**Exhibit4.25**

 

**LOAN AND SECURITY AGREEMENT**

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THISLOAN AND SECURITY AGREEMENT (this **“Agreement”**) dated as of April 30,2008, entered into by and among Open Energy Corporation, a Nevada corporation (“**Borrower**”),and The Quercus Trust (**“Lender”**), sets forth the agreementpursuant to which Borrower  is borrowingfunds from Lender, pledging its interest in, and granting a security interestand general Lien (as defined in Section 14.2 below) in and upon, theCollateral (as defined in Section 14.2 below) as security for satisfactionof any and all obligations of Borrower arising out of or related to thatcertain Secured Promissory Note made by Borrower in favor of Lender and datedas of the date hereof (the “**Note**”) orarising 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 inthe principal amount of $20,000,000 (the “**Series B ConvertibleNote**”).

 

WHEREAS,Borrower seeks to borrow additional funds from Lender on a short term basis inorder to pay off the Cornell Loan (as defined in Section 14.2 below) and toprovide working capital for Borrower.

 

WHEREAS, Lender is willing tolend to Borrower up to $3,500,000.00 subject to the terms and conditions herein.

 

WHEREAS,as consideration to induce the Lender to loan funds pursuant to this Agreement,Borrower executes this Agreement in favor of the Lender.

 

NOWTHEREFORE, in consideration of the premises and mutual covenants containedherein and for other good, valuable, and binding consideration, the receipt andsufficiency of which are hereby acknowledged, the parties hereto, intending tobe legally bound hereby, agree as follows:

 

1.             Loan.      Subject to the terms andconditions of this Agreement, the Note and the Deposit Account Control Agreementexecuted concurrently herewith among Borrower, Lender and California Bank &Trust, a California banking corporation (“**CB&T**”) (collectively,and together with any and all financing statements and any other agreements orinstruments executed by Borrower at Lender’s request the “**LoanDocuments**”), and subject to there being no Event of Default (asdefined herein) under any of the Loan Documents, (or event which would, withthe 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 ofTHREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00) (the “**Loan**”).

 

## 1.1           Purpose and Use of Borrowing. Advances hereunder shall be used solely to enable Borrower to pay offthe Cornell Loan and to provide working capital for Borrower.  Any advances hereunder shall be conclusivelypresumed to have been made to or for the benefit of Borrower when Lenderbelieves in good faith that such requests and directions have been made by an authorizedperson.

 

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## 1.2           Advances.  Subject tothe terms and conditions contained herein (and so long as no Event of Default hasoccurred and is continuing ), Lender shall make advances hereunder up to thetotal amount of the principal sum stated above, as follows: At closing, Lender shalladvance to Borrower the initial principal amount of One Million Five HundredFifty Thousand Dollars ($1,550,000.00) (the “**Initial Advance**”).  In addition to the Initial Advance, Lenderagrees to make additional advances (each a “**Subsequent****Advance**”) in minimum amounts of atleast Two Hundred Thousand Dollars ($200,000) to Borrower, within five (5) BusinessDays of receipt of a written request therefor from the date hereof until June 30,2008, provided that (A) the Borrowing Conditions (as defined herein) aresatisfied as of the date of the Initial Advance and each Subsequent Advance,and (B) the aggregate principal amount of the Initial Advance andSubsequent Advances shall not exceed Three Million Five Hundred ThousandDollars ($3,500,000).

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## 1.3           Interest.  The Loanshall bear interest at the rate of 18% per annum payable as follows:  Lender shall receive warrants (“**Interest Warrants**”) in the form attached hereto as Exhibit Ato purchase that number of shares of common stock of the Borrower (“**Common Stock**”) that will equate to an 18% annual percentagerate return on the Loan, assuming it is repaid upon maturity (which  equates to 1,389,096  shares of Common Stock as of the date hereofassuming the Loan is fully funded at $3.5 million), at an exercise price pershare of $0.506, exercisable for seven (7) years commencing six monthsfrom the closing of the Loan.  In theevent that the Loan is funded at less than $3.5 million, a ratably lower numberof Interest Warrants shall be issued.  Inthe event Subsequent Advances are made, Borrower shall issue to Lender aratable number of additional Interest Warrants.

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## 1.4           Maturity Date. The maturity date of the Loan shall be October 30, 2008 (“**Maturity Date**”) unless such Maturity Date is extended inwriting by Lender in its sole and absolute discretion.

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## 1.5           Repayment.  On theMaturity Date, Borrower shall pay to Lender in cash all outstanding principalunder the Note.   In addition to the foregoing, the followingmandatory repayment terms shall apply:

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#### (i)            Prepayments Upon Failure of MeetBorrowing Conditions.  For so long as any amount remains outstandingunder this Note, Borrower shall provide Lender with a written report (each a “**Borrowing Base Report**”) within five (5) Business Daysimmediately following the end of each week, which Borrowing Base Report shallspecify the carried value of the Qualified Accounts Receivable, Inventory andcash accounts on Borrower’s financial records as of the last day of theapplicable week (each a “**Reporting Date**”),and shall certify that the Borrowing Conditions continue to be satisfied as ofsuch Reporting Date.  In the event thatany Borrowing Base Report indicates that the Borrowing Conditions are notsatisfied as of the applicable Reporting Date, then, within five (5) BusinessDays immediately following such Reporting Date (each a “**MandatoryPrepayment Date**”), Borrower shall prepay an amount of principalunder the Loan as shall be required to satisfy the Borrowing Conditions in fullas of such Mandatory Prepayment Date.

 

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#### (ii)           Prepayments Upon Receipt of Rebates. Upon the receipt by Borrower of funds in respect of Rebates (as definedin Section 14.2), Borrower shall prepay an amount of principal under theLoan equal to such funds received in respect of such Rebates.  Prepayments pursuant to this Section 1.5(ii) shallbe made within five (5) Business Days of the receipt of the applicableRebate funds.

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## 1.6           Notwithstanding the foregoing, upon theoccurrence of an Event of Default, the principal of the Note, together with allInterest Warrants required to be granted to Lender under Section 1.3  hereof, all of Lender’s reasonable attorneys’fees and costs incurred in connection with enforcement of the terms hereof andof the Note, and any other liabilities and obligations of Borrower accruedunder the Loan Documents, shall become, at the election of Lender in writing pursuantto the terms of this Agreement, immediately due and payable withoutpresentment, demand, protest, notice of dishonor, or any other notice of anykind, all of which are expressly waived by Borrower, anything contained hereinnotwithstanding.

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## 1.7           Prepayment Privilege. The Obligations under this Agreement evidenced by the Note may beprepaid in full at any time, without penalty or premium.

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2.             Grantof Liens.  As security for the dueand punctual payment and performance in full of all Obligations (whether at thestated maturity, by acceleration, or otherwise), Borrower hereby pledges, andgrants to the Lender a continuing security interest in and a general Lien (ashereinafter defined) upon the Collateral and all additions thereto andsubstitutions therefor, whether heretofore, now or hereafter received by ordelivered or transferred to the Lender hereunder, and all proceeds of theforegoing.

 

3.             ContinuingSecurity Interest.

 

## 3.1           This Agreement creates an assignment,pledge, charge, continuing security interest in, and general Lien upon, theCollateral and shall (a) remain in full force and effect until allObligations under the Note have been indefeasibly paid in full, (b) bebinding upon Borrower and its successors, transferees, and assigns, and (c) inure,together with the rights and remedies of Lender hereunder, to the benefit ofthe Lender and its successors, transferees, and assigns.

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## 3.2           Upon the indefeasible satisfaction infull of all Obligations due under the Loan Documents, the pledge, Lien, andsecurity interest granted hereunder shall terminate and, all rights to theCollateral shall revert to Borrower. Upon such termination, the Lender will execute and deliver to Borrowersuch documents as Borrower shall reasonably request to evidence such terminationand the Lender shall deliver and transfer such Collateral to Borrower.

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4.             Deliveryand Perfection; Further Action. Borrower hereby irrevocably authorizes Lender to file one or morefinancing or continuation statements, and amendments thereto, relating to allor any part of the Collateral, and agrees itself to take all such other actionsand to execute and deliver and file or cause to be filed such otherinstruments, agreements or documents, as Lender may reasonably require in orderto establish and maintain a perfected, valid, and continuing first prioritysecurity interest and Lien in the Collateral in accordance with this Agreementand the UCC and other applicable law.  Borrower,Lender and CB&T are executing the Deposit Account Control Agreement concurrentlyherewith.

 

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5.             Proceedsof Sale.  Nothing contained in thisAgreement 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 thisAgreement.

 

6.             Representationsand Warranties.  To induce Lender toenter into the Loan Documents and to agree to make the Loan described herein,Borrower, and the individuals executing this Agreement and the Note on itsbehalf, represent and warrant, and seek to have Lender rely on the statementsas set forth herein, that as of the date hereof and as of the date of anySubsequent Advances (except as otherwise described or set forth in any of theBorrower’s filings with the Securities and Exchange Commission pursuant to theExchange Act of 1934, as amended):

 

## 6.1           Power and Authority. Borrower has the power to take all actions contemplated hereby.  The Loan Documents when executed anddelivered by Borrower will constitute the legal, valid and binding obligationof Borrower, and will be upon execution, enforceable against Borrower inaccordance with their respective terms.

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## 6.2           No Violation.  Theexecution, delivery or performance of the obligations by Borrower and complianceby Borrower with the terms and provisions hereof and thereof, (a) do notcontravene any provision of any law, statute, rule or regulation or anyorder, writ, injunction or decree of any court or governmental instrumentalityapplicable to Borrower,  (b) do notconflict with or result in any breach of any of the terms, covenants,conditions or provisions of, or constitute a default under, or result in thecreation 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 orassets of Borrower pursuant to the terms of any material indenture, mortgage,deed of trust, credit agreement, loan agreement or other agreement, contract orinstrument to which Borrower is a party or by which Borrower or any of itsproperties or assets are bound or to which any Borrower may be subject and (c) dono violate any provision of Borrower’s organizational documents or otheragreements or understandings, including but not limited to, the provisions ofthe Borrower’s articles of incorporation, by-laws, or any amendments thereto.

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## 6.3           Governmental Approvals.  Exceptfor (1) any filings with the Secretary of State or county clerk’s officein connection with the security interests covering any of the Collateral, and (2) anystate or federal securities filings required by this transaction,  no order, consent, approval, license,authorization or validation of, or filing, recording or registration with, orexemption by, or other act by (except as have been obtained or made), anygovernmental or public body or authority, or any subdivision thereof, isrequired to authorize, or is required in connection with, (a) theexecution, delivery and performance by Borrower of the Loan Documents or (b) thelegality, validity, binding effect or enforceability against Borrower of theLoan Documents.

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## 6.4           Tax Returns and Payments.  Borrowerhas filed all tax returns required to be filed by it and has paid all incomeand franchise taxes payable by it which have become due pursuant to such taxreturns and all other taxes and assessments payable by it which have becomedue, other than those not yet delinquent and except for those contested in goodfaith and by 

 

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## appropriateproceedings.  The amounts shown on thosetax returns fairly present the tax position of the Borrower, and theundersigned officer(s) of Borrower do not expect any material adjustmentsor 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 andemployee withholding taxes and all appropriate withholding required under stateor federal law, applicable for all prior fiscal years and for the currentfiscal year to the date hereof.  As ofthe 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, allgovernmental bodies, domestic or foreign, in respect of the conduct of itsbusiness and the ownership of its properties, except such noncompliance aswould not, in the aggregate, reasonably be expected to have a material adverseeffect on the condition (financial or otherwise), prospects, assets orproperties of Borrower.

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## 6.6           Name; Location of Offices and Records.  Borrowerhas never conducted business under any names other than Open Energy Corporation,Barnabus Enterprises Ltd and Barnabus Energy, Inc.  The chief executive offices and the chiefplace of business for Borrower and the office where Borrower keeps its booksand records, are located at the addresses set forth in Section 14.3 hereof.

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## 6.7           Borrower’s Organization.  Borroweris a corporation duly formed under the laws of the State of Nevada.

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## 6.8           Subsidiaries. Borrower has no Subsidiary and does not own any shares of capital stockor other securities of or equity interest in any other Person.

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## 6.9           Collateral.  Borrower isand will be the sole legal and beneficial owners of all of the Collateral nowowned or hereafter acquired free and clear of any Lien, security interest,assignment, option, or other charge or encumbrance, other than the Lien orsecurity interest created by this Agreement in favor of Lender and anyPermitted Liens.

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## 6.10         Borrower’s Authorization. The Loan Documents have been duly and validly authorized by Borrower andexecuted and delivered by Borrower.

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## 6.11         Borrower’s Solvency. As of the date hereof:

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#### (i)            Borrower is not insolvent and thegranting of the security interest in the Collateral shall not render Borrowerinsolvent (as defined in Title 11, United States Code Section 101(32));

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#### (ii)           the property remaining with Borrower isnot unreasonably small for the conduct of Borrower’s business; and

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#### (iii)          Borrowerdoes not intend to incur, and does not believe it will incur debts that wouldbe beyond the Borrower’s ability to pay as such debts mature.

 

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## 6.12         Indebtedness. All financial statements of the Borrower and all related financial dataset forth in the Borrower’s Quarterly Report on Form 10-QSB for thequarterly period ended February 29, 2008 (the “**Form 10-QSB**”)weretrue and correct in all material respects as of their respective dates and forthe periods covered, and no material adverse change has occurred in thefinancial condition presented therein since the respective dates thereof.  Since the date of the latest balance sheetset forth in the Form 10-QSB, the Borrower has incurred no indebtednessother than in the ordinary course of business.

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7.             Covenants.  In consideration of the Loan describedherein, Borrower covenants and agrees that, from the date of this Agreementuntil the indebtedness represented by the Note and all other amounts owed underthe Loan Documents are paid in full in cash, Borrower shall comply with thefollowing provisions:

 

## 7.1           No Disposition. Borrower will not sell, assign, transfer, exchange, or otherwise disposeof, or grant any option with respect to, any of the Collateral, nor will itcreate, 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 ordinarycourse of business.  Borrower covenantsand agrees that it  will take all actionnecessary to remove any claims to, interest in, or Lien upon the Collateral andthe security interest granted hereby, and shall defend the right, title andinterest of Lender in and to the Collateral against claims and demands of allpersons 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 asprovided in Section 1.1 .

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## 7.3           Taxes, Assessments and Liabilities. Borrower shall pay all taxes, assessments, and other liabilities whendue, except for those which are contested in good faith.

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## 7.4           Good Standing. Borrower shall remain in good standing under the laws of eachjurisdiction where Borrower is duly qualified to conduct business.

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## 7.5           Further Assurances. Borrower shall provide Lender with such additional information ordocumentation as Lender may reasonably request from time to time.

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## 7.6           Records and Information. Borrower agrees to keep records concerning the Collateral, includingwithout limitation, the Borrowing Base Records. Borrower agrees to promptly furnish to the Lender such informationconcerning Borrower, the Collateral, the Borrowing Base and any Account Debtoras the Lender may reasonably request

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## 7.7           Incurrence ofIndebtedness.  Borrowershall not, incur or guarantee or assume any indebtedness, other than the indebtednessevidenced by the Note and Permitted Indebtedness without the prior writtenconsent of the Lender.

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## 7.8           RestrictedPayments.  Borrowershall not directly or indirectly, redeem, defease, repurchase, repay or makeany payments in respect of, by the payment of cash or cash equivalents (inwhole or in part, whether by way of open market purchases, tender offers,private transactions or otherwise), all or any portion of any PermittedIndebtedness (other than the indebtedness outstanding pursuant to the CornellLoan), whether by way of payment in respect 

 

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## 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 effectto such payment, an event constituting, or that with the passage of time andwithout being cured would constitute, an Event of Default has occurred and iscontinuing.

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## 7.9           Restriction onRedemption and Cash Dividends.  Borrower shall not, directly or indirectly,redeem, repurchase or declare or pay any cash dividend or distribution on itscapital stock without the prior express written consent of the Lender.

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## 7.10         AdditionalCollateral Covenants.

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#### (i)            Borrowerwill maintain and keep the Collateral in good condition, repair and workingorder, ordinary wear and tear excepted, and will not commit or permit any wasteor unreasonable depreciation.  Borrower will not alter, remove, or demolishany Collateral without the Lender’s prior written consent, except as may berequired by law or in the ordinary course of business or with respect toCollateral which is worn out, obsolete or of inconsequential value.

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#### (ii)           Borrower will comply inall material respects with all applicable laws and requirements of governmentalauthorities affecting the Collateral.

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#### (iii)          TheLender may enter Borrower’s chief executive office (and any other place whereany of the Collateral is or may be located) at all reasonable times and uponreasonable notice to attend to the Lender’s interests and toinspect the Collateral.

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#### (iv)          Borrowerwill, at its own expense, procure and maintain policies of fire, extendedcoverage, providingcoverage of the Collateral as is commercially reasonable for businesses such asthat operated by Borrower.

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#### (v)           If Borrowerfails to make any payment, perform any obligation, or do any act set forth inor secured bythis Note, the Lender, at its option, without releasing Borrower from the dutyto make such payments, perform such obligations, or do such acts, then or inthe future, may make such payment, perform such obligation or do such act insuch manner and to such extent as the Lender may deem necessary to protect itsinterest in the Collateral.

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#### (vi)          At least ten (10) days prior to theoccurrence of any of the following events, Borrower shall deliver to Lender, atthe address set forth in Section 14.3 hereof, notice of the followingimpending events: (i) a change in Borrower’s principal place of businessor chief executive office; and (ii) a change in Borrower’s’ name, identityor corporate structure.

 

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8.             Eventsof Default.  The occurrence of any ofthe following events or conditions shall constitute an event of default (eachan “**Event of Default**”) under thisAgreement:

 

## 8.1           Borrower’s failure to pay to the Lenderany amount of principal, interest (in the form of the Interest Warrants) orother amounts when and as due under the Note.

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## 8.2           Borrower defaults under the Note, underthe Series B Convertible Note, or any of Borrower’s material contracts (assuch term is construed in Item 601 of Regulation S-B under the Securities Actof 1933, as amended), unless such default of a material contract would not havea material adverse effect on the Borrower or the Borrower’s ability to fulfillits obligations under the Loan Documents.

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## 8.3           Borrower uses the Loan proceeds for anypurpose except as expressly authorized under the Loan Documents.

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## 8.4           Any representation or warranty made byBorrower herein or in any Loan Document or any statement or representation madein any certificate, report or opinion delivered in connection therewith shallprove to have been incorrect or misleading in any material respect when made orrepeated and such failure continues unremedied for five (5) business daysafter notice of such failure is given to Borrower.

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## 8.5           The Lender shall fail to have a valid andenforceable perfected Lien in any Collateral other than solely by reason of anyaction on the part of the Lender.

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## 8.6           Any settlement, compromise, abandonment,or disposition by Borrower of the Collateral (other than in the ordinary courseof business) without the prior written consent of Lender, provided such writtenconsent is not unreasonably withheld by Lender.

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## 8.7           Without the prior written consent ofLender, any act or omission of Borrower that in any way impairs or reduces thevalue of the Collateral or any action of Borrower with respect to theCollateral which interferes with Lender’s ability to realize on the Collateralor makes such realization more costly for Lender.

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## 8.8           The failure or refusal by Borrower toperform, or the breach or violation of any of the terms, obligations,covenants, or warranties of this Agreement or the Note and that failure orrefusal continues unremedied for five (5) business days after notice ofsuch failure or refusal is given to Borrower.

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## 8.9           the suspension from trading or failure ofthe Common Stock to be listed on the Principal Market or an Eligible Market fora period of five (5) consecutive Trading Days or for more than an aggregateof ten (10) Trading Days in any 365-day period. Capitalized terms used inthis Section 8.9 shall have the meanings given to them in the Note.

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## 8.10         Borrower, pursuant to or within themeaning of Title 11, U.S. Code, or any similar Federal, foreign or state lawfor the relief of debtors (collectively, “**Bankruptcy Law**”),(A) commences a voluntary case, (B) consents to the entry of an orderfor relief against it in an involuntary case, (C) consents to theappointment of a receiver, trustee, assignee, liquidator or similar official (a“**Custodian**”), (D) makes a generalassignment for the benefit of its creditors or (E) admits in writing thatit is generally unable to pay its debts as they become due.

 

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## 8.11         a court of competent jurisdiction entersan order or decree under any Bankruptcy Law that (A) is for relief againstBorrower in an involuntary case, (B) appoints a Custodian of Borrower or (C) ordersthe liquidation of Borrower.

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## 8.12         a final judgment or judgments for thepayment of money aggregating in excess of $250,000 are rendered against Borrowerand 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 anyjudgment which is covered by insurance or an indemnity from a credit worthyparty shall not be included in calculating the $250,000 amount, provided thatthe creditworthiness of any such party shall be determined by Lender in itsreasonable judgment.

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9.             Remediesupon an Event of Default.  Upon theoccurrence 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 andpayable and add expenses, and fees (including, but not limited to reasonableattorneys’ fees) to principal whereupon the principal of the Note, togetherwith fees thereon and other liabilities and obligations of Borrower accruedhereunder, shall become immediately due and payable, without presentment,demand, protest, notice of dishonor, or any other notice of any kind, all ofwhich are expressly waived by Borrower, anything contained herein notwithstanding;

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## 9.2           declare null and void any obligation ofLender in the Loan Documents to make Subsequent Advances and declare this Noteimmediately due and payable.

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## 9.3           enforce collection of any of theCollateral by suit or any other lawful means available to the Lender, ordemand, collect, or receive any money or property at any time payable orreceivable on account of or in exchange for any of the Collateral;

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## 9.4           surrender, release, or exchange orotherwise modify the terms of all or any part of the Collateral, or compromiseor extend or renew for any period any indebtedness thereunder or evidencedthereby;

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## 9.5           assert all other rights and remedies of aLender under the UCC (whether or not in effect in any applicable jurisdiction)and all other applicable law, including, without limitation, the right to takepossession of, hold, collect, sell, lease, deliver, grant options to purchase,or otherwise retain, liquidate, or dispose of all or any portion of theCollateral.  The Proceeds of anycollection, liquidation, or other disposition of the Collateral shall beapplied by the Lender first to the payment of all expenses (including, withoutlimitation, all fees, taxes, reasonable attorneys’ fees and legal expenses)incurred by the Lender in connection with retaking, holding, collecting, orliquidating the Collateral.  The balanceof such Proceeds, if any, shall, to the extent permitted by law, be applied tothe payment of the Obligations in such order of application as determined bythe Lender in its sole discretion to the extent such order of application isnot inconsistent with applicable law.  Ifnotice prior to disposition of the Collateral or any portion thereof isnecessary under applicable law, written notice mailed to Borrower at its noticeaddress ten (10) days prior to the date of such disposition shallconstitute reasonable 

 

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## notice.  Without precluding any other methods of saleor other disposition, the sale or other disposition of the Collateral or anyportion thereof shall have been made in a commercially reasonable manner ifconducted in conformity with reasonable commercial practices of creditorsdisposing of similar property.

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10.           RightsCumulative.  All rights, powers andremedies may be exercised at any time by Lender after the occurrence of anysuch Event of Default while said Event of Default continues.  The rights, powers, and remedies of theLender under this Agreement shall be in addition to all rights, powers, andremedies given to the Lender by virtue of any statute or rule of law orany agreement, all of which rights, powers and remedies shall be cumulative andmay be exercised successively or concurrently without impairing the Lender’ssecurity interest, Lien, and assignment in the Collateral.

 

11.           NoWaiver.  No failure or delay on thepart of the Lender in exercising any right, power or privilege hereunder orunder the UCC or any other applicable law shall operate as a waiver hereof orthereof; nor shall any single or partial exercise of any right, power, orprivilege hereunder or under the UCC or any other applicable law preclude anyother or further exercise thereof or the exercise of any other right, power orprivilege hereunder or thereunder.  Nonotice to or demand on the Lender in any case shall entitle Borrower to anyother or further notice or demand in similar or other circumstances orconstitute a waiver of the rights of the Lender to any other or further actionin any circumstances without notice or demand.

 

12.           Waivers.  To the extent necessary to allow Lender toexercise any and all of its rights and remedies under the Loan Documents,Borrower hereby waives each of the following to the fullest extent allowed bylaw:

 

## 12.1         All statutes of limitations as a defenseto any cause of action brought by Lender against Borrower hereunder.

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## 12.2         Any defense to payment or performance byBorrower hereunder based upon the enforceability or invalidity of all or anypart of the Obligations.

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## 12.3         Any defense that arises from the modification,adjustment, renegotiation or forbearance of any of the Obligations of Borrowerto Lender, even if Borrower’s exposure as a surety is materially affectedthereby.

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## 12.4         Any defense arising from any release ofBorrower from any of its  Obligations toLender.

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## 12.5         Any right (whether now or hereafterexisting) to require Lender, as a condition to the enforcement of theobligations hereunder, to:

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#### (i)            accelerate the Obligations; or

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#### (ii)           proceed against Borrower or compelperformance by Borrower, or any other person or entity, in any manner,sequence, or fashion;

 

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#### (iii)          Proceedagainst or exhaust any security held from Borrower or any other person orentity; or

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#### (iv)          pursue any other remedy in Lender’s powerwhatsoever.

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## 12.6         Presentment, demand, protest and noticeof any kind, including without limitation notices of default and notice ofpresentment, demand, protest or acceptance, except for any notice expresslyrequired in this Agreement;

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## 12.7         Any defense based upon genuineness,validity, regularity or enforceability of the Loan Documents.

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13.           Conditionsto Close.  The obligation of Lenderto make any Advances under this Agreement are subject to the satisfaction ofeach of the following conditions:

 

## 13.1         Loan Documents. The Lender shall have received executed counterparts of all of the LoanDocuments from Borrower, and no default which if any of the Loan Documents wereexecuted and enforceable, would constitute an Event of Default hereunder shallexist.

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## 13.2         Organizational Documents. If requested by Lender, Borrower shall have provided to Lender a copy ofBorrower’s by-laws and each amendment, if any, thereto.

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## 13.3         Good Standing Certificates. If requested by Lender, Borrower shall have provided certificates ofgood standing for Borrower from the Secretaries of State for each state whereBorrower is organized and where Borrower conducts its principal operations,certifying that they are in good standing in such states (as of a datereasonably near the date of execution hereof).

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## 13.4         Governmental Action. No governmental action shall have been taken and no legal or arbitrationactions shall have been filed which seeks to enjoin or restrain the extensionof credit to Borrower hereunder or compliance by any of Borrower with the termsand conditions of the Loan Documents.

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## 13.5         Borrowing Conditions Met.  Withrespect to the Initial Advance, the Borrowing Conditions have been met.

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14.           Miscellaneous.

 

## 14.1         Amendment.  ThisAgreement may not be amended or modified except by a writing signed by all ofthe parties hereto.

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## 14.2         Definitions. Capitalized terms used herein and not otherwise defined herein shallhave the meanings provided in the Note. To the extent that any terms or concepts defined or used herein aredefined or used in the UCC (as defined below), such terms or concepts shall beinterpreted for purposes hereof in a manner that is consistent with suchdefinition or use in the UCC.  Thefollowing terms shall have the meanings set forth below:

 

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#### (i)            “**Account Debtor**”has the meaning given such term in Section 9102(a)(3) of the UCC.

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#### (ii)           “**Accounts**” hasthe meaning given such term in Section 9102(a)(2) of the UCC andincludes accounts receivables of the Borrower.

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#### (iii)          “**Borrowing Base**” means an amount equal to the lower of (1) 100%of the aggregate Qualified Accounts Receivable and (2) 50% of the sum of (A) theaggregate Qualified Accounts Receivable, (B) the Inventory, and (C) theBorrower’s cash account balances

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#### (iv)          “**Borrowing Conditions**”means that the amount of the Initial Advance plus the amount of any proposedSubsequent Advance does not exceed the Borrowing Base.

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#### (v)           “**Collateral**”shall mean all right, title, and interest of Borrower in and to all of thefollowing property of Borrower, whether now owned or hereafter acquired andwhether now existing or hereafter coming into existence:

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#### (a)           Accounts, including but not limited toQualified Accounts Receivable;

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#### (b)           all inventory of Borrower reflected inthe its financial records from time to time, to the extent the same qualify as “goods”under the Uniform Commercial Code of California (the “**UCC**”)

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#### (c)           All money and deposit accounts, as thoseterms are defined in the UCC, and all proceeds thereof;

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#### (d)           cash and non-cash Proceeds of any and allof the foregoing.

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#### (vi)          “**Cornell Loan**”means that certain loan made by  CornellCapital Partners, L.P.  to Borrower evidencedby a Secured Convertible Debenture dated as of March 30, 2007 in favor ofCornell Capital Partners, L.P. (or any successor), in the principal amount of$3,000,000.

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#### (vii)         “**Event of Default**” shall have the meaning specified in Section 8of this Agreement.

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#### (viii)        “**GAAP**” means United States generally accepted accountingprinciples, consistently applied.

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#### (ix)           “**Governmental Body**”means any nation, state, county, city, town, borough, village, district orother jurisdiction; federal, state, local, municipal, foreign or othergovernment; governmental or quasi-governmental authority of any nature (includingany agency, branch, department, board, commission, court, tribunal or otherentity exercising 

 

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#### governmental or quasi-governmental powers);multinational organization or body; body exercising, or entitled or purportingto exercise, any administrative, executive, judicial, legislative, police,regulatory or taxing authority or power; or official of any of the foregoing.

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#### (x)            “**Inventory**”means all inventory of the Borrower carried on the Borrower’s financialstatements, to the extent the same qualify as “goods” under the UCC.

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#### (xi)           “**Lien**” shallmean a pledge, assignment, lien, charge, mortgage, encumbrance, or othersecurity interest obtained under this Agreement or under any other agreement orinstrument with respect to any present or future assets, property, contractrights, or revenues in order to secure the payment of indebtedness of the partyreferred to in the context in which the term is used.

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#### (xii)          “**Person**” means an individual, partnership, corporation,business trust, limited liability company, limited liability partnership, jointstock company, trust, unincorporated association, joint venture or other entityor a Governmental Body.

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#### (xiii)         “**Permitted Indebtedness**” means (A) indebtedness incurredby the Borrower that is made expressly subordinate in right of payment to the indebtednessevidenced by this Note, as reflected in a written agreement acceptable to theLender and approved by the Lender in writing, and which indebtedness does notprovide at any time for (1) the payment, prepayment, repayment, repurchaseor 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) totalinterest and fees at a rate in excess of three percent (3%) over the greater ofthe interest rate and the rate for U.S. treasury notes with comparable maturityper annum; (B) indebtedness existing as of the date hereof ; (C) indebtednessissued in exchange for, or the net proceeds of which are used to extend,refund, renew, refinance, defease or replace Permitted Indebtedness; (D) indebtednessincurred in the ordinary course of business by the Borrower or its subsidiariesincluding, without limitation, trade payables, revolving credit card accountsand similar credit arrangements; (E) indebtedness of the Borrower or anysubsidiary to financial institutions or similar entities in connection withcommercial credit arrangements, equipment financings, commercial property leasetransactions or similar transactions; and (F) indebtedness represented bythis Note.

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#### (xiv)        **Permitted Liens**” means:

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### (a)       any Lien for taxes, assessments orgovernmental charges or claims not yet due or delinquent or being contested ingood faith by appropriate proceedings for which adequate reserves have beenestablished in accordance with GAAP;

 

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### (b)       any statutory Lien arising in theordinary course of business by operation of law with respect to a liabilitythat is not yet due or delinquent;

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### (c)       any Lien imposed by law or created byoperation of law, including, without limitation, materialmen’s mechanics’,landlords’, carriers’, warehousemen’s, suppliers’ and vendors’ Liens, Liens formaster’s and crew’s wages and other similar Liens, arising in the ordinarycourse of business with respect to a liability that is not yet due ordelinquent or that are being contested in good faith by appropriateproceedings;

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### (d)       Liens incurred or deposits andpledges made in connection with (1) obligations incurred in respect ofworkers’ compensation, unemployment insurance or other forms of governmentalinsurance or benefits or legislation, (2) the performance of letters ofcredits, 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 otherwisearise in the ordinary course of business and secure obligations not past due;and

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### (e)       Liens securing Borrower’s obligationsunder the Note.

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#### (xv)         “**Proceeds**” hasthe meaning given such term in Section 9102(a)(64) of the UCC.

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#### (xvi)        “**Qualified Accounts Receivable**” shall mean all accountsreceivable of Borrower reflected in its financial records from time to time, tothe extent such accounts receivable meet one or more of the followingqualifications:

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#### (a)           accounts receivable from Borrower’scustomers that have not been outstanding for more than sixty (60) days from theapplicable invoice date;

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#### (b)           rebates from the California SolarInitiative that have been assigned to Borrower in connection with sales of itsproducts and reserved with the State of California; and

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#### (c)           rebates that have not been reserved withthe State of California, if the applicable customer of Borrower has guaranteedthe payment of such Rebate or receipt by Borrower of all necessarydocumentation and information to submit a claim for such Rebate on or prior toa date within 180 days of the later of April 10, 2008 or the applicableinvoice date.  Section 13(b) and(c) shall together be referred to herein as “**Rebates**”.

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#### (xvii)       “**Subsidiar*y***” means any Person ofwhich (i) a majority of the outstanding share capital, voting securitiesor other equity interests are owned, directly or indirectly, by another Personor (ii) such other Person is entitled, directly or indirectly, to appointa majority of the board of directors or managers or comparable supervisory bodyof the Person.

 

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## 14.3         Notices.  All notices, requests and other communications provided for orpermitted to be given under this Agreement must be in writing and shall begiven by personal delivery, by certified or registered United States mail(postage prepaid, return receipt requested), by a nationally recognizedovernight 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 inaccordance with the provisions hereof):

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If to Borrower:Open Energy Corporation514 via de la Valle, Suite 200Solana Beach, California 92075Facsimile No.: (858) 794-8811

 

If to Lender:

 

The Quercus Trust1835 Newport Blvd.A109 — PMB 467Costa Mesa, CA 92627Facsimile No.: (949) 631-2325

All notices, requests or other communications will beeffective and deemed given only as follows: (i) if given by personal delivery, upon such personal delivery, (ii) ifsent by certified or registered mail, on the fifth business day after beingdeposited in the United States mail, (iii) if sent for next day deliveryby overnight delivery service, on the date of delivery as confirmed by writtenconfirmation of delivery, (iv) if sent by facsimile, upon the transmitter’sconfirmation of receipt of such facsimile transmission, except that if suchconfirmation is received after 5:00 p.m. (in the recipient’s time zone) ona business day, or is received on a day that is not a business day, then suchnotice, request or communication will not be deemed effective or given untilthe 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 herewithand shall not be responsible for the negligence or misconduct of any suchagents or attorneys-in-fact selected in good faith.

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## 14.5         Severabilityof Provisions.  If any provision or any part of any provisionof this Agreement shall for any reason be held to be invalid, unenforceable, orcontrary to public policy or any law, then the remainder of the Agreement shallnot be affected thereby and shall remain in full force and effect.

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## 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 ofLender, and any such assignment by a party without prior written approval ofLender 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 theirrespective successors and permitted assigns.

 

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## 14.7         Integration Clause. This Agreement and the Note contain the entire agreement between theparties pertaining to the subject matter contained herein and supersede any andall prior and/or contemporaneous oral or written negotiations, agreements,representations, and understandings with regard to the substance of thisAgreement and the Note.  The parties, andeach of them, understand that this Agreement and the Note are made withoutreliance upon any inducement, statement, promise, or representation other thanthose contained therein.

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## 14.8         Governing Law. This Agreement will be governed by and construed in accordance with thelaws of the State of California, without giving effect to any choice of lawprinciples.

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## 14.9         Advice of Counsel. Each of the parties acknowledges that they have either sought andreceived the advice of legal counsel or have been afforded an opportunity toseek the advice of counsel regarding this Agreement and the Note prior to theirexecution.  Neither this Agreement northe Note, nor any provision hereof, shall be deemed prepared or drafted by oneparty or another, or its attorneys, and shall not be construed more stronglyagainst any party.

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## 14.10       VoluntaryExecution of Agreement.** **This Agreement and the Note areexecuted voluntarily and without any duress or undue influence on the part orbehalf of the parties hereto.  Each partyacknowledges that it: (i)  has read this Agreement and the Note; (ii) has been represented in the preparation, negotiation, and execution of thisAgreement and the Note by legal counsel of its own choice or that it hasvoluntarily declined to seek such counsel; (iii)  understands the termsand consequences of this Agreement and the Note; and (iv) is fully awareof the legal and binding effect of this Agreement and the Note.

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## 14.11       Headings.  The sectionheadings contained in this Agreement are inserted for convenience only and willnot affect in any way the meaning or interpretation of this Agreement.

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## 14.12       Costs; Expenses. Except upon the occurrence of an Event of Default, the parties heretoshall each bear their own costs, attorneys’ fees and expenses, and other feesincurred in connection with this Agreement.

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## 14.13       Counterparts. This Agreement may be executed in one or more counterparts and mayinclude multiple signature pages, all of which will be deemed to be oneinstrument.  Photocopies and facsimilesof original signature pages may be deemed as originals.

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## 14.14       Construction. Unless otherwise defined herein, capitalized terms used herein shallhave the meaning set forth in the Note of even date herewith.  Unless the context clearly indicatesotherwise, the singular shall include the plural and the plural shall includethe singular.  The masculine, feminineand neuter gender shall each include the other.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be duly executed and delivered asof the day and year first written above.

 
| **BORROWER** |                                          |
|--------------|-----------------------------------------------|
|         | OPEN ENERGY CORPORATION, a Nevada Corporation |
|         |                                          |
|         | By:                                           |   |
|         | Name:                                         |   |
|         | Title:                                        |   |
|         |                                          |
|         |                                          |
| **LENDER:**  | THE QUERCUS TRUST                             |
|         |                                          |
|         | By:                                           |   |
|         | Name:                                         |   |
|         | Title:                                        |   |
|              |                                               |  |  |

 

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Exhibit A

 

Form of Interest Warrant

 

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