EXHIBIT 10.2

CONVERTIBLE SECURED PROMISSORY NOTE

 

 

 

$1,500,000

September 18, 2017

 

 

San Diego, California

 

FOR VALUE RECEIVED, Envision Solar International, Inc., a Nevada corporation
(“Borrower”), hereby promises to pay to the order of SFE VCF, LLC, a California
limited liability company (“Lender”) at P.O. Box 5005 PMB 134, Rancho Santa Fe,
CA 92067, pursuant to the terms of this convertible secured promissory note (the
“Note”), the principal sum of One Million Five Hundred Thousand Dollars U.S.
($1,500,000) plus simple interest at the floating rate per annum equal to the 12
month USD LIBOR index rate quoted from time to time in New York, New York by the
Bloomberg Service plus 400 basis points (the “Interest Rate”). The Interest Rate
will be adjusted on the first day of each calendar month during the term of this
Note to reflect any changes in the 12 month LIBOR rate as quoted at 1:00 pm
Eastern Time in New York, New York on that day, or if that day is not a business
day, on the next business day thereafter. Interest will only accrue on
outstanding principal. Accrued unpaid interest is payable monthly on the first
calendar day of each month for interest accrued during the previous month, with
all outstanding principal and accrued unpaid interest payable in full on or
before three hundred and sixty-four (364) days after the date of this Note first
above written (the “Maturity Date”), to the extent not converted into Borrower’s
equity securities pursuant to Paragraph 5 of this Note.

 

1.       Loan. On the date of this Note first above written, Borrower will
borrow from Lender and Lender will lend to Borrower an amount equal to One
Million Five Hundred Thousand Dollars ($1,500,000) in cash (the “Loan Amount”).
Payments on this Note will be credited first to any reimbursable costs under
Paragraph 9 of this Note, then to accrued but unpaid interest, and then to
outstanding principal. The Lender will keep the record of all repayments on this
Note.

 

2.       Security. This Note is secured by a perfected recorded first priority
security interest in all of the Borrower’s assets (the “Collateral”) as set
forth in that certain Security Agreement by and between Borrower and Lender,
dated September 14, 2017 (the “Security Agreement”). Upon full payment of this
Note, as provided elsewhere in this Note, the Lender shall immediately execute
all documents and take all actions necessary or appropriate in order to release
the security interest of this Note in the Collateral. While the Collateral is
pledged as security for this Note, the Lender may foreclose on the Collateral in
the event of a default by the Borrower under this Note, subject to senior liens,
if any, and the conditions in Paragraph 3 of this Note. The Borrower shall have
no right to have any portion of the Collateral released from the security
interest until the Note is repaid in full and no more Advances will be made on
it.

 

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3.       Default. Any of the following shall constitute a default by Borrower
hereunder:

 

(a)The failure of Borrower to make any payment of principal or interest required
hereunder within five (5) business days of the due date for such payment, as it
may properly be extended pursuant to the terms of this Note; or

 

(b)The failure of Borrower to fully perform any other material covenants and
agreements under this Note and continuance of such failure for a period of ten
(10) business days after written notice of the default by Lender to the
Borrower.

 

Upon the occurrence of a default hereunder, Lender may, at its option, declare
immediately due and payable the entire unpaid principal sum of this Note
together with all accrued and unpaid interest owing at the time of such
declaration pursuant to this Note. In the event of a default by Borrower under
Paragraph 3(a) of this Note, commencing on the first day of the default and
continuing thereafter until the default is cured, interest will accrue on unpaid
outstanding principal at the rate equal to 500 basis points over the Interest
Rate on this Note.

 

4.       Right of Prepayment. In the event that the Borrower repays outstanding
principal on the Note before the Maturity Date, Borrower will pay a prepayment
penalty in cash to Lender equal to the amount of interest that would have
accrued on the Note at the Interest Rate during the period from the date of the
repayment until the Maturity Date.

 

5.       Conversion. Lender will have the right at any time until the Maturity
Date, provided Lender gives Borrower written notice of Lender’s election to
convert prior to any prepayment of this Note by the Borrower with respect to
converting that portion of this Note covered by the prepayment, to convert all
or any portion of the outstanding principal and accrued interest (the
“Conversion Amount”), into such number of fully paid and nonassessable shares of
the Borrower’s common stock as is determined by dividing the Conversion Amount
by the greater of (i) fifteen cents ($0.15) or (ii) 75% of the Volume Weighted
Average Price of the Borrower’s common stock that is quoted on a public
securities trading market (if more than one, the one with the then highest
trading volume), during the five (5) consecutive trading days immediately prior
to the date of Lender’s written notice of its election to convert.

 

6.       Additional Consideration. As additional consideration for the loan made
by the Lender to the Borrower as evidenced by this Note, the Borrower hereby
agrees to issue to Lender common stock purchase warrants exercisable for a
period of three years from the date of issuance with an exercise price equal to
$0.15 per share. The number of warrants issuable to Lender pursuant to this
Paragraph 6 of the Note will equal 25% of the Loan Amount divided by fifteen
cents ($0.15). The warrants will be issued to the Lender within five (5)
business days after the date of this Note first above written.

 

7.       Use of Proceeds. Borrower covenants to use the proceeds of the Note
exclusively to pay-off the entire outstanding amount of that certain loan and
security agreement that Borrower has with Silicon Valley Bank, dated October 30,
2015.

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8.       Note is Nonrecourse. In the event that Borrower defaults on this Note,
Lender shall look solely to the assets of the Borrower for payment on this Note,
and none of the shareholders, officers, directors or affiliates of the Borrower
shall have any personal liability for payment hereunder.

 

9.       Costs of Collections. Lender shall be entitled to collect reasonable
attorney's fees and costs from Borrower, as well as other costs and expenses
reasonably incurred, in curing any default or attempting collection of any
payment due on this Note.

 

10.       Repayment Options. Payments of outstanding principal and interest on
this Note may be made in cash, subject to the following: (a) the Borrower may
request in writing delivered to the Lender from time to time that a monthly
payment be made by adding the amount due to the outstanding principal of this
Note, and the Lender may in its sole discretion approve or deny such request,
and (b) Lender may elect in its sole discretion by written notice to the
Borrower delivered at least one (1) business day before the due date, to have
any payment of interest or principal on this Note paid in cash or in shares of
the common stock of the Borrower, using a price per share equal to the greater
of (x) $0.15, or (y) 75% of the Volume Weighted Average Price of the Borrower’s
common stock that is quoted on a public securities trading market (if more than
one, the one with the highest trading volume), during the five (5) consecutive
trading days immediately prior to the due date for the payment.

 

11.       Payment. This Note shall be payable in lawful money of the United
States.

 

12.       Place of Payment. All payments on this Note are to be made or given to
Lender at the address provided to Borrower or to such other place as Lender may
from time to time direct by written notice to Borrower.

 

13.       Waiver. Borrower, for itself and its successors, transfers and
assigns, waives presentment, dishonor, protest, notice of protest, demand for
payment and dishonor in nonpayment of this Note, bringing of suit or diligence
of taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereunder.

 

14.       Severability. If any provision of this Note or the application thereof
to any persons or entities or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Note shall not be deemed affected thereby
and every provision of this Note shall be valid and enforceable to the fullest
extent permitted by law.

 

15.       No Partner. Lender shall not become or be deemed to be a partner or
joint venturer with Borrower by reason of any provision of this Note. Nothing
herein shall constitute Borrower and Lender as partners or joint venturers or
require Lender to participate in or be responsible or liable for any costs,
liabilities, expenses or losses of Borrower.

 

16.       Governing Law and Venue. This Note shall be governed by and construed
solely in accordance with the laws of the State of California without giving
effect to applicable

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conflict of laws provisions. Borrower and Lender agree that the sole
jurisdiction and venue for any litigation arising out of the Note involving
Borrower or Lender shall be in the appropriate federal or state court located in
San Diego County, California.

 

17.       No Waiver. The failure to exercise any rights herein shall not
constitute a waiver of the right to exercise the same or any other right at any
subsequent time in respect of the same event or any other event.

 

18.       Entire Agreement. This Note contains the entire understanding and
agreement between the parties with respect to the subject matter herein and may
not be altered or amended except by the written agreement of the parties.

 

19.       Management Rights. During any time when this Note is outstanding, or
when the Lender holds any stock, or any warrants to acquire stock where the
combination of both could result in the Lender owning stock with a current value
of one million dollars or greater, in the Borrower, Lender shall have the
following rights:

 

a.       Lender shall be entitled to consult with and advise management of the
Borrower on significant business issues, including management’s proposed annual
operating plans, and management will meet with Lender regularly during each year
at the Borrower’s facilities at mutually agreeable times for such consultation
and advice and to review progress in achieving said plans.

 

b.       Lender may examine the books and records of the Borrower and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Borrower’s financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided.

 

c.       The Borrower shall, concurrently with delivery to the board of
directors, give a representative of Lender copies of all notices, minutes,
consents and other material that the Borrower provides to its directors, except
that the representative may be excluded from access to any material or meeting
or portion thereof if the board of directors determines in good faith, upon
advice of counsel, that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential proprietary
information, or for other similar reasons.  Upon reasonable notice and at a
scheduled meeting of the board or such other time, if any, as the board may
determine in its sole discretion, such representative may address the board with
respect to Lender’s concerns regarding significant business issues facing the
Borrower.

 

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IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
hereinabove written.

 

 

BORROWER:

 

Envision Solar International, Inc.

a Nevada corporation

 

 

By: /s/ Desmond Wheatley

Desmond Wheatley, Chief Executive Officer

 

 

 

LENDER:SFE VCF, LLC

a California limited liability company

 

 

By: /s/ Lender

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