chattel Paper or
General Intangibles (including a Payment Intangible).
 

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Accounts. Accounts shall mean all “accounts” as such term is defined in the
Code, now owned or hereafter acquired by Debtor, including: (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments) (including
any such obligations that may be characterized as an account or contract right
under the Code); (b) all of Debtor’s rights in, to, and under, all purchase
orders or receipts for goods or services; (c) all of Debtor’s rights to any
goods represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all rights to payment due to
Debtor for Goods or other property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, or for services rendered or to be
rendered by Debtor or in connection with any other transaction (whether or not
yet earned by performance on the part of Debtor); (e) all health care insurance
receivables; and (f) all collateral security of any kind given by any Account
Debtor or any other Person with respect to any of the foregoing.
 
Books and Records. Books and Records shall mean all books, records, board
minutes, contracts, licenses, insurance policies, environmental audits, business
plans, files, computer files, computer discs and other data and software storage
and media devices, accounting books and records, financial statements (actual
and pro forma), filings with Governmental Authorities, and any and all records
and instruments relating to the Collateral or Debtor’s business.
 
Chattel Paper. Chattel Paper shall mean all “chattel paper,” as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Person.
 
Code. Code shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California.
 
Collateral. Collateral is defined in Section 2.
 
Contracts. Contracts shall mean all the contracts, undertakings, or agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which Debtor may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.
 
Copyright License. Copyright License shall mean rights under any written
agreement now owned or hereafter acquired by Debtor granting the right to use
any Copyright or Copyright registration of any Person.
 
Copyrights. Copyrights shall mean all of the following now owned or hereafter
acquired by any Person: (a) all copyrights in any original work of authorship
fixed in any tangible medium of expression, now known or later developed, all
registrations and applications for registration of any such copyrights in the
U.S. Copyright Office or any other country, including registrations, recordings
and applications, and supplemental registrations, recordings, and applications
in the U.S. Copyright Office; and (b) all Proceeds of the foregoing, including
license royalties and proceeds of infringement suits, the right to sue for past,
present and future infringements, all rights corresponding thereto throughout
the world and all renewals and extensions thereof.
 

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Deposit Accounts. Deposit Accounts shall have the meaning as such term is
defined in the Code, now or hereafter held in the name of Debtor.
 
Documents. Documents shall have the meaning as such term is defined in the Code,
now owned or hereafter acquired by any Person, wherever located, including all
bills of lading, dock warrants, dock receipts, warehouse receipts, and other
documents of title, whether negotiable or non-negotiable.
 
General Intangibles. General Intangible shall have the meaning as such term is
defined in the Code, now owned or hereafter owned by Debtor, including all
right, title and interest that Debtor may now or hereafter have in or under any
Contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, Deposit Accounts, rights to receive tax refunds and other
payments, rights to received dividends, distributions, cash, Instruments and
other property, and rights of indemnification.
 
Goods. Goods shall have the meaning as such term is defined in the Code, now
owned or hereafter owned by Debtor, wherever located, including equipment,
embedded software to the extent included in “goods” as defined in the Code,
manufactured homes, standing timber that is cut and removed for sale and unborn
young of animals.
 
Goodwill. Goodwill shall mean all goodwill, trade secrets, proprietary or
confidential information, technical information, procedures, formulae, quality
control standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter owned by Debtor.
 
Indebtedness. Indebtedness shall mean the indebtedness evidenced by the Credit
Facility Agreement, together with all other indebtedness and costs, or expenses
for which Debtor is responsible under the Credit Facility Agreement and this
Agreement. In addition, the word “Indebtedness” includes all other obligations,
debts and liabilities, plus interest thereon, of Debtor to Secured Party, as
well as all claims by Secured Party against Debtor, whether existing now or
later; whether they are voluntary or involuntary, due or not due, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether Debtor may
be liable individually or jointly with others; whether Debtor may be obligated
as Debtor, surety, accommodation party or otherwise, whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
 

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Instruments. Instruments shall have the meaning as such term is defined in the
Code, now owned or hereafter owned by any Person, wherever located, including
all certificated securities and all notes and other evidences of indebtedness,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
 
Intellectual Property. Intellectual Property shall mean any and all Licenses,
Copyrights, Patents, Trademarks, Trade Secrets and customer lists.
 
Inventory. Inventory shall have the meaning as such term is defined in the Code,
now owned or hereafter owned by Debtor, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of Debtor for sale or lease or are furnished or are to be furnished under
a contract of service or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in Debtor’s business or
in the processing, production, packaging, promotion, delivery or shipping of the
same, including all supplies and embedded software.
 
Investment Property. Investment Property shall have the meaning as such term is
defined in the Code, now or hereafter acquired by any Person, wherever located.
 
License. License shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter held by
any Person.
 
Lien. Lien shall mean with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including the interest of a vendor or lessor
under a conditional sale agreement, capital lease or other title retention
agreement, or any agreement to provide any of the foregoing, and the filing of
any financing statement or similar instrument under the Code or comparable law
of any jurisdiction.
 
Patents. Patents shall mean all of the following in which any Person now holds
or hereafter holds any interest: (a) all Patent Applications; (b) all letters
patent of any country and all registrations and recordings thereof; and (c) all
reissues, continuations, continuations-in-part or extensions thereof.
 
Payment Intangibles. Payment Intangibles shall have the meaning as such term is
defined in the Code, now owned or hereafter owned by any Person.
 

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Permitted Liens. 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 incurred or deposits made in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security, and mechanic’s Liens,
carrier’s Liens and other Liens to secure the performance of tenders, statutory
obligations, contract bids, government contracts, performance and return of
money bonds and other similar obligations, in each case incurred in the ordinary
course of business, whether pursuant to statutory requirements, common law or
consensual arrangements; (d) Liens securing obligations under a capital lease if
such Liens do not extend to property other than the property leased under such
capital lease; (e) Liens upon any equipment acquired or held by Debtor 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; (f) Liens arising from judgments, decrees or attachments in
circumstances where they are undischarged for not more than 30 days; (g) Liens
in favor of customs and revenue authorities arising as a matter of law to secure
payments of customs duties in connection with the importation of goods, (h)
Liens which constitute rights of setoff of a customary nature or banker’s liens,
whether arising by law or by contract; (i) Liens on insurance proceeds in favor
of insurance companies granted solely as security for financed premiums; and (j)
leases or subleases and licenses or sublicenses granted in the ordinary course
of Debtor’s business.
 
Person. Person shall mean an individual, a partnership, a corporation (including
a business trust), a joint stock company, a limited liability company, an
unincorporated association, a joint venture or other entity or governmental
authority.
 
Proceeds. Proceeds shall have the meaning as such term is defined in the Code
and, in any event, shall include: (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with respect
to any Collateral; (b) any and all payments (in any form whatsoever) made or due
and payable to Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority); (c) any recoveries by Debtor against third parties
with respect to any litigation or dispute concerning any Collateral, including
claims arising out of the loss or nonconformity of, interference with the use
of, defects in, or infringement of rights in, or damage to, Collateral; (d) all
amounts collected on, or distributed on account of, other Collateral; and (e)
any and all other amounts, rights to payment or other property acquired upon the
sale, lease, license, exchange or other disposition of Collateral and all rights
arising out of Collateral.
 
Supporting Obligations. Supporting Obligations shall have the meaning as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
 
Trade Secrets. Trade Secrets shall mean all proprietary information, including
formulas, patterns, compilations, programs, devices, methods, techniques or
processes that derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other Persons who can obtain economic value from its disclosure or use, all
whether now owned or hereafter owned by any Person.
 
Trademark License. Trademark License shall mean the rights under any written
agreement now held or hereafter held by any Person granting any right to use any
Trademark or Trademark registration.
 

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Trademarks. Trademarks shall mean all of the following now owned or hereafter
owned by any Person: (a) all trademarks, trade names, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or territory hereof, or any other country
or any political subdivision thereof, and (b) all reissues, extensions or
renewals thereof.
 
2. Grant of Security. As collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Indebtedness, Debtor hereby grants to Secured Party a security
interest in all of the following assets now owned or at any time hereafter
acquired by Debtor or in which Debtor now has or at any time in the future may
acquire any right, title or interest (collectively, the “Collateral”):
 

 
(a)
all Goods

 

 
(b)
all Accounts;

 

 
(c)
all General Intangibles;

 

 
(d)
all Deposit Accounts;

 

 
(e)
all Equipment;

 

 
(f)
all Inventory;

 

 
(g)
all Intellectual Property;

 

 
(h)
all books and records pertaining to the Collateral;

 

 
(i)
Chattel Paper;

 

 
(j)
Instruments;

 

 
(k)
Investment Property;

 

 
(l)
Letter-of-Credit Rights;

 

 
(m)
Documents; and

 
(n)     to the extent not otherwise included, all Proceeds, Supporting
Obligations and products pertaining to any and all of the foregoing and all
collateral security and guarantees given by any Person with respect to any of
the foregoing.
 
3.    Obligations of Debtor. Debtor warrants and covenants to Secured Party as
follows:
 

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(a)    Perfection of Security Interest. Debtor agrees to execute such financing
statements and to take whatever other actions are requested by Secured Party to
perfect and continue Secured Party’s security interest in the Collateral. It is
the intention of the parties to create in Secured Party a first priority
security interest in Secured Party with the exception of Permitted Liens, and
Secured Party shall take all necessary actions to cause the security interest
created hereby to have such priority. Upon request of Secured Party, Debtor will
deliver to Secured Party any and all of the documents evidencing or constituting
the Collateral. If the Collateral consist of Chattel Paper, Debtor will note
Secured Party’s interest upon any and all Chattel Paper if not delivered to
Secured Party for possession by Secured Party. Debtor hereby appoints Secured
Party as its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue the security interest granted in
this Agreement. Secured Party may at any time, and without further authorization
from Debtor, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Further,
Secured Party shall be entitled to use the generic description of collateral in
its financing statement by indicating that the financing statement covers all
assets and all personal property of Debtor, or such other description of the
Collateral as Secured Party deems advisable. Debtor will reimburse Secured Party
for all expenses for the perfection and the continuation of the perfection of
Secured Party’s security interest in the Collateral. Debtor promptly will notify
Secured Party before any change in Debtor’s name including any change to the
assumed business names of Debtor. This Agreement is a continuing Security
Agreement and will continue in effect until all of the payments and fees due
under the Notes have been paid in full.
 
(b)    No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Debtor or to which Debtor is a party.
 
(c)    Title and Enforceability of Collateral. Debtor represents and warrants to
Secured Party that upon the filing of UCC-1 financing statements in the
appropriate filing offices, Secured Party has (or in the case of after-acquired
Collateral, at the time Debtor acquires rights therein, will have) a first
priority perfected security interest in the Collateral to the extent that a
security interest in the Collateral can be perfected by such filing, except for
Permitted Liens.
 
(d)    Taxes, Assessments and Liens. Debtor will pay when due all taxes,
assessments and liens upon the Collateral.
 
(e)    Compliance With Governmental Requirements. Debtor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral.
 
(f)     Indemnification. Debtor agrees to defend, indemnify and hold harmless
Secured Party against any and all liabilities, costs and expenses (including,
without limitation, legal fees and expenses) (“Liabilities”): (i) with respect
to, or resulting from, any delay in paying, any and all excise, sales or other
taxes which may be payable or determined to be payable with respect to any
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any governmental authority applicable to
any of the Collateral or (iii) with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, provided however,
Debtor shall have no obligation hereunder to indemnify or hold harmless the
Secured Party for any Liabilities that have arisen as a result of the Secured
Party’s willful misconduct or gross negligence.
 

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4.    Debtor’s Right to Possession. Subject to Section 6, in the event of an
Event of Default (as defined herein), Debtor may have possession of the tangible
personal property and beneficial use of all the Collateral and may use it in any
lawful manner not inconsistent with this Agreement, provided that Debtor’s right
to possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Secured Party is required by law to perfect
Secured Party’s security interest in such Collateral.
 
5.    Events of Default. For purposes of this Agreement the occurrence of any
one of the following events (each an “Event of Default”) shall constitute a
default hereunder, under the Note and the Credit Facility Agreement:
 
(a)    Failure by the Debtor to make any payments when due on the Indebtedness.
 
(b)    Insolvency of Debtor, the commission of any act of bankruptcy by the
Debtor, the execution by the Debtor of a general assignment for the benefit of
creditors, the filing by or against Debtor of petition in bankruptcy or any
petition for relief under the federal bankruptcy act or the continuation of such
petition without dismissal for a period of ninety (90) days or more, or the
appointment of a receiver or trustee to take possession of the property or
assets of the Debtor.
 
6.    Rights and Remedies Upon Default. If an Event of Default occurs and has
not been remedied within fifteen (15) days after the Secured Party has provided
written notice of such default to Debtor, at any time thereafter, Secured Party
shall have all the rights of a secured party under the Code. In addition and
without limitation, Secured Party may exercise any one or more of the following
rights and remedies:
 
(a)    Assemble Collateral. Secured Party may require Debtor to deliver to
Secured Party all or any portion of the Collateral and any and all certificates
of title and other documents relating to the Collateral. Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place to be designated by Secured Party. Secured Party also shall have full
power to enter upon the property of Debtor to take possession of and remove the
Collateral. If the Collateral contains other goods not covered by this Agreement
at the time of repossession, Debtor agrees Secured Party may take such other
goods, provided that Secured Party makes reasonable efforts to return them to
Debtor after repossession.
 
(b)    Sell the Collateral. Secured Party shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its own
name or that of Debtor. Secured Party may sell the Collateral at public auction
or private sale. Unless the Collateral threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Secured Party will give
Debtor reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10) days or
such lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
 

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(c)    Appoint Receiver. To the extent permitted by applicable law, Secured
Party shall have the following rights and remedies regarding the appointment of
a receiver: (i) Secured Party may have a receiver appointed as a matter of
right, (ii) the receiver may be an employee of Secured Party and may serve
without bond, and (iii) all fees of the receiver shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
 
(d)    Collect Receivables, Apply Accounts. Secured Party, either itself or
through a receiver, may collect the payments, rents, income, and revenues from
the Collateral. Secured Party may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the payments,
rents, income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the indebtedness in such order of
preference as Secured Party may determine. Insofar as the Collateral consists of
Accounts, General Intangibles, insurance policies, Instruments, Chattel Paper,
choses in action, or similar property, Secured Party may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the
Collateral as Secured Party may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Secured Party may, on behalf of and
in the name of Debtor, receive, open and dispose of mail addressed to Debtor;
change any address to which mail and payments are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral. To facilitate
collection, Secured Party may notify account debtors and obligors on any
Collateral to make payments directly to Secured Party.
 
(e)    Obtain Deficiency. If Secured Party chooses to sell any or all of the
Collateral, Secured Party may obtain a judgment against Debtor for any
deficiency remaining on the Indebtedness due to Secured Party after application
of all amounts received from the exercise of the rights provided in this
Agreement. Debtor shall be liable for a deficiency even if the transaction
described in this subsection is a sale of Accounts or Chattel Paper.
 
(f)     Other Rights and Remedies. Secured Party shall have all the rights and
remedies of a secured creditor under the provisions of the Code, as may be
amended from time to time. In addition, Secured Party shall have and may
exercise any or all other rights and remedied it may have available at law, in
equity, or otherwise.
 
(g)    Cumulative Remedies. All of Secured Party’s rights and remedies, whether
evidenced by this Agreement or Credit Facility Agreement or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by Secured Party to pursue any remedy shall not exclude pursuit of any
other remedy, and an election to make expenditures or to take action to perform
an obligation of Debtor under this Agreement, after Debtor’s failure to perform,
shall not affect Secured Party’s right to declare a default and to exercise its
remedies.
 

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7.    Termination. When all Indebtedness shall have been paid in full and the
Commitments under the Note and Credit Facility Agreement shall have expired or
been terminated, this Agreement shall terminate, and Secured Party shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Debtor. Secured Party shall also execute and deliver to Debtor upon such
termination such termination statements under the Code, and such other
documentation as shall be reasonably requested by Debtor to effect the
termination and release of the Liens on the Collateral.
 
8.    Miscellaneous Provisions. The following miscellaneous provisions are a
part of this Agreement:
 
(a)    Amendments. This Agreement, together with the Loan Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment of this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.
 
(b)    Applicable Law. This Agreement has been delivered to Secured Party and
accepted by Secured Party in the State of California. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California, excluding conflict of laws principles.
 
(c)    Jurisdiction. The parties hereby consent to the exclusive jurisdiction of
the state and federal courts sitting in Sacramento County, California in any
action on a claim arising out of, under or in connection with this Agreement or
the transactions contemplated by this Agreement.
 
(d)    Expenses. Debtor agrees to pay upon demand all of Secured Party’s costs
and expenses, including legal expenses, incurred in connection with the
enforcement of this Agreement. Secured Party may pay someone else to help
enforce this Agreement, and Debtor shall pay the costs and expenses of such
enforcement. Costs and expenses include Secured Party’s legal expenses whether
or not there is a lawsuit, including legal expenses for bankruptcy proceedings
(and including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Debtor also
shall pay all court costs and such additional fees as may be directed by the
court.
 
(e)    Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
 
(f)     Notices. Any and all notices required or permitted to be given to a
party pursuant to the provisions of this Agreement will be in writing and shall
be deemed to have been duly given on the earliest of (i) if delivered
personally, the date when received, (ii) if transmitted by facsimile, the date
upon receipt of a confirmation of receipt, (iii) if sent by e-mail, the date
upon transmission, (iv) if sent by U.S. nationally recognized overnight courier
service, the date of mailing, or (v) the date upon actual receipt by the party
to whom such notice is required to be given. All such notices, requests, demands
and other communications shall be addressed to the following addresses, unless
written notice is provided to each of the parties identified below of a new
address or contact delivered at least 30-days in advance:
 

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If to Secured Party:
Welund Fund, Inc.
 
Attn: Steven Strasser, President
 
136 East South Temple, Suite 2112
 
Salt Lake City, Utah 84111
 
Fax: (801) 521-6325
   
If to Debtor:
Solar Power, Inc.
 
Attn: Stephen C. Kircher
 
4080 Cavitt Stallman Road, Suite 100
 
Granite Bay, California 95746
Fax:
(916) 789-7411
       
and Copy to:
Bullivant Houser Bailey PC
 
Attn: David C. Adams, Esq.
 
1415 L Street, Suite 1000
 
Sacramento, CA 95814
 
Fax: (916) 930-2501

or at such other address of which any party may, from time to time, advise the
other parties 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.
 
(g)    Power of Attorney. Debtor hereby appoints Secured Party as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution to do the
following: (i) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (ii) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral, (iii) to settle or compromise any and all claims arising under
the Collateral, and, in the place and stead of Debtor, to execute and deliver
its release and settlement for the claim; and (iv) to file any claim or claims
or to take any action or institute or take part in any proceedings, either in
its own name or in the name of Debtor, or otherwise, which in the discretion of
Secured Party may seem to be necessary or advisable. This power is given as
security for the Indebtedness, and the authority hereby conferred is and shall
be irrevocable and shall remain in full force and effect until renounced by
Secured Party.
 
(h)    Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or circumstance,
such finding shall not render that provision invalid or unenforceable as to any
other persons or circumstances. If feasible, any such offending provision shall
be deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
 

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(i)     Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral and in the Note, this Agreement shall be binding upon
and inure to the benefit of the parties, their successors and assigns.
 
(j)     Waiver. Secured Party shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Secured Party. No delay or omission on the part of Secured Party in exercising
any right shall operate as a waiver of such right or any other right. A waiver
by Secured Party of a provision of this Agreement shall not prejudice or
constitute a waiver of Secured Party’s right otherwise to demand strict
compliance with that provision or any other provision of this Agreement. No
prior waiver by Secured Party, nor any course of dealing between Secured Party
and Debtor, shall constitute a waiver of any of Secured Party’s rights or of any
of Debtor’s obligations as to any future transactions. Whenever the consent of
Secured Party is required under this Agreement, the granting of such consent by
Secured Party in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Secured Party.
 
(k)    Counterparts. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

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

 
DEBTOR:
       
SOLAR POWER, INC.
             
By:
/s/ Glenn Carnahan                                         
   
Glenn Carnahan, Chief Financial Officer
             
SECURED PARTY:
       
By:
/s/ Steve Strasser                                           
   
Steve Strasser, President

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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