Document:

SECURITY
AGREEMENT

 

THIS
SECURITY AGREEMENT (the “Security Agreement”) is made as of April 27, 2018 by and between SUNWORKS
INC., a Delaware corporation, whose address is 1030 Winding Creek Road, Suite 100, Roseville, California 95678 (“Obligor”)
and CROWDOUT CAPITAL, LLC, a Texas limited liability company, whose address is 1010 Land Creek Cove, Austin, Texas 78746
(“Secured Party”). Obligor and Secured Party may be hereinafter referred to singularly as a “Party”
or collectively as the “Parties”.

 

W I T N E S S E T H:

 

WHEREAS,
Obligor and Secured Party have entered into that certain Loan Agreement dated as of even date herewith (“Loan Agreement”)
pursuant to which Secured Party has agreed to lend to Obligor, and Obligor has agreed to pay the Secured Party, the amounts outstanding
under that certain Promissory Note made by Obligor as of even date herewith for the benefit of Secured Party in the original principal
amount of Three Million and No/100 Dollars ($3,000,000) (“Promissory Note”). All capitalized terms used herein
and not otherwise defined shall have the meaning set forth in the Loan Agreement;

 

WHEREAS,
pursuant to the Loan Agreement and the Promissory Note, and as a material inducement for Secured Party to enter into the same,
Obligor has agreed to grant Secured Party a first priority security interest in certain assets of Obligor, as more fully set forth
herein, in the Promissory Note, and in the Loan Agreement; and

 

WHEREAS,
this Security Agreement is the Security Agreement referenced in the Loan Agreement.

 

NOW,
THEREFORE, it is hereby agreed by the Parties as follows:

 

 1. Defined Terms.

 

As
used in this Security Agreement, the following terms shall have the following meanings:

 

“Collateral”
has the meaning specified in Section 2.

 

“Excluded
Property” means all property of Obligor subject to a Permitted Lien.

 

“Event
of Default” has the meaning specified in Section 10.

 

“Proceeds”
means all proceeds of, and all other profits, rentals or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or realization upon, Collateral, including, without limitation, all claims
of Obligor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect
to any Collateral, in each case whether now existing or hereafter arising.

 

“Receivables”
means all “accounts”, “chattel paper”, “instruments”, “documents”,
“general intangibles” (including “payment intangibles”) (as each such term is defined in the UCC)
and other obligations owed to Obligor of any kind, now or hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services, and whether or not evidenced by a written agreement, and all rights now
or hereafter existing in and to all security agreements, leases, and other contracts including support agreements (as such term
is defined in the UCC) (all such written or unwritten agreements, security agreements, leases and other contracts, including all
support agreements, being the “Related Contracts”), securing or otherwise relating to any such accounts, chattel
paper, instruments, documents, general intangibles or other obligations.

 

    	 	 	 

    	 

    

 

“Secured
Liabilities” means the Obligations, together with:

 

(i) any
modification, renewal or extension of or increase in any such Obligations;

 

(ii) any
claim for damages or restitution in the event of rescission of any such Obligations or otherwise in connection with the Loan Documents;

 

(iii) any
claim against Obligor flowing from the recovery by Obligor of a payment or discharge in respect of any such Obligations on grounds
of preference or otherwise; and

 

(iv) any
amounts that would be included in any of the foregoing but for any discharge, non-provability, unenforceability or non-allowability
of the same in any insolvency, bankruptcy or other proceedings.

 

“Security
Interest” means the security interest granted in accordance with Section 2, as well as all other security interests
created or assigned as additional Collateral for the Secured Liabilities in accordance with the provisions of this Security Agreement
or otherwise.

 

“UCC”
means the Uniform Commercial Code in effect from time to time in the State of Texas; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Texas, “UCC”
means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Security Agreement
relating to such perfection or effect of perfection or non-perfection.

 

 2. Security Interest.

 

(a) In
order to secure the full and punctual payment of the Secured Liabilities in accordance with the terms of the Loan Documents, Obligor
hereby grants and assigns to the Secured Party a continuing security interest in and to all right, title and interest of Obligor
in all of Obligor’s property, including but not limited to the following property, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being collectively referred to as the “Collateral”):

 

(i) Accounts.
All accounts (as such term is defined in Article 9 of the UCC) whether now owned or existing or hereafter arising or acquired
by Obligor, and all returned or repossessed goods arising from or relating to any such accounts, or other proceeds of any sale,
lease or other disposition of inventory, and expressly including all notes, drafts, acceptances, instruments and chattel paper
arising from any of the foregoing, and all refunds and rights to reimbursement.

 

(ii) Inventory.
All inventory (as such term is defined in Article 9 of the UCC), including all goods, merchandise, raw materials, work in process,
finished goods and other tangible personal property, wheresoever located, whether now owned or existing or hereafter arising or
acquired by Obligor, and (a) leased by Obligor as lessor, (b) held for sale or lease or furnished or to be furnished under contracts
for service, (c) furnished by Obligor under a contract of service, or (d) used or consumed in Obligor’s business, and all
additions and accessions thereto and all purchase orders, leases and contracts with respect thereto and all documents of title
evidencing or representing any part thereof, and all products and proceeds thereof, whether in the possession of Obligor, a warehouseman,
a bailee, or any other person.

 

(iii) Fixtures.
All fixtures (as such term is defined in Article 9 of the UCC) and appurtenances thereto, whether now owned or existing or hereafter
arising or acquired by Obligor, and such other goods, chattels, fixtures, equipment and personal property affixed or in any manner
attached to the real estate and/or building(s) or structure(s), including all attachments, appurtenances, additions and accessions
thereto and replacements thereof and articles in substitution therefor, howsoever attached or affixed (together with all tools,
components, parts and equipment now or hereafter added to or used in connection with the foregoing).

 

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(iv) Equipment.
All equipment (as such term is defined in Article 9 of the UCC) of every nature and description whatsoever, whether now owned
or existing or hereafter arising or acquired by Obligor, including all appurtenances and additions and accessions thereto and
substitutions therefor and replacements thereof, wheresoever located, including all tools, parts, components and accessories used
in connection therewith, and expressly including all vehicles, rolling stock, and goods (as such term is defined in Article 9
of the UCC) other than inventory, farm products and consumer goods.

 

(v) General
Intangibles. All general intangibles (as such term is defined in Article 9 of the UCC) and other personal property, whether
now owned or existing or hereafter arising or acquired by Obligor, and expressly including any personal property, including things
in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment
property, letter of credit rights, letters of credit, money, oil, gas or other minerals before extraction. The term “general
intangibles” includes (a) payment intangibles (as such term is defined in Article 9 of the UCC), (b) software (as such term
is defined in Article 9 of the UCC), (c) all patents, copyrights, trademarks, service marks, processes, formulae, know-how, prototypes,
samples, plans, scientific and/or technical information, trade secrets, confidential or proprietary information, items under development,
in application or other “pending” status, and all other items of a similar nature used in the conduct of Obligor’s
business, and (d) all benefits, rights, titles and interests under all partnership, joint venture and other corporation agreements
between or among Obligor and any other party (but none of Obligor’s liabilities or obligations with respect thereto); however,
the term “general intangibles” shall not include any swap agreement (as defined in 11 U.S.C. Sec. 101) with Secured
Party.

 

(vi) Chattel
Paper. All chattel paper (as such term is defined in Article 9 of the UCC), whether now owned or existing or hereafter arising
or acquired by Obligor.

 

(vii) Instruments.
All instruments (as such term is defined in Article 9 of the UCC), including promissory notes, whether now owned or existing or
hereafter arising or acquired by Obligor.

 

(viii) Documents.
All documents (as such term is defined in Article 9 of the UCC) whether now owned or existing or hereafter arising or acquired
by Obligor.

 

(ix) Letter
of Credit Rights. All letter of credit rights (as such term is defined in Article 9 of the UCC) whether now owned or existing
or hereafter arising or acquired by Obligor.

 

(x) Deposit
Accounts. All deposit accounts (as such term is defined in Article 9 of the UCC), whether now owned or existing or hereafter
arising or acquired by Obligor, and expressly including without limitation all cash, money, property, deposit accounts, accounts,
securities, documents, chattel paper, claims, demands, instruments, items or deposits of Obligor, now held or hereafter coming
within Secured Party’s custody or control, including without limitation, all certificates of deposit and other depository
accounts, whether such have matured or the exercise of Secured Party’s rights results in loss of interest or principal or
other penalty on such deposits, but excluding deposits subject to tax penalties if assigned.

 

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(xi) Pledged
Equity. All Capital Securities of Obligor (the “Pledged Equity”).

 

(xii) Proceeds.
All of the Proceeds of the foregoing.

 

(b) Notwithstanding
anything to the contrary contained in clauses (a) above, the security interest created by this Agreement shall not extend to Excluded
Property.

 

(c) The
Security Interest is granted as security only and shall not subject the Secured Party to, or transfer or in any way affect or
modify, any obligation or liability of Obligor with respect to any of the Collateral or any transaction in connection therewith.

 

(d) The
inclusion of Proceeds in this Security Agreement does not authorize Obligor to sell, dispose of or otherwise use the Collateral
in any manner not specifically authorized hereby.

 

 3. Representations and Warranties. Obligor represents and warrants as follows:

 

(a) The
exact legal name of Obligor, as the legal name appears in Obligor’s Certificate of Formation as of the date of this Security
Agreement, is as set forth in the introductory paragraph of this Security Agreement. Obligor has no other trade name, assumed
name or alias other than as set forth in the introductory paragraph of this Security Agreement.

 

(b) The
place of business or, if any Obligor has more than one place of business, the chief executive office is located at the address
of Obligor specified in the introductory paragraph of this Security Agreement.

 

(c) The
office where Obligor keeps its records concerning the Receivables, and all originals of all chattel paper which evidence Receivables,
is located at the address of Obligor specified in Section 3(b) of this Security Agreement. None of the Receivables are evidenced
by a promissory note or other instrument.

 

(d) Obligor
owns its Collateral free and clear of any Lien (except for Permitted Liens). No effective financing statement or other instrument
similar in effect covering all or any part of such Collateral is on file in any recording office except for the filing by Secured
Party.

 

(e) This
Security Agreement creates a valid security interest and when the financing statements have been filed in the appropriate offices,
will create a perfected first priority security interest in the Collateral securing the payment of the Secured Liabilities.

 

(f) No
authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required either (i)
for the grant by Obligor of the Security Interest or for the execution, delivery or performance of this Security Agreement thereby,
or (ii) for the perfection of or the exercise by the Secured Party of its rights and remedies under this Security Agreement, including
without limitation, the filing of a UCC-1 financing statement.

 

(g) Obligor
is a corporation duly organized and validly existing under the laws of the State of Delaware, qualified to do business in all
jurisdictions in which the nature of the business conducted by Obligor makes such qualification necessary and where failure so
to qualify would not have a Material Adverse Effect.

 

(h) Obligor
is not in violation of any applicable Legal Requirements, which violations, individually or in the aggregate, would materially
affect Obligor’s performance of any obligation under the Loan Documents to which it is a party; there is no litigation before
any Governmental Authorities now pending or (to Obligor’s Knowledge) threatened against Obligor which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect.

 

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(i) Obligor
is the holder of all governmental approvals, permits and licenses required to permit Obligor to conduct its business as currently
conducted and to enter into and perform Obligor’s obligations under the Loan Documents to which it is a party.

 

(j) None
of the execution and delivery of this Security Agreement, the consummation of the transactions contemplated in this Security Agreement,
or compliance with the terms and provisions of this Security Agreement will conflict with or result in a breach of, or require
any consent under, Obligor’s Organizational Documents, or any applicable Legal Requirements, or any agreement or instrument
to which Obligor is a party or by which Obligor is bound or to which Obligor or any of its assets are subject, or constitute a
default under any such agreement or instrument.

 

(k) Obligor
has all necessary power and authority to execute, deliver and perform Obligor’s obligations under this Security Agreement;
Obligor’s execution, delivery and performance of this Security Agreement has been duly authorized by all necessary action
on Obligor’s part; and this Security Agreement has been duly and validly executed and delivered by Obligor and constitutes
Obligor’s legal, valid and binding obligation, enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors’
rights generally and by general equitable principles.

 

4. Places
of Business. Obligor will notify the Secured Party promptly of the addition or discontinuance of any place of business or
any change in the address of its principal or any other place of business. None of the Collateral shall be removed from Obligor’s
principal place of business set forth in the introductory paragraph of this Security Agreement or the other locations set forth
on Schedule 5.10 to the Loan Agreement, as from time to time supplemented, unless the Secured Party is given thirty (30) days
prior written notice of such removal, which notice shall state the location or locations to which said Collateral will be removed,
or Obligor shall have paid all amounts relating to the purchase price of such Collateral. Obligor warrants that all of its Collateral
is and shall continue to be located at the locations set forth herein or such other locations of which the Secured Party receives
notice in accordance with this Section.

 

5. Encumbrances.
Obligor will not create, incur, assume, or suffer to exist now or at any time throughout the duration of the term of this Security
Agreement, any Lien (except for Permitted Liens) against the Collateral, whether now owned or hereafter acquired. Obligor will
notify the Secured Party of any Lien (other than Permitted Liens) securing an obligation against the Collateral, and will defend
the Collateral against any such Lien.

 

6. Maintenance
of Collateral. Obligor shall preserve its Collateral for the benefit of the Secured Party. Without limiting the generality
of the foregoing, Obligor shall:

 

(a) make
all repairs, replacements, additions and improvements to its equipment necessary to prevent the deterioration or loss thereof;

 

(b) preserve
all of its beneficial contract rights to the extent commercially reasonable;

 

(c) in
conjunction with, and at the direction of, the Secured Party, take commercially reasonable steps to collect all of its Receivables;
and

 

(d) pay
all taxes, assessments or other charges on its Collateral when due, unless the amount or validity of such taxes, assessments or
charges are being contested in good faith by appropriate proceedings and reserves have been deposited with the Secured Party with
respect thereto.

 

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7. Additional
Provisions Concerning the Collateral.

 

(a) Obligor
authorizes the Secured Party to file, without the signature of Obligor, where permitted by law, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral, all in the discretion of the Secured Party.

 

(b) If
there is an Event of Default, Obligor hereby irrevocably appoints the Secured Party as its attorney-in-fact (which power of attorney
is coupled with an interest) and proxy, with full authority in the place and stead of Obligor and in its name or otherwise, from
time to time in the Secured Party’s discretion, to take any action or execute any instrument which the Secured Party may
deem necessary or advisable to accomplish the purposes of this Security Agreement, including, without limitation: (i) to obtain
and adjust insurance required to be paid to the Secured Party pursuant to Section 8 hereof; (ii) to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral; (iii) to receive, endorse, and collect any checks, drafts or other instruments, documents, and chattel
paper in connection with clause (i) or clause (ii) above; (iv) to sign Obligor’s names on any invoice or bill of lading
relating to any account, on drafts against customers, on schedules and assignments of accounts, on notices of assignment, financing
statements and other public records, on verification of accounts and on notices to customers (including notices directing customers
to make payment directly to the Secured Party); (v) during the continuation of an Event of Default hereunder, to notify the postal
authorities to change the address for delivery of its mail to an address designated by the Secured Party, to receive, open and
process all mail addressed to Obligor; (vi) to send requests for verification of accounts to customers; and (vii) to file any
claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral. Obligor
hereby ratifies and approves in advance all acts of said attorney, and so long as the attorney acts in good faith and without
gross negligence or willful misconduct, the attorney shall have no liability to Obligor for any act or omission as to such attorney.

 

(c) If
Obligor fails to perform any agreement relating to the Collateral contained herein, the Secured Party may perform, or cause performance
of, such agreement or obligation, and the reasonable costs and expenses of the Secured Party incurred in connection therewith
shall be payable by Obligor immediately upon demand by Secured Party, shall bear interest at the Default Interest Rate from the
date incurred until paid and shall be fully secured hereby.

 

(d) The
powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any
duty upon the Secured Party to exercise any such powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

 

(e) Anything
herein to the contrary notwithstanding, (i) Obligor shall remain liable under any contracts and agreements relating to the Collateral,
to the extent set forth therein, to perform all of its obligations thereunder, to the same extent as if this Security Agreement
had not been executed; (ii) the exercise by the Secured Party of any of its rights hereunder shall not release Obligor from any
of their obligations under the contracts and agreements relating to the Collateral; and (iii) the Secured Party shall not have
any obligation or liability by reason of this Security Agreement under any contracts and agreements relating to the Collateral,
nor shall the Secured Party be obligated to perform any of the obligations or duties of Obligor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.

 

(f) Until
the Secured Liabilities are paid in full, Obligor agrees that Obligor will (i) preserve its company existence and not without
the prior written consent of Secured Party, in one transaction or a series of related transactions, convert to a different type
of entity, merge into or consolidate with any other entity, or sell all or substantially all of its assets; (ii) not change the
state of Obligor’s organization without the prior written consent of Secured Party; and (iii) not change Obligor’s
name or identity in any manner without the prior written consent of Secured Party, in each case except as otherwise permitted
under the Loan Agreement.

 

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8. Insurance.
Obligor shall at all times maintain all Insurance Policies required by the Loan Agreement.

 

9. Fixtures.
It is the intention of the Parties hereto that none of the equipment or other property securing the Secured Liabilities hereunder
shall become fixtures.

 

10. Default.
An “Event of Default” as defined in the Loan Agreement shall constitute an Event of Default hereunder.

 

11. Remedies.

 

(a) Upon
the occurrence of an Event of Default and at any time or times during the continuance thereof, unless such Event of Default shall
have been waived in writing by the Secured Party, and subject to the provisions of applicable law, the Secured Party may exercise
any one or more of the following remedies:

 

(i) The
Secured Party shall have full power and authority to sell or otherwise dispose of the Collateral or any part thereof. Any such
sale or other disposition, subject to the provisions of applicable law, may be by public or private proceedings and may be made
by one or more contracts, as a unit or in parcels, at such time and place, by such method, in such manner and on such terms as
the Secured Party may determine. Except as required by law, such sale or other disposition and such notice will be deemed to have
been sufficiently given if such notice is hand-delivered or mailed postage prepaid, at least fifteen (15) days before the time
of such sale or other disposition, to Obligor at its address as specified in the Security Agreement. To the extent permitted by
law, the Secured Party may buy any or all of the Collateral upon any sale thereof. To the extent permitted by law, upon any such
sale or sales, the Collateral so purchased shall be held by the purchaser absolutely free from any claims or rights of whatsoever
kind or nature, including any claim of redemption and any similar rights being hereby expressly waived and released by Obligor.
In connection with any such sale, the Secured Party shall be permitted to limit its warranties to the maximum extent provided
in the UCC. After deducting all reasonable costs and expenses of collection, custody, sale or other disposition or delivery (including
legal costs and reasonable attorneys’ fees) and all other charges due against the Collateral, the residue of the proceeds
of any such sale or other disposition shall be applied to the payment of the Secured Liabilities, except as otherwise provided
by law or directed by any court of competent jurisdiction, and any surplus after the payment in full of the Secured Liabilities
shall be returned to Obligor, except as otherwise provided by law or any such court. Obligor shall be liable for any deficiency
in payment of the Secured Liabilities, including all reasonable costs and expenses of collection, custody, sale or other disposition
or delivery and all other charges due against the Collateral, as herein enumerated.

 

(ii) The
Secured Party may notify a debtor of Obligor to make payment to the Secured Party whether Obligor or the Secured Party were previously
making collections on any of the accounts receivable, and the Secured Party may also take control of any proceeds from any Collateral.

 

(iii) Upon
the occurrence and during the continuance of an Event of Default, with or without notice, the Secured Party is authorized to offset
and charge against any other credits and obligations owed by the Secured Party to Obligor under the Loan Documents, any amount
for which Obligor may become obligated to the Secured Party at any time, whether under the Promissory Note or otherwise. The obligations
secured by the Security Interest granted and by the Secured Party’s right of offset includes all obligations of any kind
or type now or hereafter arising, owed by Obligor to the Secured Party, whether liquidated or unliquidated, direct or indirect,
contingent or not.

 

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(iv) The
Secured Party may commence proceedings in any court of competent jurisdiction for the appointment of a receiver (which term shall
include a receiver-manager) of the Collateral or of any part thereof or may by instrument in writing appoint any person to be
a receiver of the Collateral or any part thereof and may remove any receiver so appointed by the Secured Party and appoint another
in his stead; and any such receiver appointed by instrument in writing shall have power (a) to take possession of the Collateral
or any part thereof, (b) to carry on the business of Obligor, (c) to borrow money on the security of the Collateral in priority
to this Security Agreement to the extent required for the maintenance, preservation or protection of the Collateral or any part
thereof or for the carrying on of the business of Obligor, and (d) to sell lease or otherwise dispose of the whole or any part
of the Collateral at public auction, by public tender or by private sale, either for cash or upon credit, at such time and upon
such terms and conditions as the receiver may determine; provided that any such receiver shall be deemed the agent of Obligor
and the Secured Party shall not be in any way responsible for any misconduct or negligence of any such receiver.

 

(v) The
Secured Party shall have all other rights and remedies of a secured party provided under the UCC.

 

(vi) The
Secured Party shall have all other rights and remedies allowed at law and/or in equity.

 

(vii) The
Secured Party shall have all other rights and remedies set forth in the Loan Agreement.

 

(b) It
is provided, however, that in the Secured Party’s efforts in collection on the Collateral, Obligor shall be liable and responsible
for any deficiency.

 

(c) Upon
the occurrence of an Event of Default and at any time or times during the continuance thereof, unless such Event of Default shall
have been waived in writing by the Secured Party, and subject to the provisions of applicable Legal Requirements, Obligor hereby
grants Secured Party an irrevocable proxy and power of attorney to exercise all voting rights, which proxy and power of attorney
shall be effective upon the occurrence of an Event of Default and is coupled with an interest and is thus irrevocable, to vote
the Pledged Equity for all purposes. Upon the request of Secured Party, Obligor shall deliver to Secured Party such further evidence
of such irrevocable proxy and power of attorney to exercise the voting rights as Secured Party may request.

 

12. Limitation
on Duty of the Secured Party in Respect of Collateral. The powers conferred on the Secured Party under this Security Agreement
are solely to protect the Secured Party’s interests in the Collateral and shall not impose any duty upon the Secured Party
to exercise any such powers. Except for reasonable care in the custody of any Collateral in the Secured Party’s possession
and the accounting for moneys actually received by the Secured Party under this Security Agreement, the Secured Party shall have
no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in the Secured Party’s possession if the Collateral is accorded treatment substantially equal to that
which the Secured Party accords its own property, it being understood that the Secured Party shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission
of any warehouseman, carrier, forwarding agency, consignee or other bailee selected by the Secured Party in good faith. Except
as otherwise expressly provided in this Section 12, Obligor has the risk of loss of the Collateral. Further, the Secured
Party has no duty to collect any income accruing on the Collateral or to preserve any rights relating to the Collateral. The Secured
Party shall have no obligation to clean up or otherwise prepare the Collateral for sale.

 

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13. Concerning
Secured Party. In furtherance and not in derogation of the rights, privileges and immunities of the Secured Party:

 

(a) The
Secured Party is authorized to take all such action as is provided to be taken by the Secured Party under this Security Agreement
and all other action reasonably incidental thereto. As to any matters not expressly provided for in this Security Agreement (including
the timing and methods of realization upon the Collateral), the Secured Party shall act or refrain from acting in the Secured
Party’s sole reasonable discretion.

 

(b) The
Secured Party shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason
of any action or omission to act on the Secured Party’s part under this Security Agreement. The Secured Party shall have
no duty to ascertain or inquire as to the performance or observance of any of the terms of this Security Agreement by Obligor.

 

14. Payment
of Taxes, Charges, Etc. The Secured Party, at its option, after written notice to Obligor, may discharge any Lien (other than
Permitted Liens) upon the Collateral or otherwise protect the value thereof. All such expenditures incurred by the Secured Party
shall become payable by Obligor to the Secured Party upon demand, shall bear interest at the rate then applicable to the Obligations
from the date incurred to the date of payment, and shall be secured by the Collateral.

 

15. Waivers.
To the extent permitted by law, Obligor hereby waives demand for payment, notice of dishonor or protest and all other notices
of any kind in connection with the Secured Liabilities except notices required hereby, by law or by any other agreement between
Obligor and the Secured Party. The Secured Party may release, supersede, exchange or modify any Collateral or security which it
may from time to time hold and may release, surrender or modify the liability of any third party without giving notice hereunder
to Obligor. Such modifications, changes, renewals, releases or other actions shall in no way affect Obligor’s obligations
hereunder.

 

16. Transfer
Expenses, Etc. Obligor will pay, indemnify and hold the Secured Party harmless from and against all reasonable costs and expenses
(including taxes, if any) arising out of or incurred in connection with any transfer of Collateral into or out of the name of
the Secured Party and all reasonable costs and expenses, including reasonable legal fees, of the Secured Party arising out of
or incurred in connection with this Security Agreement.

 

17. Termination.
This Security Agreement and the Security Interest shall terminate following the full payment, satisfaction, or discharge of all
Secured Liabilities. Upon such termination, the Secured Party will promptly deliver to Obligor appropriate UCC termination statements
with respect to Collateral so released from the Security Interest for filing with each filing officer with which UCC financing
statements have been filed by the Secured Party to perfect the Security Interest in such Collateral.

 

18. Successors
and Assigns. This Security Agreement shall be binding upon and inure to the benefit of Obligor and the Secured Party and their
respective successors and assigns.

 

19. Severability
of Provisions. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions
of this Security Agreement or affecting the validity or enforceability of this Security Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

    	 	 	 9

    	 

    

 

20. Governing
Law; Venue. This Security Agreement shall be governed by and construed, interpreted and enforced in accordance with the internal,
substantive laws of the State of Texas, without giving effect to conflicts of laws principles. The Parties voluntarily and irrevocably
submit to the jurisdiction of the courts of the State of Texas located in Travis County, Texas, and the Federal Courts of the
United States of America located in Travis County, Texas, over any dispute between or among the Parties related to or arising
out of this Security Agreement, and each Party irrevocably agrees that all such claims in respect of such dispute shall be heard
and determined exclusively in such courts. The Parties hereby irrevocably consent to the jurisdiction of such courts and hereby
waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the venue of such dispute
related to or arising out of this Security Agreement brought in such court or any defense of inconvenient forum for the maintenance
of such dispute. Each Party agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Notwithstanding anything to the contrary contained herein or in any Loan Document, Lender
may bring suit and otherwise make filings in any jurisdiction in which the Collateral is located to enforce its rights pursuant
to this Security Agreement.

 

21. Waiver
of Jury Trial. OBLIGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS SECURITY AGREEMENT OR ARISING FROM OR RELATING TO ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS SECURITY AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

22. Notice.
Any notice or communication required or permitted hereunder shall be made in accordance with the terms of the Loan Agreement.

 

SIGNATURE
PAGE FOLLOWS:

 

    	 	 	 10

    	 

    

 

IN
WITNESS WHEREOF, the Parties hereto have executed this Security Agreement as of the date first written above.

 

	 	SECURED
    PARTY:
	 	 
	 	CrowdOut
    Capital, LLC
	 	a
    Texas limited liability company
	 	 	 
	 	By:	/s/
    Brian Gilmore
	 	 	Brian
    Gilmore, President
	 	 	 
	 	OBLIGOR:
	 	 
	 	Sunworks
    Inc. 
	 	a
    Delaware corporation
	 	 	 
	 	By:	/s/
    Paul McDonnel
	 	 	Paul
    McDonnel, Chief Financial Officer

 

[Signature
Page to Security Agreement]SUBORDINATION
AGREEMENT

 

THIS
SUBORDINATION AGREEMENT (this “Agreement”) is entered into as of April 27, 2018 by and among CrowdOut
Capital, LLC, a Texas limited liability company (“Lender” and referred
to herein as the “Junior Creditor” in its capacity as the payee under
the Junior Note, as such term is defined below, and as the “Senior Creditor”
in its capacity as the payee under the Senior Note, as such term is defined below), and
Sunworks Inc., a Delaware corporation (the “Borrower”).

 

R
E C I T A L S

 

A.
Borrower and Lender have entered into a Loan Agreement of even date herewith (as the same may be amended, supplemented or otherwise
modified from time to time, the “Loan Agreement”) and a Security Agreement of even date herewith (as the same
may be amended, supplemented or otherwise modified from time to time, the “Security Agreement”) pursuant to
which, among other things, Lender has agreed, subject to the terms and conditions set forth in the Loan Agreement and the Security
Agreement, to make certain loans and financial accommodations to Borrower.

 

B.
Pursuant to the Loan Agreement, Borrower shall
deliver (a) to Senior Creditor that certain Promissory Note in the amount of Three Million Dollars ($3,000,000.00) (as
the same may be amended, supplemented or otherwise modified from time to time, the “Senior
Note”) and (b) to Junior Creditor that certain Promissory Note in the amount of Seven Hundred Fifty Thousand
Dollars ($750,000.00) (as the same may be amended, supplemented or otherwise modified from time
to time, the “Junior Note”).

 

C.
As an inducement to and as one of the conditions precedent to the agreement of Senior Creditor to consummate the transactions
contemplated by the Loan Agreement and the Security Agreement, Senior Creditor has required the execution and delivery of this
Agreement by Junior Creditor and Borrower. 

 

NOW,
THEREFORE, in order to induce Senior Creditor to consummate the transactions contemplated by the Loan and Security Agreements,
and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto
hereby agree as follows:

 

1.
Definitions. All capitalized terms used in this Agreement without definition shall have the meanings ascribed to such terms
in the Loan Agreement. In addition, the following terms shall have the following meanings in this Agreement:

 

    	 	 	 

     

    

 

Blockage
Period shall have the meaning set forth in Section 2.3(a)(i) hereto.

 

Covenant
Default shall mean any “Event of Default” described in Section 7.1 of the Loan Agreement, other than a Senior
Payment Default, or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default
if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

 

Enforcement
Action shall mean (a) to demand, sue for, take or receive from or on behalf of Borrower or any guarantor of the Junior Debt,
by setoff or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by Borrower or any such
guarantor with respect to the Junior Debt, (b) to initiate or participate with others in any suit, action or proceeding against
Borrower or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Junior Debt or (ii) commence
judicial enforcement of any of the rights and remedies under the Junior Debt Documents or applicable law with respect to the Junior
Debt, (c) to accelerate any Junior Debt, or (d) to exercise any put option or to cause Borrower or any such guarantor to honor
any redemption or mandatory prepayment obligation under any Junior Debt Document.

 

Junior
Debt shall mean all of the obligations of Borrower to Junior Creditor evidenced by the Junior Note and all other amounts now
or hereafter owed by Borrower to Junior Creditor under any of the Junior Debt Documents.

 

Junior
Debt Documents shall mean the Junior Note and all other documents and instruments evidencing or pertaining to all or any portion
of the Junior Debt.

 

Junior
Default shall mean a default in the payment of the Junior Debt or in the performance of any term, covenant or condition contained
in the Junior Debt Documents or any other occurrence resulting in the maturity of the Junior Debt prior to Payment in Full of
the Senior Debt, or permitting Junior Creditor to accelerate the payment of, put or cause the redemption of all or any portion
of the Junior Debt.

 

Junior
Default Notice shall mean a written notice from Junior Creditor or Borrower to Senior Creditor pursuant to which Senior Creditor
is notified of the occurrence of a Junior Default, which notice incorporates a reasonably detailed description of such Junior
Default.

 

    	 	2	 

     

    

 

Payment
in Full or Paid in Full shall mean the indefeasible payment in full in cash of the Senior Debt in accordance with the Loan
Agreement and the Senior Note.

 

Proceeding
shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or
any other proceeding for the liquidation, dissolution or other winding up of a Person.

 

Senior
Debt shall mean the “Obligations,” as such term is defined in the Loan Agreement, with respect to the Loan Agreement
and all amounts pursuant to the Loan Agreement, together with (a) all complete or partial refinancings of the Obligations, (b)
any amendments, modifications, renewals or extensions thereof and (c) any interest and fees accruing thereon after the commencement
of a Proceeding, without regard to whether or not such interest or fees are an allowed claim in such Proceeding.

 

Senior
Debt Documents shall mean the Loan Agreement and all other documents and instruments evidencing or pertaining to all or any
portion of the Senior Debt.

 

Senior
Default shall mean any Senior Payment Default or Covenant Default.

 

Senior
Default Notice shall mean a written notice from Senior Creditor to Junior Creditor pursuant to which Junior Creditor is notified
of the occurrence of a Senior Default, which notice incorporates a reasonably detailed description of such Senior Default.

 

Senior
Payment Default shall mean any “Event of Default” described in Section 7.1 of the Loan Agreement, including, without
limitation, any default in payment of Senior Debt after acceleration thereof.

 

2.
Subordination.

 

2.1.
Subordination of Junior Debt to Senior Debt. Borrower covenants and agrees, and Junior Creditor by its acceptance of the
Junior Note (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, that (a) the payment of
any and all of the Junior Debt shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter
set forth, to the prior Payment in Full of the Senior Debt and (b) any amounts of Exit Fees (as such term is defined in the Loan
Agreement) or similar fees payable by Borrower pursuant to the Loan Agreement shall be payable for the benefit of the Senior Creditor
only and not the Junior Creditor. Each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed
or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.

 

    	 	3	 

     

    

 

2.2.
Proceedings. In the event of any Proceeding involving Borrower, (a) all Senior Debt first shall be Paid in Full before
any payment of or with respect to the Junior Debt shall be made; (b) any payment or distribution, whether in cash, property or
securities which, but for the terms hereof, otherwise would be payable or deliverable in respect of the Junior Debt, shall be
paid or delivered directly to Senior Creditor (to be held and/or applied in accordance with the terms of the Loan Agreement) until
all Senior Debt is Paid in Full, and Junior Creditor irrevocably authorizes, empowers and directs all receivers, trustees, liquidators,
custodians, conservators and others having authority in the premises to effect all such payments and distributions, and Junior
Creditor also irrevocably authorizes, empowers and directs Senior Creditor to demand, sue for, collect and receive every such
payment or distribution; (c) Junior Creditor agrees to execute and deliver to Senior Creditor or its representative all such further
instruments confirming the authorization referred to in the foregoing clause (b); (d) Junior Creditor agrees not to initiate or
prosecute or encourage any other Person to initiate or prosecute any claim, action or other proceeding challenging the enforceability
of the Senior Debt or any liens and security interests securing the Senior Debt, (e) Junior Creditor agrees not to object to any
use of cash collateral by Borrower under Section 363 of the Bankruptcy Code permitted by Senior Creditor or any borrowing by Borrower
from Senior Creditor, or to any grant of a lien or security interest by any Person in favor of Senior Creditor (or any agent therefore),
under Section 364 of the Bankruptcy Code; and (f) Junior Creditor agrees to execute, verify, deliver and file any proofs of claim
in respect of the Junior Debt requested by Senior Creditor in connection with any such Proceeding and hereby irrevocably authorizes,
empowers and appoints Senior Creditor its agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim
upon the failure of Junior Creditor promptly to do so (and, in any event, prior to 15 days before the expiration of the time to
file any such proof) and (ii) vote such claim in any such Proceeding upon the failure of Junior Creditor to do so prior to 15
days before the expiration of the time to vote any such claim; provided Senior Creditor shall have no obligation to execute, verify,
deliver, file and/or vote any such proof of claim. In the event that Senior Creditor votes any claim in accordance with the authority
granted hereby, Junior Creditor shall not be entitled to change or withdraw such vote. Junior Creditor agrees that it will consent
and not otherwise object to a sale or other disposition of any assets securing the Senior Debt (or any portion thereof) free and
clear of Liens, claims and other interests under the Bankruptcy Code, including Sections 363, 365 and 1129, if Senior Creditor
has consented to such sale or other disposition. At the written request of Senior Creditor, Junior Creditor will object to any
such sale. Junior Creditor waives any claims it may now or hereafter have arising out of the Senior Creditor’s election
of the application of Section 1111(b)(2) of the Bankruptcy Code. Junior Creditor agrees not to (i) initiate or prosecute or join
with any other Person to initiate or prosecute any claim, action or other proceeding opposing a motion by Senior Creditor to lift
the automatic stay, or (ii) propose or vote (to the extent such vote is required to satisfy Section 1129(a)(10) of the Bankruptcy
Code) in favor of any chapter 11 plan that seeks confirmation under Section 1129(b)(2)(A) of the Bankruptcy Code with respect
to Senior Debt. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue
to govern the relative rights and priorities of Senior Creditor and Junior Creditor even if all or part of the Senior Debt or
the liens and security interests securing the Senior Debt are subordinated, set aside, avoided or disallowed in connection with
any such Proceeding and this Agreement shall be reinstated if at any time any payment of any of the Senior Debt is rescinded or
must otherwise be returned by any holder of Senior Debt or any representative of such holder.

 

    	 	4	 

     

    

 

2.3.
Payment Upon Senior Default. (a) Borrower may not make, and Junior Creditor may not receive, any payment with respect to
the Junior Debt Documents; provided, (x) that subject to the limitations set forth in this Section 2.3, Borrower may make and
Junior Creditor may retain scheduled payments of interest with respect to the Junior Debt (“Permitted Payments”)
and (y) Borrower may make, and Junior Creditor may retain, payments on the Junior Debt permitted by the second sentence of
subsection 2.4. Notwithstanding the foregoing, Borrower may not make and Junior Creditor may not receive any Permitted Payments
or any other amount due with respect to the Junior Debt if, at the time of such payment:

 

(i)
A Senior Payment Default exists and such Senior Payment Default shall not have been cured or waived in accordance with the terms
of the Senior Debt Documents; or

 

(ii)
Subject to the last sentence of this subsection 2.3, (x) Borrower and Junior Creditor shall have received a Senior Default Notice
from Senior Creditor stating that a Covenant Default exists or would be created by the making of such payment, and (y) each such
Covenant Default shall not have been cured or waived in accordance with the terms of the Senior Debt Documents (the period during
which either of such conditions described in Section 2.3(i) or (ii) exist being referred to as a “Blockage Period”).

 

(b)
Subject to the last sentence of this subsection 2.3, Borrower may resume payments of Permitted Payments (and may make any payments
of Permitted Payments missed due to the existence of a Blockage Period) in respect of the Junior Debt or any judgment with respect
thereto upon the expiration of the Blockage Period, whether by cure or waiver of the applicable Senior Payment Default or Covenant
Default.

 

    	 	5	 

     

    

 

(c)
Notwithstanding any provision of this subsection 2.3 to the contrary:

 

(i)
No Covenant Default existing on the date any Senior Default Notice is given pursuant to clause (a)(ii)(x) of this subsection 2.3
shall, unless the same shall have ceased to exist for a period of at least 30 consecutive days, be used as a basis for any subsequent
such notice; and

 

(ii)
The failure of Borrower to make any payment with respect to the Junior Debt by reason of the operation of this subsection 2.3
shall not be construed as preventing the occurrence of a Junior Default under the applicable Junior Debt Documents.

 

The
provisions of this subsection 2.3 shall not apply to any payment with respect to which subsection 2.2 would be applicable.

 

2.4.
Payments Otherwise Permitted. Nothing contained in this Section 2 or elsewhere in this Agreement or in the Junior Debt
Documents shall prevent Borrower at any time, except during the pendency of any Proceeding referred to in subsection 2.2 or under
the conditions referred to in subsection 2.3, from making Permitted Payments with respect to the Junior Debt. Notwithstanding
anything to the contrary herein, except during the pendency of any Proceeding referred to in subsection 2.2 or unless a Senior
Default is then in effect and has not been cured or waived by Senior Creditor, Borrower may repay the Junior Debt as provided
in Section 2.6 of the Loan Agreement.

 

2.5.
Restriction on Action by Junior Creditor.

 

(a)
Until the Senior Debt is Paid in Full, Junior Creditor shall not, without the prior written consent of Senior Creditor, take any
Enforcement Action with respect to the Junior Debt.

 

Notwithstanding
anything herein to the contrary, on or after (but not before) the filing of a Proceeding with respect to the Borrower, Junior
Creditor may (a) accelerate the Junior Debt and (b) file proofs of claim against the Borrower; provided that any distributions
or other proceeds of any Enforcement Action obtained by Junior Creditor shall be held in trust by it for the benefit of Senior
Creditor and be paid or delivered to Senior Creditor in the form received until all Senior Debt is indefeasibly Paid in Full.

 

    	 	6	 

     

    

 

(b)
Until the Senior Debt is Paid in Full and notwithstanding anything contained in the Junior Debt Documents, the Loan Agreement
or any of the other Senior Debt Documents to the contrary, Junior Creditor shall not, without the prior written consent of Senior
Creditor, agree to any amendment, modification or supplement to the Junior Debt Documents, including, without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the maximum principal amount of the Junior Debt,
the amount of any fee payable with respect to the Junior Debt or rate of interest on any of the Junior Debt, (ii) change the dates
upon which payments of principal or interest on the Junior Debt are due, (iii) change or add any event of default or any covenant
with respect to the Junior Debt, (iv) change any redemption or prepayment provisions of the Junior Debt, (v) alter the subordination
provisions with respect to the Junior Debt, including, without limitation, subordinating the Junior Debt to any other debt, (vi)
change the maturity date of any of the Junior Debt or otherwise to alter the repayment terms of the Junior Debt, or (vii) change
or amend any other term of the Junior Debt Documents if such change or amendment would result in an Event of Default under the
Loan Agreement, increase the obligations of Borrower or any guarantor of the Junior Debt or confer additional material rights
on Junior Creditor or any other holder of the Junior Debt in a manner adverse to Borrower, any such guarantor or Senior Creditor.

 

2.6.
Incorrect Payments. If any payment or distribution on account of the Junior Debt not permitted to be made by Borrower or
received by Junior Creditor under this Agreement is received by Junior Creditor before all Senior Debt is Paid in Full, such payment
or distribution shall not be commingled with any asset of Junior Creditor, shall be held in trust by Junior Creditor for the benefit
of Senior Creditor and shall be promptly paid over to Senior Creditor, or its designated representative, for application (in accordance
with the Loan Agreement) to the payment of the Senior Debt then remaining unpaid, until all of the Senior Debt is Paid in Full.

 

2.7.
Sale and Transfer. Junior Creditor shall not sell, assign, pledge, dispose of or otherwise transfer all or any portion
of the Junior Debt or any Junior Debt Document (a) without giving prior written notice of such action to Senior Creditor and (b)
unless prior to the consummation of any such action, the transferee thereof shall execute and deliver to Senior Creditor an agreement
substantially identical to this Agreement, providing for the continued subordination and forbearance of the Junior Debt to the
Senior Debt as provided herein and for the continued effectiveness of all of the rights of Senior Creditor arising under this
Agreement. Notwithstanding the failure to execute or deliver any such agreement, the subordination effected hereby shall survive
any sale, assignment, pledge, disposition or other transfer of all or any portion of the Junior Debt, and the terms of this Agreement
shall be binding upon the successors and assigns of Junior Creditor, as provided in Section 14 below.

 

    	 	7	 

     

    

 

2.8.
Legends. Until the Senior Debt is Paid in Full, the Junior Note and any other Junior Debt Document at all times shall contain
in a conspicuous manner the following legend:

 

“This
instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain
Subordination Agreement (the “Subordination Agreement”) dated as of April 27, 2018, by and among Sunworks Inc.,
a Delaware corporation (“Borrower”), and CrowdOut Capital, LLC, a Texas limited liability company (“CrowdOut”),
to the indebtedness (including interest) owed by Borrower pursuant to that certain Loan Agreement dated as of April 27, 2018 between
Borrower and CrowdOut, as such Loan Agreement has been and hereafter may be amended, supplemented or otherwise modified from time
to time; and each holder of this instrument, by its acceptance hereof, shall be bound by the provisions of the Subordination Agreement.”

 

3.
Modifications to Senior Debt. Senior Creditor may at any time and from time to time without the consent of or notice to
Junior Creditor, without incurring liability to Junior Creditor and without impairing or releasing the obligations of Junior Creditor
under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms
of the Senior Debt, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise
relating to the Senior Debt.

 

4.
Continued Effectiveness of this Agreement. The terms of this Agreement, the subordination effected hereby, and the rights
and the obligations of Junior Creditor, Borrower and Senior Creditor arising hereunder shall not be affected, modified or impaired
in any manner or to any extent by: (a) any amendment or modification of or supplement to the Loan Agreement, any of the other
Senior Debt Documents or any of the Junior Debt Documents; (b) the validity or enforceability of any of such documents; or (c)
any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or the Junior Debt or any of
the instruments or documents referred to in clause (a) above. The Junior Creditor and each other holder of Junior Debt hereby
acknowledges that the provisions of this Agreement are intended to be enforceable at all times, whether before the commencement
of, after the commencement of, in connection with or premised on the occurrence of a Proceeding.

 

5.
No Contest by Junior Creditor; No Security for Junior Debt. Junior Creditor agrees that it will not at any time contest
the validity, perfection, priority or enforceability of the Senior Debt, the Senior Debt Documents, or the liens and security
interests of Senior Creditor in the Collateral securing the Senior Debt. Junior Creditor shall not accept any security for the
Junior Debt at any time. In the event that Junior Creditor at any time obtains any lien on or security interest in the assets
of Borrower or any guarantor of the Senior Debt, Junior Creditor hereby authorizes Senior Creditor to file terminations of any
Uniform Commercial Code financing statements with respect thereto and shall deliver such other releases as Senior Creditor shall
require to evidence the release of such liens and security interests.

 

    	 	8	 

     

    

 

6.
Representations and Warranties. Junior Creditor hereby represents and warrants, severally as to itself and not jointly,
to Senior Creditor as follows as of the date hereof:

 

6.1.
Existence and Power. Junior Creditor is a duly organized limited liability company, validly existing and in good standing
under the laws of the State of Texas.

 

6.2.
Authority. Junior Creditor has the power and authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary action and are not prohibited by its organizational
documents.

 

6.3.
Binding Agreements. This Agreement, when executed and delivered, will constitute the valid and legally binding obligation
of Junior Creditor enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by equitable
principles.

 

6.4.
Conflicting Agreements; Litigation. No provisions of any mortgage, indenture, contract, agreement, statute, rule, regulation,
judgment, decree or order binding on Junior Creditor conflicts with, or requires any consent which has not already been obtained
under, or would in any way prevent the execution, delivery or performance of the terms of this Agreement by Junior Creditor. The
execution, delivery and carrying out of the terms of this Agreement will not constitute a default under, or result in the creation
or imposition of, or obligation to create, any lien or security interest in the property of Junior Creditor pursuant to the terms
of any such mortgage, indenture, contract or agreement. No pending or, to the best of Junior Creditor’s knowledge, threatened,
litigation, arbitration or other proceedings if adversely determined would in any way prevent the performance of the terms of
this Agreement by Junior Creditor.

 

6.5.
No Divestiture. The Junior Creditor is the sole owner, beneficially and of record, of the Junior Note and the Junior Debt.

 

6.6.
Default under Junior Note. To its knowledge, no Junior Default exists under or with respect to the Junior Note or any of
the other Junior Debt Documents.

 

    	 	9	 

     

    

 

7.
Junior Default Notice. Junior Creditor (after it obtains knowledge of a Junior Default) and Borrower each shall provide
Senior Creditor with a Junior Default Notice upon the occurrence of each Junior Default, and Junior Creditor shall notify Senior
Creditor in the event such Junior Default is cured or waived.

 

8.
Cumulative Rights, No Waivers. Each and every right, remedy and power granted to Senior Creditor hereunder shall be cumulative
and in addition to any other right, remedy or power specifically granted herein, in the Loan Agreement or the other Senior Debt
Documents or now or hereafter existing in equity, at law, by virtue of statute or otherwise, and may be exercised by Senior Creditor,
from time to time, concurrently or independently and as often and in such order as Senior Creditor may deem expedient. Any failure
or delay on the part of Senior Creditor in exercising any such right, remedy or power, or abandonment or discontinuance of steps
to enforce the same, shall not operate as a waiver thereof or affect the rights of Senior Creditor thereafter to exercise the
same, and any single or partial exercise of any such right, remedy or power shall not preclude any other or further exercise thereof
or the exercise of any other right, remedy or power, and no such failure, delay, abandonment or single or partial exercise of
the rights of Senior Creditor hereunder shall be deemed to establish a custom or course of dealing or performance among the parties
hereto.

 

9.
Modification. Any modification or waiver of any provision of this Agreement, or any consent to any departure by Junior
Creditor therefrom, shall not be effective in any event unless the same is in writing and signed by Senior Creditor, and then
such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any
notice to or demand on Junior Creditor in any event not specifically required of Senior Creditor hereunder shall not entitle Junior
Creditor to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

 

10.
Additional Documents and Actions. Junior Creditor at any time, and from time to time, after the execution and delivery
of this Agreement, promptly will execute and deliver such further documents and do such further acts and things as Senior Creditor
reasonably may request that may be necessary in order to effect fully the purposes of this Agreement.

 

11.
Independent Credit Investigations. None of Senior Creditor nor its directors, members, managers, officers, agents or employees
shall be responsible to Junior Creditor for Borrower’s solvency, financial condition or ability to repay the Junior Debt
or for statements of Borrower or any other obligor, oral or written, or for the validity, sufficiency or enforceability of the
Senior Debt, the Senior Debt Documents or any liens or security interests granted by Borrower or any other obligor to Senior Creditor
in connection therewith. Junior Creditor has entered into its financing arrangements with Borrower based on its own independent
investigation and does not rely upon any representation of Senior Creditor with respect to matters identified or referred to in
this section. If Senior Creditor, in its sole discretion, undertakes, at any time or from time to time, to provide any information
of the type described herein to Junior Creditor, Senior Creditor shall be under no obligation to subsequently update any such
information or to provide any such information to Junior Creditor on any subsequent occasion.

 

    	 	10	 

     

    

 

None
of Junior Creditor nor its directors, members, managers, officers, agents or employees shall be responsible to Senior Creditor
for Borrower’s solvency, financial condition or ability to repay the Senior Debt or for statements of Borrower or any other
obligor, oral or written, or for the validity, sufficiency or enforceability of the Junior Debt or the Junior Debt Documents.
Senior Creditor has entered into its financing arrangements with Borrower based on its own independent investigation and does
not rely upon any representation of Junior Creditor with respect to matters identified or referred to in this section. If Junior
Creditor, in its sole discretion, undertakes, at any time or from time to time, to provide any information of the type described
herein to Senior Creditor, Junior Creditor shall be under no obligation to subsequently update any such information or to provide
any such information to Senior Creditor on any subsequent occasion.

 

12.
Notices. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied or sent by overnight
courier service or certified or registered United States mail and shall be deemed to have been given (a) if delivered in person,
when delivered; or (b) if delivered by overnight courier, one Business Day after delivery to such courier properly addressed;
or (c) if by United States mail, four (4) Business Days after deposit in the United States mail, postage prepaid and properly
addressed.

 

Notices
shall be addressed as follows: 

 

	(a)	If
    to Junior Creditor: 
	 	 
	 	CrowdOut
    Capital, LLC
	 	Attn:
    Adam Weber, Vice-President
	 	1010
    Land Creek Cove, Suite 150
	 	Austin,
    Texas 78746
	 	 
	 	With
    a copy to: 
	 	 
	 	Ewing
    & Jones, PLLC
	 	Attn:
    Randolph Ewing
	 	6363
    Woodway, Suite 1000
	 	Houston,
    Texas 77057

 

    	 	11	 

     

    

 

	(b)	If
    to Senior Creditor:
	 	 
	 	CrowdOut
    Capital, LLC
	 	Attn:
    Brian Gilmore, President
	 	1010
    Land Creek Cove, Suite 150
	 	Austin,
    Texas 78746
	 	 
	 	With
    a copy to: 
	 	 
	 	Ewing
    & Jones, PLLC
	 	Attn:
    Randolph Ewing
	 	6363
    Woodway, Suite 1000
	 	Houston,
    Texas 77057
	 	 
	(c)	If
    to Borrower: 
	 	 
	 	Sunworks
    Inc.
	 	Attn:
    Chief Financial Officer
	 	1030
    Winding Creek Road, Suite 100
	 	Roseville,
    CA 95678
	 	 
	 	With
    a copy to: 
	 	 
	 	Sichenzia
    Ross Ference Kesner LLP
	 	Attn:
    Gregory Sichenzia
	 	1185
    Avenue of the Americas, 37th Floor
	 	New
    York, NY 10036

 

or
in any case, to such other address as the party addressed shall have previously designated by written notice to the serving party,
given in accordance with this Section 12. A notice not given as provided above shall, if it is in writing, be deemed given if
and when actually received by the party to whom given.

 

13.
Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason
of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby,
and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention
of this Agreement.

 

    	 	12	 

     

    

 

14.
Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of Senior Creditor and
shall be binding upon the successors and assigns of Junior Creditor and Borrower.

 

15.
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original,
but all of which taken together shall be one and the same instrument.

 

16.
Defines Rights of Creditors. The provisions of this Agreement are solely for the purpose of defining the relative rights
of Junior Creditor and Senior Creditor and shall not be deemed to create any rights or priorities in favor of any other Person,
including, without limitation, Borrower.

 

17.
Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant
or condition of any of the Junior Debt Documents, the provisions of this Agreement shall control and govern.

 

18.
Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation
of any of the provisions hereof.

 

19.
Termination. This Agreement shall terminate upon the indefeasible Payment in Full of the Senior Debt.

 

20.
Applicable Law. This Agreement shall be governed by and shall be construed and enforced in accordance with the internal
laws of the State of Texas, without regard to conflicts of law principles.

 

21.
CONSENT TO JURISDICTION. EACH OF JUNIOR CREDITOR AND BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN TRAVIS COUNTY, TEXAS AND IRREVOCABLY AGREES THAT, SUBJECT TO SENIOR CREDITOR’S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE JUNIOR DEBT DOCUMENTS OR THE SENIOR DEBT DOCUMENTS SHALL BE LITIGATED
IN SUCH COURTS. EACH OF JUNIOR CREDITOR AND BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS
AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH OF JUNIOR CREDITOR AND BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO JUNIOR CREDITOR AND BORROWER AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL
BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

    	 	13	 

     

    

 

22.
WAIVER OF JURY TRIAL. JUNIOR CREDITOR, BORROWER AND SENIOR CREDITOR HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE JUNIOR DEBT DOCUMENTS OR ANY OF THE SENIOR
DEBT DOCUMENTS. EACH OF JUNIOR CREDITOR, BORROWER AND SENIOR CREDITOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE SENIOR DEBT DOCUMENTS
AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF JUNIOR CREDITOR, BORROWER AND SENIOR
CREDITOR WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

23.
Subrogation. Subject to the Payment in Full of the Senior Debt, the Junior Creditor shall be subrogated to the rights of
Senior Creditor to receive payments and distributions with respect to the Senior Debt until the Junior Debt is paid in full. Junior
Creditor agrees that in the event that all or any part of a payment made with respect to the Senior Debt is recovered from the
holders of the Senior Debt in a Proceeding or otherwise, any payment or distribution received by Junior Creditor with respect
to the Junior Debt at any time after the date of the payment that is so recovered, whether pursuant to the right of subrogation
provided for in this Agreement or otherwise, shall be deemed to have been received by such Junior Creditor in trust as property
of the holders of the Senior Debt and such Junior Creditor shall forthwith deliver the same to Senior Creditor for application
to the Senior Debt until the Senior Debt is paid in full. A payment or distribution made pursuant to this Agreement to Senior
Creditor which otherwise would have been made to a Junior Creditor is not, as between the Borrower and such Junior Creditor, a
payment by the Borrower to or on account of the Junior Debt.

 

24.
Drafting. Each of the parties hereto acknowledges that each party was actively involved in the negotiation and drafting
of this Agreement and that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall
be construed in favor or against any party hereto because one is deemed to be the author thereof.

 

[SIGNATURE
PAGE FOLLOWS]

 

    	 	14	 

     

    

 

IN
WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be executed as of the date first above written.

 

	 	BORROWER:
	 	 
	 	Sunworks
    Inc.,
	 	a
    Delaware corporation
	 	 	 
	 	By: 	/s/
    Paul McDonnel
	 	 	Paul
    McDonnel, Chief Financial Officer
	 	 	 
	 	SENIOR
    CREDITOR:
	 	 
	 	CrowdOut
    Capital, LLC,
	 	a
    Texas limited liability company
	 	 	 
	 	By:	/s/
    Brian Gilmore
	 	 	Brian
    Gilmore, President
	 	 	 
	 	JUNIOR
    CREDITOR:
	 	 
	 	CrowdOut
    Capital, LLC,
	 	a
    Texas limited liability company
	 	 	 
	 	By:	/s/
    Adam Weber
	 	 	Adam
    Weber, Vice-President

 

Signature
Page

Subordination
Agreement

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