Document:

Exhibit 10.4

    
      

      

    

    

    CREDIT
      FACILITY AGREEMENT

    

    THIS
      CREDIT FACILITY AGREEMENT (the "Agreement"), is made and entered into and
      effective as of September 19, 2006, by and between Welund Fund, Inc., a Nevada
      corporation ("Welund") and Solar Power, Inc., a California corporation ("SPI").
      

    

    For
      good
      and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereby agree as follows:

    

    1.   Purpose.

    

    Welund
      and SPI are parties to a certain Agreement and Plan of Merger dated as of August
      23, 2006, by and among Welund, SPI and Welund Acquisition Corp. (the “Merger
      Sub”), a Nevada corporation and wholly owned subsidiary of Welund (the “Merger
      Agreement”). Pursuant to the Merger Agreement, the parties contemplate that SPI
      will merge into the Merger Sub with SPI as the surviving entity (the “Merger”).
      Welund is conducting a private placement offering in the aggregate amount of
      $16,000,000 in order to raise working capital to be used by SPI upon the
      consummation of the Merger. SPI is currently in need of working capital. Welund
      desires to provide working capital to SPI and SPI desires to draw upon the
      Welund commitment to provide a revolving line of credit for up to an aggregate
      of Two Million Dollars ($2,000,000) for such purposes, pursuant to the terms
      and
      conditions of this Agreement

    

    2.   Definitions.

    

    The
      following terms shall have the meanings ascribed to them for purposes of this
      Agreement, the Exhibits, Attachments and Schedules thereto, unless otherwise
      specifically defined in such Exhibits, Attachments and Schedules.

    

    “Advances”
means
      the aggregate of funds made under the Revolving Loan Commitment to SPI during
      the term of this Agreement, including all accrued and unpaid
      interest.

    

    “Applicable
      Rate”
means,
      with respect to any Advance, as the case may be, the interest rate of eight
      percent (8%) simple interest per annum charged by Welund.

    

    “Commitments”
means
      the Revolving Loan Commitments under this Agreement.

    

    “Default”
means
      any event or condition which constitutes an Event of Default or which upon
      notice, lapse of time or both would, unless cured or waived, become an Event
      of
      Default, as defined in the Security Agreement attached to this
      Agreement.

    

    “Event
      of Default”
has
      the
      meaning assigned to such term in the Security Agreement attached
      hereto.

    

    “Loan
      Documents”
means,
      collectively, this Agreement, the Security Documents, Security Agreement, and
      other schedules, exhibits and attachments hereto.

    

    

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    

    “Maturity
      Date”
means
      March 31, 2007, unless this Agreement is extended, as provided herein, in which
      case the Maturity Date shall be the date of termination of any
      extension.

    

    “Notes”
means,
      collectively, the Promissory Notes substantially in the form attached as
Exhibit
      A
      hereto,
      and made by SPI to Welund in connection with each Advance.

    

    “Person”
means
      any natural person, corporation, trust, foundation, limited liability
      corporation, limited liability partnership, association, limited partnership,
      general partnership, or other entity, and their respective successors or
      assigns.

    

    “Revolving
      Loan Availability Period”
means
      the period from and including the Effective Date to and including February
      28,
      2007, unless extended by Welund, in its sole discretion, for additional
      terms.

    

    “Revolving
      Loan Commitment”
means
      the commitment of Welund to make one or more Revolving Loans hereunder during
      the Revolving Loan Availability Period, expressed as an amount representing
      the
      maximum aggregate principal amount of the Revolving Loans to be made by Welund
      which shall be outstanding at any one time hereunder. The aggregate amount
      of
      the Revolving Loan Commitment is $2,000,000.

    

    “Revolving
      Loans”
means
      the revolving loans made by Welund to the SPI pursuant to Section
      3.

    

    “Security
      Agreement”
means
      a
      Security Agreement substantially in the form of Exhibit
      B
      between
      SPI, as the same shall be modified and supplemented and in effect from time
      to
      time.

    

    “Security
      Documents”
means,
      collectively, the Security Agreement, all California Commercial Code financing
      statements (Form UCC-1) and all other filings required by the Security Agreement
      to be filed with respect to the security interests in real property, personal
      property and fixtures created pursuant to the Security Agreement.

    

    3.    Credit
      Facility.
      Advances and reports shall be governed by this Section 3.

    

    (a)    The
      Commitments.
      Subject
      to the terms and conditions set forth herein, Welund agrees to make one or
      more
      Revolving Loans to the SPI during the Revolving Loan Availability Period up
      to
      the Revolving Loan Commitment subject to the terms and conditions set forth
      herein.

    

    (b)    Notice
      by SPI.
      To
      request an Advance (other than any Advance on the date hereof or prior to the
      date hereof), SPI shall notify Welund of such request at least one (1) Business
      Day before the date of the proposed Advance. Each such request shall be
      irrevocable and shall be in a form approved by Welund and signed by the
      SPI.

    

    

    
      
        
          
          

        

        
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    (c) Content
      of Advance Requests.
      Each
      telephonic and written request for an Advance shall specify the following
      information:

    

    (i)    the
      aggregate amount of such requested Advance;

    

    (ii)   the
      date
      of such requested Advance to be deposited into SPI’s account, which shall be a
      Business Day during the Revolving Loan Availability Period; and

    

    (iii)  
        the
      location, account number, and other relevant wire transfer instructions for
      SPI’s account to which funds are to be disbursed.

    

    (d)    Funding
      of Advances.
      Welund
      shall make each Advance on the proposed date thereof by wire transfer of
      immediately available funds by 12:00 noon (P.S.T.), to the account of SPI as
      designated by it for such purpose in the request for Advance.

    

    (e)    Termination
      and Reduction of the Commitments.

    

    (i)   Scheduled
      Termination.
      Unless
      previously terminated, the Revolving Loan Commitments shall terminate at 5:00
      p.m. (P.S.T.), on the last day of the Revolving Loan Availability
      Period.

    

    (ii)   Voluntary
      Termination or Reduction.
      SPI may
      at any time terminate, or from time to time reduce, the Revolving Loan
      Commitments; provided that SPI shall not reduce or terminate the Revolving
      Loan
      Commitments if after giving effect to any concurrent prepayment of Advances,
      the
      Advances outstanding would exceed the total Revolving Loan
      Commitments.

    

    (iii)   Notice
      of Voluntary Termination or Reduction.
      SPI
      shall notify Welund of any election to terminate or reduce the Revolving Loan
      Commitments under Section 3(e)(ii) of this Section at least three Business
      Days
      prior to the effective date of such termination or reduction, specifying such
      election and the effective date thereof. Each notice delivered by SPI pursuant
      to this Section shall be irrevocable.

    

    (iv)   Effect
      of Termination or Reduction.
      Any
      termination or reduction of the Commitments shall be permanent.

    

    (f)
    Repayment
      of Advances; Evidence of Debt.

    

    (i)    Repayment.
      SPI
      hereby unconditionally promises to pay to Welund the aggregate outstanding
      principal amount of the Advances and accrued interest on the Maturity
      Date.

    

    (ii)   Maintenance
      of Records by Welund.
      Welund
      shall maintain in accordance with its usual practice records evidencing the
      Advances to SPI resulting from each Advance, including the amounts of principal
      and interest payable and paid to Welund from time to time
      hereunder.

    

    

    
      
        
          
          

        

        
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    (iii)   Effect
      of Entries.
      The
      entries made by Welund in its records maintained pursuant to Section 3(f)(ii)
      of
      this Section shall be prima facie evidence of the existence and amounts of
      the
      obligations recorded therein; provided that the failure of Welund maintain
      such
      records or any error therein shall not in any manner affect the obligation
      of
      SPI to repay the Advances in accordance with the terms of this
      Agreement.

    

    (iv)   Promissory
      Notes.
      For
      each Advance, SPI shall prepare, execute and deliver to Welund a Note payable
      to
      Welund.

    

    (g)    Prepayments.

    

    (i)    Subject
      to the requirements of this Section, SPI shall have the right from time to
      time,
      on any Business Day, to prepay any Revolving Borrowings in whole or in
      part.

    

    (ii)   SPI
      shall
      notify the President and Vice-President of Welund by telephone (confirmed by
      telecopy) of any prepayment hereunder not later than 12:00 noon (P.S.T.), three
      (3) Business Days before the date of prepayment. Each such notice shall be
      irrevocable and shall specify the Advances to be prepaid, the prepayment date,
      and the principal amount of such Advance. 

    

    (h)    Interest.

    

    (i)     Advances.
      Each
      Advance shall bear interest at a rate per annum equal to the Applicable
      Rate.

    

    (ii)    Payment
      of Interest.
      Accrued
      interest on the Advances shall be payable on the Maturity Date.

    

    4.    Representations
      and Warranties of SPI.

    

    As
      a
      material inducement to Welund to enter into and execute this Agreement and
      to
      perform its covenants, agreements, duties and obligations hereunder, and in
      consideration therefore, SPI hereby makes the following representations and
      warranties, each of which (i) is material and is being relied upon by Welund
      as
      a material inducement to enter into this Agreement and (ii) is true at and
      as of
      the date hereof.

    

    (a)    Authority.
      SPI has
      full power and authority to enter into and perform its obligations set forth
      in
      this Agreement and to borrow and repay Advances under this
      Agreement.

    

    (b)    Compliance
      with Laws, Etc.
      The
      execution and delivery of this Agreement and the drawing of Advances hereunder
      does not and will not violate any requirement of law or any contractual
      obligation of SPI.

    

    

    

    
      
        
          
          

        

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

    

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

    

    5.    Covenants.

    

    Until
      the
      Revolving Commitments have expired or been terminated and the principal of
      and
      interest on each Advance and all fees payable hereunder shall have been paid
      in
      full, SPI covenants and agrees with Welund that promptly upon written request
      by
      Welund SPI shall deliver:

    

    (a)    A
      certificate of a duly authorized financial officer of SPI certifying as to
      whether a Default has occurred and, if a Default has occurred, specifying the
      details thereof and any action taken or proposed to be taken with respect
      thereto;

    

    (b)    Such
      other information regarding the operations, business affairs and financial
      condition of SPI, or compliance with the terms of this Agreement and the other
      Loan Documents, Welund may reasonably request.

    

    6.    Use
      of
      Proceeds.

    

    The
      proceeds of the Advances will be used for working capital.

    

    7.    Miscellaneous.

    

    (a)    Notices.
      Except
      as provided in Section 3(g)(ii), 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:

    

    

    
      	
              If
                to Welund:

            	
              Welund
                Fund, Inc.

            
	 	
              Attn:
                Steven Strasser, President

            
	 	
              136
                East South Temple, Suite 2112

            
	 	
              Salt
                Lake City, Utah 84111

            
	 	
              Fax:
                (801) 521-6325

            

    

    

    

    
      
        
          
          

        

        
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              If
                to SPI:

            	
              Solar
                Power, Inc.

            
	 	
              Attn:
                Stephen C. Kircher, Chief Executive Officer

            
	 	
              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

            

    

    

    (b)    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.

    

    (c)    Entire
      Agreement.
      This
      Agreement, the attached Exhibits, Schedules, and other documents, including
      agreements entered into in connection herewith, supersede all prior negotiations
      and agreements (whether written or oral) and constitute the entire understanding
      among the parties hereto.

    

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

    

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

    

    (f)
    Governing
      Law.
      This
      Agreement shall be construed and enforced in accordance with the laws of the
      State of California, and in the event of any litigation or other dispute in
      connection with this Agreement or any of the exhibits attached hereto, the
      venue
      and jurisdiction shall be in Sacramento, California.

    

    (g)    Delay;
      Waiver.
      No
      delay or omission to exercise any right, power or remedy accruing to any party
      hereto shall impair any such right, power or remedy of such party nor be
      construed to be a waiver of any such right, power or remedy nor constitute
      any
      course of dealing or performance hereunder. A waiver of an event shall not
      constitute a waiver of similar or subsequent events, unless expressly stated
      in
      a written amendment to this Agreement. 

    

    

    
      
        
          
          

        

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

    

    (i)
    Further
      Assurances, Etc.
      SPI
      will cooperate with Welund in order to effectuate the transactions contemplated
      by this Agreement and, in that regard, will execute and deliver such
      instruments, documents and further assurances as Welund from time to time may
      reasonably request.

    

    (j)
    Amendment.
      Any of
      the terms and provisions of this Agreement may be waived at any time by the
      party that is entitled to the benefit thereof, but only by a written instrument
      executed by such party. This Agreement may be amended only by an agreement
      in
      writing executed by the parties.

    

    (k)    Assignment.
      Neither
      this Agreement nor any right pursuing hereto or interest herein shall be
      assignable by either of the parties hereto without the prior written consent
      of
      the other party hereto.

    

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

    

    
      	 	
              WELUND
                FUND, INC.

            
	 	 	 
	 	 	 
	 	
              By

            	
              /s/
                Steve
                Strasser                                     
                

            
	 	 	
              Steve
                Strasser, President

            
	 	 	 
	 	 	 
	 	 	 
	 	
              SOLAR
                POWER, INC.

            
	 	 	 
	 	 	 
	 	
              By

            	
              /s/
                Glenn
                Carnahan                                   
                

            
	 	 	
              Glenn
                Carnahan, Chief Financial Officer

            

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
        
          
          

        

        
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    EXHIBIT
      A

    

    FORM
      OF SECURED PROMISSORY NOTE

    

    

    
      	 	
              Sacramento,
                California

            
	
              $__________

            	
              September
                ___2006

            

    

    

    This
      Secured Promissory Note (this "Note") is made and delivered pursuant to that
      certain Credit Facility Agreement dated as of September __, 2006 between Solar
      Power, Inc., a California corporation (“Borrower”) and Welund Fund, Inc., a
      Nevada corporation (“Lender” or “Holder”), as such may be amended from time to
      time (the "Credit Agreement"). Unless otherwise defined herein, all capitalized
      terms used in this Note shall have the same meanings that are given to such
      terms in the Credit Agreement, the terms of which are incorporated into this
      Note by reference.

    

    

    1.    Obligation.
      The
      Borrower hereby promises to pay to the order of Lender or Holder on or before
      the Maturity Date, at Lender's principal place of business, or at such other
      place as Holder may direct, the principal sum of TWO MILLION Dollars
      ($2,000,000.00) or so much thereof as may be advanced and outstanding, together
      with all interest accrued on unpaid principal, to be computed on each Advance
      from the date of its disbursement to Borrower, at a rate equal to eight percent
      (8%) simple interest per annum, as provided in the Credit Agreement. The
      outstanding principal amount of this Note, together with accrued interest
      thereon, shall be due and payable in full on the Maturity Date. The outstanding
      unpaid principal balance of this Note at any time shall be the total principal
      amounts advanced hereunder by Holder less the amounts of payments of principal
      made hereon by Borrower, which balance may be endorsed hereon from time to
      time
      by Holder in accordance with Section 2.

    

    2.    Recording
      Advances and Payments.
      Holder
      is authorized to record on Schedule A hereto, and on any continuation(s) of
      such
      Schedule that may be attached to this Note: (a) the date and principal amount
      of
      each Advance by Lender under the Credit Agreement; and (b) the date and amount
      of each payment or prepayment of principal and/or accrued interest of any
      Advance; which recordation will constitute prima facie evidence of the accuracy
      of the information so endorsed on Schedule A; provided however, that any failure
      to record such information on such Schedule or continuation thereof will not
      in
      any manner affect the obligations of Borrower to make payments of principal
      and
      interest in accordance with the terms of this Note. Holder will promptly provide
      Borrower with a copy of each recordation made by Holder on Schedule A attached
      hereto.

    

    3.    Security.
      This
      Note is subject to a Security Agreement executed September ___, 2006 between
      Lender as the Secured party and Borrower as Debtor.

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    4.    Prepayment.
      Prepayment of unpaid principal and/or interest due under this Note may be made
      at any time without penalty as specified in the Credit Agreement. Unless
      otherwise agreed in writing by Holder, all payments will be made in lawful
      tender of the United States and will be applied (a) first, to the payment of
      accrued interest, and (b) second, (to the extent that the amount of such
      prepayment exceeds the amount of all such accrued interest), to the payment
      of
      principal.

    

    5.    Default,
      Acceleration of Obligation.
      Borrower will be deemed to be in default under this Note and the outstanding
      unpaid principal balance of this Note, together with all interest accrued
      thereon, will immediately become due and payable in full, without the need
      for
      any further action on the part of Holder, upon the occurrence of any Event
      of
      Default (as defined in the Credit Agreement or the Security Agreement) not
      otherwise remedied pursuant to the terms of the Credit Agreement or the Security
      Agreement.

    

    6.    Remedies
      on Default; Acceleration.
      Upon
      any Event of Default, Holder will have, in addition to its rights and remedies
      under this Note, the Credit Agreement and Security Agreement, full recourse
      against any real, personal, tangible or intangible assets of Borrower, and
      may
      pursue any legal or equitable remedies that are available to Holder, and may
      declare the entire unpaid principal amount of this Note and all unpaid accrued
      interest under this Note to be immediately due and payable in full.

    

    7.    Waiver
      and Amendment.
      Any
      provision of this Note may be amended or modified only by a writing signed
      by
      both Borrower and Holder. Except as provided below with respect to waivers
      by
      Borrower, no waiver or consent with respect to this Note will be binding or
      effective unless it is set forth in writing and signed by the party against
      whom
      such waiver is asserted. No course of dealing between Borrower and Holder will
      operate as a waiver or modification of any party's rights or obligations under
      this Note. No delay or failure on the part of either party in exercising any
      right or remedy under this Note will operate as a waiver of such right or any
      other right. A waiver given on one occasion will not be construed as a bar
      to,
      or as a waiver of, any right or remedy on any future occasion.

    

    8.    Waiver
      of Borrower.
      Borrower
      hereby waives presentment, notice of non-payment, notice of dishonor, protest,
      demand and diligence. This Note may be amended only by a writing executed by
      Borrower and Holder.

    

    9.    Governing
      Law.
      This
      Note will be governed by and construed in accordance with the internal laws
      of
      the State of California as applied to agreements between residents thereof
      to be
      performed entirely within such State, without reference to that body of law
      relating to conflict of laws or choice of law.

    

    10.  
        Severability;
      Headings.
      The
      invalidity or unenforceability of any term or provision of this Note will not
      affect the validity or enforceability of any other term or provision hereof.
      The
      headings in this Note are for convenience of reference only and will not alter
      or otherwise affect the meaning of this Note.

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    11.  
        Jurisdiction;
      Venue.
      Borrower, by its execution of this Note, hereby irrevocably submits to the
      in
      personal jurisdiction of the state courts of the State of California and of
      the
      United States District Court for the Northern District of California that are
      located in Sacramento, California, for the purpose of any suit, action or other
      proceeding arising out of or based upon this Note.

    

    12.  
        Assignment.
      This
      Note is not assignable by Holder without the written consent of Borrower. This
      Note may not be assigned or delegated by Borrower, whether by voluntary
      assignment or transfer, operation of law, merger or otherwise.

    

    13.  
        Credit
      Agreement and Security Agreement.
      This
      Note incorporates by reference all the provisions of the Credit Agreement and
      the Security Agreement, including but not limited to all provisions contained
      therein with respect to Events of Default, waivers, remedies and covenants,
      and
      the description of the benefits, rights and obligations of each of Borrower
      and
      Holder under the Credit Agreement and the Security Agreement.

    

    IN
      WITNESS WHEREOF, the Borrower has executed and delivered this Note effective
      as
      of the date first above written.

    

    

    
      	 	
              SOLAR
                POWER, INC.

            
	 	 
	 	
              /s/
                Glenn
                Carnahan                                            
                

            
	 	
              Glenn
                Carnahan, Chief Financial Officer

            

    

    

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    

    SCHEDULE
      A

    

    LOANS
      AND
      PAYMENTS OF PRINCIPAL

     

    
      

    

    
      	
              Date

            	
              Amount
                of Loan

            	
              Amount
                of Principal Repaid

            	
              Notation
                Made By

            

    

    
      

    

     

    
      
 

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

    
      

    

     

      

    

     

    
      

    

     

    
      
 

    

    

    

    

    

    

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    

    EXHIBIT
      B

    

    

    SECURITY
      AGREEMENTExhibit 10.5

    
      

      

    

    

    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).

     

    

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

     

     

    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.

     

    

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    

     

    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.

     

    

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

     

    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.

     

    

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

    

     

    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.

     

    

    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    

     

    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:

     

    

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

    

    

    (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.

     

    

    
      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

    

    

    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.

     

    

    
      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

    

    

    (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.

     

    

    
      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

    

    

    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:

     

    

    
      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    

    

    
      	
              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.

     

    

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    

     

    (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

            

    

    

    
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    13

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