LOAN AND SECURITY AGREEMENT
Exhibit
10.1
THIS LOAN
AND SECURITY AGREEMENT (this “Agreement”) dated as of May 18,
2009 (the “Effective
Date”), entered into by and among Applied Solar, Inc., a Nevada
corporation (“Borrower”), and The Quercus Trust
(“Lender”), sets forth the agreement
pursuant to which Borrower is borrowing funds from Lender, pledging its interest
in, and granting a security interest and general Lien (as defined in Section
14.2 below) in and upon, the Collateral (as defined in Section 14.2 below) as
security for satisfaction of any and all obligations of Borrower arising out of
or related to that certain Secured Promissory Note made by Borrower in favor of
Lender and dated as of the date hereof or arising out of or related to this
Agreement or any of the Loan Documents (the “Obligations”).
WHEREAS,
Lender is the holder of a Series B Convertible Note payable by Borrower in the
principal amount of $20,000,000 (the “Series B Convertible Note”),
and
WHEREAS,
Borrower seeks to borrow additional funds from Lender on a short term basis to
be used as set forth in Section 1.1 below, and
WHEREAS,
Borrower requires immediate funds to continue its operations and intends, within
thirty (30) days from the date hereof, to file for protection under Chapter 11
of the U.S. Bankruptcy Code,
WHEREAS,
Lender is willing to lend to Borrower $698,000 subject to the terms and
conditions herein upon execution of this Agreement and a Secured Promissory
Note, a copy of which is attached hereto as Exhibit “A” and made a part hereof
(the “Note”),
WHEREAS,
as consideration to induce the Lender to loan funds pursuant to this Agreement,
Borrower executes this Agreement in favor of the Lender.
NOW
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good, valuable, and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Loan. Subject to the
terms and conditions of this Agreement and the Note (collectively, and together
with any and all financing statements and any other agreements or instruments
executed by Borrower at Lender’s request the “Loan Documents”), and subject
to there being no Event of Default (as defined herein) under any of the Loan
Documents, (or event which would, with the giving of notice or the passage of
time, mature into an Event of Default), Lender agrees to lend to Borrower an
amount not to exceed the principal sum of Six Hundred Ninety Eight
Thousand ($698,000) on the terms set forth in the Note and in this
Agreement (the “Loan”).
1.1 Purpose and Use of
Borrowing. The proceeds from the Loan shall be used solely as
follows:
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(a) $297,558.18
shall be paid to Suntech America, Inc.; and
(b) the
remaining funds will be used to pay the expenses associated with a bankruptcy
proceeding and for working capital purposes.
Any
amounts loaned hereunder shall be conclusively presumed to have been made to or
for the benefit of Borrower when Lender believes in good faith that such
requests and directions have been made by an authorized person.
2. Grant of
Liens. As security for the due and punctual payment and
performance in full of all obligations under this Agreement or the Note (whether
at the stated maturity, by acceleration, or otherwise), Borrower hereby pledges,
and grants to the Lender a continuing security interest in and a general Lien
(as hereinafter defined) upon the Collateral and all additions, accessions,
replacements, proceeds and any permitted substitutions thereto,
whether heretofore, now or hereafter received by or delivered or transferred to
the Lender hereunder, and all proceeds of the foregoing. To the
extent that any provision set forth herein or in any Loan Document is in
conflict with or would result in a breach of or default under that certain Loan
and Security Agreement dated as of April 30, 2008, as amended, or the Secured
Promissory Note dated of even date therewith (including all documents and
instruments executed in connection therewith, and amendments thereto, the “April 2008 Loan Documents”),
Lender hereby waives any such conflict, breach or default.
3. Continuing Security
Interest.
3.1 This
Agreement creates an assignment, pledge, charge, continuing security interest
in, and general Lien upon, the Collateral and shall (a) remain in full force and
effect until all Obligations under the Note have been indefeasibly paid in full,
(b) be binding upon Borrower and its successors, transferees, and assigns, and
(c) inure, together with the rights and remedies of Lender hereunder, to the
benefit of the Lender and its successors, transferees, and assigns.
3.2 Upon the
indefeasible satisfaction in full of all Obligations due under the Loan
Documents, the pledge, Lien, and security interest granted hereunder shall
terminate and, all rights to the Collateral shall revert to
Borrower. Upon such termination, the Lender will execute and deliver
to Borrower such documents as Borrower shall reasonably request to evidence such
termination and the Lender shall deliver and transfer such Collateral to
Borrower.
4. Delivery and
Perfection;
Further Action. Borrower hereby irrevocably authorizes Lender
to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral, and agrees itself to
take all such other actions and to execute for its account and as an agent of
Borrower and deliver and file or cause to be filed such other instruments,
agreements or documents, as Lender may reasonably require in order to establish
and maintain a perfected, valid, and continuing first priority security interest
and Lien in the Collateral in accordance with this Agreement and the UCC and
other applicable law including, without limitation, any intellectual property
including trademarks and patents.
5. Proceeds of
Sale. Nothing contained in this Agreement shall limit or
restrict in any way Lender’s right to receive Proceeds (as defined in Section
14.2 below) of the Collateral in any form in accordance with the provisions of
this Agreement.
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6. Representations and
Warranties. To induce Lender to enter into the Loan Documents
and to agree to make the Loan described herein, Borrower represents and
warrants, and seek to have Lender rely on the statements as set forth herein,
that as of the date hereof (except as otherwise described or set forth in any of
the Borrower’s filings with the Securities and Exchange Commission pursuant to
the Exchange Act of 1934, as amended)(the “SEC Filings”):
6.1 Power and
Authority. Borrower and the person or persons executing this
Agreement on behalf of Borrower and each of them has the power to take all
actions contemplated hereby. The Loan Documents when executed and
delivered by Borrower will constitute the legal, valid and binding obligation of
Borrower, and will be upon execution, be enforceable against Borrower in
accordance with their respective terms.
6.2 No
Violation. The execution, delivery or performance of the
obligations by Borrower and compliance by Borrower with the terms and provisions
hereof and thereof, (a) do not contravene any provision of any law, statute,
rule or regulation or any order, writ, injunction or decree of any court or
governmental instrumentality applicable to Borrower, (b) do not
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (other than as
contemplated by the Loan Documents) upon any of the property or assets of
Borrower pursuant to the terms of any material indenture, mortgage, deed of
trust, credit agreement, loan agreement or other agreement, contract or
instrument to which Borrower is a party or by which Borrower or any of its
properties or assets are bound or to which any Borrower may be subject and (c)
do no violate any provision of Borrower’s organizational documents or other
agreements or understandings, including but not limited to, the provisions of
the Borrower’s articles of incorporation, by-laws, or any amendments
thereto.
6.3 Governmental
Approvals. Except for (1) any filings with the Secretary of
State or county clerk’s office or office of any Agency or Department of the
Federal Government in connection with the security interests covering
any of the Collateral, and (2) any state or federal securities filings required
by this transaction, no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, or other act by (except as have been obtained or made), any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (a) the execution,
delivery and performance by Borrower of the Loan Documents or (b) the legality,
validity, binding effect or enforceability against Borrower of the Loan
Documents.
6.4 Tax Returns and
Payments. Borrower has filed all tax returns required to be
filed by it and has paid all income and franchise taxes payable by it which have
become due pursuant to such tax returns and all other taxes and assessments
payable by it which have become due, other than those not yet delinquent and
except for those contested in good faith and by appropriate
proceedings. The amounts shown on those tax returns fairly present
the tax position of the Borrower does not expect any material adjustments or any
amounts shown on such tax returns. Borrower has paid, or has provided
adequate reserves for the payment of, all foreign, federal and state income and
franchise taxes, all employer and employee withholding taxes and all appropriate
withholding required under state or federal law, applicable for all prior fiscal
years and for the current fiscal year to the date hereof. As of the
date hereof, no tax lien has been filed, and, to the knowledge of Borrower, no
claim is being asserted, with respect to any tax, fee or other
charge.
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6.5 Compliance with Laws,
etc. Borrower is in compliance with all applicable statutes,
laws, regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its properties, except such noncompliance as would
not, in the aggregate, reasonably be expected to have a material adverse effect
on the condition (financial or otherwise), prospects, assets or properties of
Borrower.
6.6 Name; Location of Offices
and Records. Borrower has never conducted business under any
names other than Applied Solar, Inc., Open Energy Corporation, Barnabus
Enterprises Ltd and Barnabus Energy, Inc. The chief executive offices
and the chief place of business for Borrower and the office where Borrower keeps
its books and records, are located at the addresses set forth in Section 14.3 hereof.
6.7 Borrower’s
Organization. Borrower is a corporation duly formed under the
laws of the State of Nevada.
6.8 Subsidiaries. Borrower
has no Subsidiary and does not own any shares of capital stock or other
securities of or equity interest in any other Person, other than Solar
Communities I, LLC, and the other Subsidiaries described in the SEC
Filings.
6.9 Collateral. Borrower
is and will be the sole legal and beneficial owners of all of the Collateral now
owned or hereafter acquired free and clear of any Lien, security interest,
assignment, option, or other charge or encumbrance, other than the Lien or
security interest created by this Agreement in favor of Lender, any Permitted
Liens and any Liens already held by Secured Party.
6.10 Borrower’s
Authorization. The Loan Documents have been duly and validly
authorized by Borrower and executed and delivered by Borrower.
6.11 Indebtedness. All
financial statements of the Borrower and all related financial data set forth in
the Borrower’s Quarterly Report on Form 10-Q for the quarterly period ended
February 28, 2009 (the “Form
10-Q”)were true and correct in all material respects as of their
respective dates and for the periods covered, and no material adverse change has
occurred in the financial condition presented therein since the respective dates
thereof. Since the date of the latest balance sheet set forth in the
Form 10-Q, the Borrower has incurred no indebtedness other than in the ordinary
course of business.
7. Covenants. In
consideration of the Loan described herein, Borrower covenants and agrees that,
from the date of this Agreement until the indebtedness represented by the Note
and all other amounts owed under the Loan Documents are paid in full in cash,
Borrower shall comply with the following provisions:
7.1 No
Disposition. Borrower will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, any of
the Collateral, nor will it create, incur, or permit to exist any Lien on or
with respect to any of the Collateral, any interest therein, or any Proceeds
thereof, other than in the ordinary course of business or any Permitted
Lien. Borrower covenants and agrees that
it will take all action necessary to remove any claims to, interest
in, or Lien upon the Collateral and the security interest granted hereby, and
shall defend the right, title and interest of Lender in and to the Collateral
against claims and demands of all persons and entities at any time claiming the
same or any interest therein.
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7.2 Use of
Proceeds. All proceeds of the Loan will be used by Borrower
exclusively as provided in Section 1.1 .
7.3 Bankruptcy
Filing. Borrower shall, within thirty (30) days of the
Effective Date, file for protection pursuant to Title 11 of the U.S. Bankruptcy
Code.
7.4 Taxes, Assessments and
Liabilities. Borrower shall pay all taxes, assessments, and
other liabilities when due, except for those which are contested in good
faith.
7.5 Good
Standing. Borrower shall remain in good standing under the
laws of each jurisdiction where Borrower is duly qualified to conduct
business.
7.6 Further
Assurances. Borrower shall provide Lender with such additional
information or documentation as Lender may reasonably request from time to
time.
7.7 Records and
Information. Borrower agrees to keep records concerning the
Collateral. Borrower agrees to promptly furnish to the Lender such
information concerning Borrower, the Collateral, and any Account Debtor as the
Lender may reasonably request
7.8 Incurrence of
Indebtedness. Borrower shall not, incur or guarantee or assume
any indebtedness, other than the indebtedness evidenced by the Note and
Permitted Indebtedness without the prior written consent of the
Lender.
7.9 Restricted
Payments. Borrower shall not directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of
cash or cash equivalents (in whole or in part, whether by way of open market
purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness, whether by way of payment in respect of principal
of (or premium, if any) or interest on such indebtedness, if at the time such
payment is due or is otherwise made or after giving effect to such payment, an
event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is
continuing.
7.10 Restriction on Redemption
and Cash Dividends. Borrower shall not, directly or
indirectly, redeem, repurchase or declare or pay any cash dividend or
distribution on its capital stock without the prior express written consent of
the Lender.
7.11 Additional Collateral
Covenants.
(i) Borrower
will maintain and keep the Collateral in good condition, repair and working
order, ordinary wear and tear excepted, and will not commit or permit any waste
or unreasonable depreciation. Borrower will not alter, remove, or
demolish any Collateral without the Lender's prior written consent, except as
may be required by law or in the ordinary course of business or with respect to
Collateral which is worn out, obsolete or of inconsequential value.
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(ii) Borrower
will comply in all material respects with all applicable laws and requirements
of governmental authorities affecting the Collateral.
(iii) The
Lender may enter Borrower's chief executive office (and any other place where
any of the Collateral is or may be located) at all reasonable times and upon
reasonable notice to attend to the Lender's interests and to inspect the
Collateral.
(iv) Borrower
will, at its own expense, procure and maintain policies of fire, extended
coverage, providing coverage of the Collateral as is commercially reasonable for
businesses such as that operated by Borrower.
(v) If
Borrower fails to make any payment, perform any obligation, or do any act set
forth in or secured by the Note, the Lender, at its option, without releasing
Borrower from the duty to make such payments, perform such obligations, or do
such acts, then or in the future, may make such payment, perform such obligation
or do such act in such manner and to such extent as the Lender may deem
necessary to protect its interest in the Collateral.
(vi) At least
ten (10) days prior to the occurrence of any of the following events, Borrower
shall deliver to Lender, at the address set forth in Section 14.3 hereof, notice
of the following impending events: (i) a change in Borrower’s principal place of
business or chief executive office; and (ii) a change in Borrower’s’ name,
identity or corporate structure.
8. Events of
Default. The
occurrence of any of the following events or conditions shall constitute an
event of default (each an “Event of Default”) under this
Agreement:
8.1 Borrower's
failure to pay to the Lender any amount of principal, interest or other amounts
when and as due under the Note.
8.2 Borrower’s default
under the Note, under the Series B Convertible Note, or any of Borrower’s
material contracts (as such term is construed in Item 601 of Regulation S-B
under the Securities Act of 1933, as amended), unless such default of a material
contract would not have a material adverse effect on the Borrower or the
Borrower’s ability to fulfill its obligations under the Loan
Documents.
8.3 Borrower’s
use of the Loan proceeds for any purpose except as expressly
authorized under the Loan Documents.
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8.4 Any
representation or warranty made by Borrower herein or in any Loan Document or
any statement or representation made in any certificate, report or opinion
delivered in connection therewith shall prove to have been incorrect or
misleading in any material respect when made or repeated and such failure
continues unremedied for five (5) business days after notice of such failure is
given to Borrower.
8.5 The
Lender shall fail to have a valid and enforceable perfected Lien in any
Collateral other than solely by reason of any action on the part of the
Lender.
8.6 Any
settlement, compromise, abandonment, or disposition by Borrower of the
Collateral (other than in the ordinary course of business) without the prior
written consent of Lender, provided such written consent is not unreasonably
withheld by Lender. The Lender hereby consents to the sale and
assignment of the Borrower’s current corporate name “Applied Solar, Inc.” and
its former trade name “Open Energy,” including any intellectual property rights
associated therewith (provided that Borrower complies with the requirements of
Section 7.10(vi).
8.7 Without
the prior written consent of Lender, any act or omission of Borrower that in any
way impairs or reduces the value of the Collateral or any action of Borrower
with respect to the Collateral which interferes with Lender’s ability to realize
on the Collateral or makes such realization more costly for Lender.
8.8 The
failure or refusal by Borrower to perform, or the breach or violation of any of
the terms, obligations, covenants, or warranties of this Agreement or the Note
and that failure or refusal continues unremedied for five (5) business days
after written notice of such failure or refusal is given to Borrower by
Lender.
8.9 Borrower,
pursuant to or within the meaning of Title 11, U.S. Code, or any similar
Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”) (A) consents
to the appointment of a receiver, trustee, assignee, liquidator or similar
official (a “Custodian”)
or (B) makes a general assignment for the benefit of its creditors.
8.10 A court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against Borrower in an involuntary case, (B) appoints a
Custodian of Borrower or (C) orders the liquidation of Borrower.
8.11 A final
judgment or judgments for the payment of money aggregating in excess of $250,000
are rendered against Borrower and which judgments are not, within sixty (60)
days after the entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within sixty (60) days after the expiration of such stay;
provided, however, that any judgment which is covered by insurance or an
indemnity from a credit worthy party shall not be included in calculating the
$250,000 amount, provided that the creditworthiness of any such party shall be
determined by Lender in its reasonable judgment.
8.12 Any
person or group other than Secured Party acquires beneficial ownership of 15% or
more of the outstanding common stock of Borrower, as defined in Rule 13d of the
Securities and Exchange Commission or any change in control in the management of
the Company, including appointment of any Custodian.
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8.13 The
imposition of any Lien senior to any Liens held by Secured Party other than
Permitted Liens.
9. Remedies upon an Event of
Default. Upon the occurrence of, and during the continuance
of, any Event of Default hereunder, Lender shall be entitled, at its option and
without notice, in its discretion, to:
9.1 declare
the Note immediately due and payable and add expenses, and fees (including, but
not limited to reasonable attorneys’ fees) to unpaid principal and interest
whereupon the unpaid principal and interest under the Note, together with fees
thereon and other liabilities and obligations of Borrower accrued hereunder,
shall become immediately due and payable, without presentment, demand, protest,
notice of dishonor, or any other notice of any kind, all of which are expressly
waived by Borrower, anything contained herein notwithstanding;
9.2 enforce
collection of any of the Collateral by suit or any other lawful means available
to the Lender, or demand, collect, or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral;
9.3 surrender,
release, or exchange or otherwise modify the terms of all or any part of the
Collateral, or compromise or extend or renew for any period any indebtedness
thereunder or evidenced thereby;
9.4 assert
all other rights and remedies of a Lender under the UCC and any similar statute
or regulation (whether or not in effect in any applicable jurisdiction) and all
other applicable law, including, without limitation, the right to take
possession of, hold, collect, sell, lease, deliver, grant options to purchase,
or otherwise retain, liquidate, or dispose of all or any portion of the
Collateral. The Proceeds of any collection, liquidation, or other
disposition of the Collateral shall be applied by the Lender first to the
payment of all expenses (including, without limitation, all fees, taxes,
reasonable attorneys’ fees and legal expenses) incurred by the Lender in
connection with retaking, holding, collecting, or liquidating the
Collateral. The balance of such Proceeds, if any, shall, to the
extent permitted by law, be applied to the payment of the Obligations in such
order of application as determined by the Lender in its sole discretion to the
extent such order of application is not inconsistent with applicable
law. If notice prior to disposition of the Collateral or any portion
thereof is necessary under applicable law, written notice mailed to Borrower at
its notice address ten (10) days prior to the date of such disposition shall
constitute reasonable notice. Without precluding any other methods of
sale or other disposition, the sale or other disposition of the Collateral or
any portion thereof shall have been made in a commercially reasonable manner if
conducted in conformity with reasonable commercial practices of creditors
disposing of similar property.
10. Rights
Cumulative. All rights, powers and remedies may be exercised
at any time by Lender after the occurrence of any such Event of Default while
said Event of Default continues. The rights, powers, and remedies of
the Lender under this Agreement shall be in addition to all rights, powers, and
remedies given to the Lender by virtue of any statute or rule of law or any
agreement, all of which rights, powers and remedies shall be cumulative and may
be exercised successively or concurrently without impairing the Lender’s
security interest, Lien, and assignment in the Collateral.
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11. No
Waiver. No failure or delay on the part of the Lender in
exercising any right, power or privilege hereunder or under the UCC or any other
applicable law shall operate as a waiver hereof or thereof; nor shall any single
or partial exercise of any right, power, or privilege hereunder or under the UCC
or any other applicable law preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder or
thereunder. No notice to or demand on the Lender in any case shall
entitle Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Lender to any other or
further action in any circumstances without notice or demand.
12. Waivers. To
the extent necessary to allow Lender to exercise any and all of its rights and
remedies under the Loan Documents, Borrower hereby waives each of the following
to the fullest extent allowed by law:
12.1 All
statutes of limitations as a defense to any cause of action brought by Lender
against Borrower hereunder.
12.2 Any
defense to payment or performance by Borrower hereunder based upon the
enforceability or invalidity of all or any part of the Obligations.
12.3 Any
defense that arises from the modification, adjustment, renegotiation or
forbearance of any of the Obligations of Borrower to Lender, even if Borrower’s
exposure as a surety is materially affected thereby.
12.4 Any
defense arising from any release of Borrower from any of
its Obligations to Lender.
12.5 Any right
(whether now or hereafter existing) to require Lender, as a condition to the
enforcement of the obligations hereunder, to:
(i) accelerate
the Obligations; or
(ii) proceed
against Borrower or compel performance by Borrower, or any other person or
entity, in any manner, sequence, or fashion;
(iii) Proceed
against or exhaust any security held from Borrower or any other person or
entity; or
(iv) pursue
any other remedy in Lender’s power whatsoever.
12.6 Presentment,
demand, protest and notice of any kind, including without limitation notices of
default and notice of presentment, demand, protest or acceptance, except for any
notice expressly required in this Agreement;
12.7 Any
defense based upon genuineness, validity, regularity or enforceability of the
Loan Documents.
13. Conditions to
Close. The obligation of Lender to make the Loan under this
Agreement are subject to the satisfaction of each of the following
conditions:
13.1 Loan
Documents. The Lender shall have received executed
counterparts of all of the Loan Documents from Borrower, and no default which if
any of the Loan Documents were executed and enforceable, would constitute an
Event of Default hereunder shall exist.
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13.2 Organizational
Documents. If requested by Lender, Borrower shall have
provided to Lender a copy of Borrower’s by-laws and each amendment, if any,
thereto.
13.3 Good Standing
Certificates. If requested by Lender, Borrower shall have
provided certificates of good standing for Borrower from the Secretaries of
State for each state where Borrower is organized and where Borrower conducts its
principal operations, certifying that they are in good standing in such states
(as of a date reasonably near the date of execution hereof).
13.4 Governmental
Action. No governmental action shall have been taken and no
legal or arbitration actions shall have been filed which seeks to enjoin or
restrain the extension of credit to Borrower hereunder or compliance by any of
Borrower with the terms and conditions of the Loan Documents.
14. Miscellaneous.
14.1 Amendment. This
Agreement may not be amended or modified except by a writing signed by all of
the parties hereto.
14.2 Definitions. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
provided in the Note. To the extent that any terms or concepts
defined or used herein are defined or used in the UCC (as defined below), such
terms or concepts shall be interpreted for purposes hereof in a manner that is
consistent with such definition or use in the UCC. The following
terms shall have the meanings set forth below:
(i) “Account Debtor” has the
meaning given such term in Section 9102(a)(3) of the UCC.
(ii) “Accounts” has the meaning
given such term in Section 9102(a)(2) of the UCC and includes accounts
receivables of the Borrower.
(iii) “Collateral” shall mean all
right, title, and interest of Borrower in and to all property of Borrower,
together with all accessions, replacements substitutions and proceeds thereof,
whether now owned or hereafter acquired and whether now existing or hereafter
coming into existence, including without limitation:
(a) all
General Intangibles; including without limitation all patent, trademark and
other interests in property including intellectual property
(b) all
Accounts;
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(b) all
Inventory of Borrower reflected in the its financial records from time to time,
to the extent the same qualify as “goods” under the Uniform Commercial Code of
California (the “UCC”)
(c) All
money and deposit accounts, as those terms are defined in the UCC, and all
proceeds thereof; and
(d) cash
and non-cash Proceeds of any and all of the foregoing.
(iv) “Event of Default” shall have
the meaning specified in Section 8 of this Agreement.
(v) “GAAP” means United States
generally accepted accounting principles, consistently applied.
(vi) “General
Intangibles” shall mean and include all of the Borrower’s general
intangibles (as such term is defined in the UCC) and all other general
intangibles of the Borrower, whether now owned or hereafter acquired including,
without limitation, all payment intangibles, choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, service marks, trade secrets, goodwill, copyrights,
design rights, software, computer information, source codes, codes, records and
dates, registrations, licenses, franchises, customer lists, tax refunds, tax
refund claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to the Borrower, all rights of
indemnification and all other intangible property of every kind and
nature.
(vii) "Governmental Body" means any
nation, state, county, city, town, borough, village, district or other
jurisdiction; federal, state, local, municipal, foreign or other government;
governmental or quasi-governmental authority of any nature (including any
agency, branch, department, board, commission, court, tribunal or other entity
exercising governmental or quasi-governmental powers); multinational
organization or body; body exercising, or entitled or purporting to exercise,
any administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power; or official of any of the foregoing.
(viii) “Inventory” means all inventory
of the Borrower carried on the Borrower’s financial statements, to the extent
the same qualify as “goods” under the UCC.
(ix) “Lien” shall mean a pledge,
assignment, lien, charge, mortgage, encumbrance, or other security interest
obtained under this Agreement or under any other agreement or instrument with
respect to any present or future assets, property, contract rights, or revenues
in order to secure the payment of indebtedness of the party referred to in the
context in which the term is used.
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(x) "Person" means an individual,
partnership, corporation, business trust, limited liability company, limited
liability partnership, joint stock company, trust, unincorporated association,
joint venture or other entity or a Governmental Body.
(xi) “Permitted Indebtedness” means
(A) indebtedness incurred by the Borrower that is made expressly subordinate in
right of payment to the indebtedness evidenced by this Note, as reflected in a
written agreement acceptable to the Lender and approved by the Lender in
writing, and which indebtedness does not provide at any time for (1) the
payment, prepayment, repayment, repurchase or defeasance, directly or
indirectly, of any principal or premium, if any, thereon until ninety-one (91)
days after the maturity date or later and (2) total interest and fees at a rate
in excess of three percent (3%) over the greater of the interest rate and the
rate for U.S. treasury notes with comparable maturity per annum; (B)
indebtedness existing as of the date hereof ; (C) indebtedness issued in
exchange for, or the net proceeds of which are used to extend, refund, renew,
refinance, defease or replace Permitted Indebtedness; (D) indebtedness incurred
in the ordinary course of business by the Borrower or its subsidiaries
including, without limitation, trade payables, revolving credit card accounts
and similar credit arrangements; (E) indebtedness of the Borrower or any
subsidiary to financial institutions or similar entities in connection with
commercial credit arrangements, equipment financings, commercial property lease
transactions or similar transactions; and (F) indebtedness represented by this
Note.
(xii) Permitted Liens”
means:
(a) any
Lien for taxes, assessments or governmental charges or claims not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP;
(b) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent;
(c) any
Lien imposed by law or created by operation of law, including, without
limitation, materialmen's mechanics', landlords’, carriers’, warehousemen’s,
suppliers’ and vendors’ Liens, Liens for master’s and crew’s wages and other
similar Liens, arising in the ordinary course of business with respect to a
liability that is not yet due or delinquent or that are being contested in good
faith by appropriate proceedings;
(d) Liens
incurred or deposits and pledges made in connection with (1) obligations
incurred in respect of workers' compensation, unemployment insurance or other
forms of governmental insurance or benefits or legislation, (2) the
performance of letters of credits, bids, tenders, leases, contracts (other than
for the payment of money) and statutory obligations or (3) obligations on surety
or appeal bonds, but only to the extent such deposits, pledges or Liens are made
or otherwise arise in the ordinary course of business and secure obligations not
past due;
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(e) Liens
securing Borrower’s obligations under the Note; and
(f) Liens
created pursuant to the April 2008 Loan Documents.
(xiii) “Proceeds” has the meaning
given such term in Section 9102(a)(64) of the UCC.
(xiv) “Subsidiary” means
any Person of which (i) a majority of the outstanding share capital, voting
securities or other equity interests are owned, directly or indirectly, by
another Person or (ii) such other Person is entitled, directly or indirectly, to
appoint a majority of the board of directors or managers or comparable
supervisory body of the Person.
14.3 Notices. All
notices, requests and other communications provided for or permitted to be given
under this Agreement must be in writing and shall be given by personal delivery,
by certified or registered United States mail (postage prepaid, return receipt
requested), by a nationally recognized overnight delivery service for next day
delivery, or by facsimile transmission, as follows (or to such other address as
any party may give in a notice given in ccordance
with the provisions hereof):
If to
Borrower:
0000
Xxxxxxx Xxxxxx
Xxx
Xxxxx, Xxxxxxxxxx 00000
Facsimile
No.: (000) 000-0000
If to
Lender:
The
Quercus Trust
0000
Xxxxxxx Xxxx.
A109 --
PMB 000
Xxxxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxxx, Esq.
0000 Xxxxxx xx xxx Xxxxx
00xx
Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile
No: (000) 000-0000
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All notices, requests or other
communications will be effective and deemed given only as
follows: (i) if given by personal delivery, upon such personal
delivery, (ii) if sent by certified or registered mail, on the fifth business
day after being deposited in the United States mail, (iii) if sent for next day
delivery by overnight delivery service, on the date of delivery as confirmed by
written confirmation of delivery, (iv) if sent by facsimile, upon the
transmitter’s confirmation of receipt of such facsimile transmission, except
that if such confirmation is received after 5:00 p.m. (in the recipient’s time
zone) on a business day, or is received on a day that is not a business day,
then such notice, request or communication will not be deemed effective or given
until the next succeeding business day. Notices, requests and other
communications sent in any other manner, including by electronic mail, will not
be effective.
14.4 Agents and
Attorneys-in-Fact. Lender may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected in
good faith.
14.5 Severability of
Provisions. If any provision or any part of any provision of
this Agreement shall for any reason be held to be invalid, unenforceable, or
contrary to public policy or any law, then the remainder of the Agreement shall
not be affected thereby and shall remain in full force and effect.
14.6 Assignment; Binding
Effect. Borrower may not assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of Lender, and any such assignment by a party without prior written
approval of Lender will be deemed invalid and not binding on
Lender. All of the terms, agreements, covenants, representations,
warranties and conditions of this Agreement are binding upon, and inure to the
benefit of and are enforceable by, the parties and their respective successors
and permitted assigns.
14.7 Integration
Clause. This Agreement and the Note contain the entire
agreement between the parties pertaining to the subject matter contained herein
and supersede any and all prior and/or contemporaneous oral or written
negotiations, agreements, representations, and understandings with regard to the
substance of this Agreement and the Note. The parties, and each of
them, understand that this Agreement and the Note are made without reliance upon
any inducement, statement, promise, or representation other than those contained
therein.
14.8 Governing
Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law principles.
14.9 Advice of
Counsel. Each of the parties acknowledges that they have
either sought and received the advice of legal counsel or have been afforded an
opportunity to seek the advice of counsel regarding this Agreement and the Note
prior to their execution. Neither this Agreement nor the Note, nor
any provision hereof, shall be deemed prepared or drafted by one party or
another, or its attorneys, and shall not be construed more strongly against any
party.
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14.10 Voluntary Execution of
Agreement. This Agreement and the
Note are executed voluntarily and without any duress or undue influence on the
part or behalf of the parties hereto. Each party acknowledges that
it: (i) has read this Agreement and the Note; (ii) has
been represented in the preparation, negotiation, and execution of this
Agreement and the Note by legal counsel of its own choice or that it has
voluntarily declined to seek such counsel; (iii) understands the
terms and consequences of this Agreement and the Note; and (iv) is fully aware
of the legal and binding effect of this Agreement and the Note.
14.11 Headings. The
section headings contained in this Agreement are inserted for convenience only
and will not affect in any way the meaning or interpretation of this
Agreement.
14.12 Costs;
Expenses. Except upon the occurrence of an Event of Default,
the parties hereto shall each bear their own costs, attorneys’ fees and
expenses, and other fees incurred in connection with this
Agreement.
14.13 Counterparts. This
Agreement may be executed in one or more counterparts and may include multiple
signature pages, all of which will be deemed to be one
instrument. Photocopies and facsimiles of original signature pages
may be deemed as originals.
14.14 Construction. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the Note of even date herewith. Unless the context
clearly indicates otherwise, the singular shall include the plural and the
plural shall include the singular. The masculine, feminine and neuter
gender shall each include the other.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
| BORROWER | |||
| APPLIED SOLAR, INC., a Nevada Corporation | |||
|
|
By:
|
/s/ Xxxxx Xxxxx | |
| Name: | Xxxxx Xxxxx | ||
| Title : | President and Chief Executive Officer | ||
| LENDER: | |||
| THE QUERCUS TRUST | |||
|
|
By:
|
/s/ Xxxxx Xxxxxxx | |
| Name: | Xxxxx Xxxxxxx | ||
| Title : | Trustee | ||
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