**Exhibit 4.26**

 

**SECURED PROMISSORY NOTE**

** **

**THEISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS SECURED PROMISSORY NOTEHAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ORAPPLICABLE STATE SECURITIES LAWS.  THESECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) INTHE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIESUNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OFCOUNSEL, IN A FORM REASONABLY ACCEPTABLE TO BORROWER, THAT REGISTRATION ISNOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 ORRULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED INCONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENTSECURED BY THE SECURITIES.**

 

**OPEN ENERGY CORPORATION**

 
| Date: April 30, 2008 |   | U.S. $3,500,000 |
|----------------------|--------|-----------------|

 

**FOR VALUE RECEIVED,**Open Energy Corporation, aNevada corporation (“**Borrower**”),hereby promises to pay to The Quercus Trust, or its registered assigns (“**Lender**”), the sum of Three Million Five Hundred ThousandDollars ($3,500,000.00) or such lesser amount as shall equal the outstandingamount of advances made by Lender to Borrower (the “Loan”) pursuant to Section 1.2of the Loan and Security Agreement (the “**Advances**”).

 

# *(1)*   PAYMENTS OF PRINCIPAL.  On the Maturity Date, Borrower shall pay toLender, in cash, all outstanding principal under this Secured Promissory Note(this “**Note**”). The “**Maturity****Date**”shall be October 30, 2008.  Borrowermay prepay all or any portion of the outstanding principal at any time withoutfee, charge or premium.

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# *(2)*   MANDATORY PREPAYMENTS OF PRINCIPAL.

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## (a)   PrepaymentsUpon Failure of Meet Borrowing 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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## (b)   PrepaymentsUpon Receipt of Rebates.  Uponthe receipt by Borrower of funds in respect of Rebates (as defined in herein),Borrower shall prepay an amount of principal under the Loan equal to such fundsreceived in respect of such Rebates. Prepayments pursuant to this Section 1.5(ii) shall be madewithin five (5) Business Days of the receipt of the applicable Rebatefunds.

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# *(3)*   INTEREST.  This Note shall bear interest at the rate of18% per annum payable as follows:  Lendershall receive warrants (“Interest Warrants”) in the form attached to the Loanand Security Agreement as Exhibit A to purchase that number of shares ofcommon stock of the Borrower (“Common Stock”) that will equate to an 18% annualpercentage rate return on the Loan, assuming it is repaid upon maturity (whichequates to 1,389,096 shares of Common Stock as of the date hereof assuming theLoan is fully funded at $3.5 million), at an exercise price per share of$0.506, exercisable for seven (7) years commencing six months from theclosing of the Loan. In the event that the Loan is funded at less than $3.5million, a ratably lower number of Interest Warrants shall be issued.  In the event Subsequent Advances are made,Borrower shall issue to Lender a ratable number of additional InterestWarrants.

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# *(4)*   SECURITY.  Borrower’s performance of the obligations andcovenants of this Note, including but not limited to repayment, shall besecured by the lien and security interest in the Collateral, as set forth inthe Loan and Security Agreement.

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# *(5)*   EVENTOF DEFAULT.

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## (a)   Event of Default.  Each of the following events shall constitutean “**Event of Default**” hereunder:

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### (i) Borrower’s failure to pay to the Lender any amount when and as dueunder this Note; or

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### (ii) any Event of Default under the Loan and Security Agreement.

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## (b)   Acceleration.  Upon the occurrence of an Event of Defaultunder this Note, Lender shall have, at its option, the right, without furthernotice or demand, which Borrower hereby expressly waives, to declare the unpaidprincipal immediately due and payable and to exercise any other rights andremedies that Lender may have; provided, however, that Lender has delivered toBorrower written notice of such default and Borrower has not cured said defaultwithin five (5) business days after said notice.  Lender’s failure to accelerate the payment ofthis Note upon the occurrence of one or more events of default shall notconstitute a waiver of Lender’s right to exercise such options at anysubsequent time with respect to the same or any other event of default.  Lender’s acceptance of any payment under thisNote which is less than payment in full of all amounts then due and payableshall not constitute a waiver by Lender of any right to declare a defaulthereunder or to pursue any remedy available under this Note, at law or inequity, or under any other agreement, instrument or document entered into byand between Borrower and Lender.

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# *(6)*   LOST, STOLEN OR MUTILATED NOTE.  Uponreceipt by Borrower of evidence reasonably satisfactory to Borrower of theloss, theft, destruction or mutilation of this Note, and, in the case of loss,theft or destruction, of any indemnification undertaking by the Lender toBorrower in customary form and, in the case of mutilation, upon surrender andcancellation of this Note, Borrower shall execute and deliver to the Lender anew Note representing the outstanding principal.

 

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# *(7)   CUMULATIVERIGHTS AND INJUNCTIVE RELIEF.  Theremedies provided in this Note shall be cumulative and in addition to all otherremedies available under this Note, or any other agreement between Lender and Borrower,at law or in equity (including a decree of specific performance and/or otherinjunctive relief) and nothing herein shall limit the Lender’s right to pursueactual and consequential damages for any failure by Borrower to comply with theterms of this Note.  Borroweracknowledges that a breach by it of its obligations hereunder will causeirreparable harm to the Lender and that the remedy at law for any such breachmay be inadequate.  Borrower thereforeagrees that, in the event of any such breach or threatened breach, the Lendershall be entitled, upon posting a bond and demonstrating economic loss, inaddition to all other available remedies, to an injunction restraining anybreach.*

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# *(8)*   PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) thisNote is placed in the hands of an attorney for collection or enforcement or iscollected or enforced through any legal proceeding or the Lender otherwisetakes action to collect amounts due under this Note or to enforce theprovisions of this Note or (b) there occurs any bankruptcy,reorganization, receivership of Borrower or other proceedings affecting Companycreditors’ rights and involving a claim under this Note, then Borrower shallpay the costs incurred by the Lender for such collection, enforcement or actionor in connection with such bankruptcy, reorganization, receivership or otherproceeding, including, but not limited to, financial advisory fees andattorneys’ fees and disbursements.

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# *(9)*   CONSTRUCTION; HEADINGS.  This Note shall bedeemed to be jointly drafted by Borrower and the Lender and shall not beconstrued against any person as the drafter hereof.  The headings of this Note are for convenienceof reference and shall not form part of, or affect the interpretation of, thisNote.

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# *(10)*         FAILURE OR INDULGENCE NOT WAIVER.  Nofailure or delay on the part of the Lender in the exercise of any power, rightor privilege hereunder shall operate as a waiver thereof, nor shall any singleor partial exercise of any such power, right or privilege preclude other orfurther exercise thereof or of any other right, power or privilege.

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# *(11)*         NOTICES; PAYMENTS.

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## (a)   Notices.  Any and all notices or other communications ordeliveries required or permitted to be provided hereunder shall be in writingand shall be deemed given and effective on the earliest of (a) the date oftransmission, if such notice or communication is delivered via facsimile at thefacsimile number set forth on the signature pages attached hereto prior to 5:30p.m. (Pacific time) on a Business Day, (b) the next Business Day after the dateof transmission, if such notice or communication is delivered via facsimile atthe facsimile number set forth on the signature pages attached hereto on a daythat is not a Business Day or later than 5:30 p.m. (Pacific time) on anyBusiness Day, (c) the 2nd Business Day following the date of mailing, if sentby U.S. nationally recognized overnight courier service, or (d) upon actual 

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## receipt by the party to whomsuch notice is required to be given.  Theaddress for such notices and communications shall be as set forth below:

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|   | If to Lender:                        |
|--------|--------------------------------------|
|   |                                 |
|   | The Quercus Trust                    |
|   | 1835 Newport Blvd.                   |
|   | A109 - PMB 467                       |
|   | Costa Mesa, CA 92627                 |
|   | Facsimile No: (949)  631-2325        |
|   | Attention: David Gelbaum             |
|   |                                 |
|   | If to Borrower:                      |
|   |                                 |
|   | Open Energy  Corporation             |
|   | 514 Via de la  Valle, Suite 200 |
|   | Solana Beach,  California 92075      |
|   | Facsimile No.:  (858) 794-8811       |
|   | Attention:  General Counsel          |

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## (b)   Payments. Whenever any payment of cash is to bemade by Borrower to any Person pursuant to this Note, such payment shall bemade in lawful money of the United States of America by a check drawn on theaccount of Borrower and sent via overnight courier service to such Person atthe address provided for notice pursuant to Section 11(a) above, oras subsequently provided to the other party in writing; provided that theLender may elect to receive a payment of cash via wire transfer of immediatelyavailable funds by providing Borrower with prior written notice setting outsuch request and the Lender’s wire transfer instructions.  Whenever any amount expressed to be due bythe terms of this Note is due on any day which is not a Business Day, the sameshall instead be due on the next succeeding day which is a Business Day.

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# *(12)*         CANCELLATION.  After all principal,****interest (in the form of the Interest Warrants) and otheramounts at any time owed on this Note have been indefeasibly paid in full, thisNote shall automatically be deemed canceled, shall be surrendered to Borrowerfor cancellation and shall not be reissued, and the security interest grantedin the Collateral shall terminate.  TheLender agrees to promptly execute, file and/or deliver any and all documentsreasonably required or requested to further evidence such termination,including a UCC termination statement.

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# *(13)*         WAIVERS BY BORROWER.  Borrower(a) waives diligence, grace, demand, presentment for payment, exhibitionof this Note, protest, notice of protest, notice of dishonor, notice of demand,notice of nonpayment, and any or all other notices whatsoever, and any and allexemption rights against the indebtedness evidenced by this Note; (b) agreesto any and all extensions or renewals from time to time without notice and toany partial payments of this Note; (c) consents to offsets of any sumsowed to Borrower by Lender at any time and to any release of all or any part ofthe security for this Note, or to any release of any party liable for 

 

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# *payment of this Note; and (d) agreesthat any such waiver, extension, renewal, release, consent, or partial paymentmay be made without notice to Borrower or any other party and shall not releaseor discharge any one or all of them from the obligation of payment of this Noteor any installment of this Note or any other liability under this Note.  Any security given for the obligations ofBorrower may be waived, exchanged, surrendered or otherwise dealt with byLender without affecting the liability of Borrower or any other party who mightsubsequently become liable hereon.*

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# *(14)*         GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL.  ThisNote shall be construed and enforced in accordance with, and all questionsconcerning the construction, validity, interpretation and performance of thisNote shall be governed by, the internal laws of the State of California,without giving effect to any choice of law or conflict of law provision or rule (whetherof the State of California or any other jurisdictions) that would cause theapplication of the laws of any jurisdictions other than the State of California.  Borrower hereby irrevocably submits to theexclusive jurisdiction of the state and federal courts sitting in Los AngelesCounty, California, for the adjudication of any dispute hereunder or inconnection herewith or with any transaction contemplated hereby or discussedherein, and hereby irrevocably waives, and agrees not to assert in any suit,action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding is broughtin an inconvenient forum or that the venue of such suit, action or proceedingis improper.  Nothing contained hereinshall be deemed to limit in any way any right to serve process in any mannerpermitted by law.  In the event that anyprovision of this Note is invalid or unenforceable under any applicable statuteor rule of law, then such provision shall be deemed inoperative to theextent that it may conflict therewith and shall be deemed modified to conformwith such statute or rule of law. Any such provision which may prove invalid or unenforceable under anylaw shall not affect the validity or enforceability of any other provision ofthis Note.  Nothing contained hereinshall be deemed or operate to preclude the Lender from bringing suit or takingother legal action against Borrower in any other jurisdiction to collect on Borrower’sobligations to the Lender, to realize on any collateral or any other securityfor such obligations, or to enforce a judgment or other court ruling in favorof the Lender.  **BORROWERHEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TOREQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR INCONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATEDHEREBY**

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# *(15)*         RECORDS OF PAYMENT.  The records of Lender shall be prima facie evidenceof the amount owing on this Note.

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# *(16)*         USURY SAVINGS.  Borrower and Lender intend to contract incompliance with all state and federal usury laws governing the loan evidencedby this Note.  Lender and Borrower agreethat none of the terms of this Note shall be construed to require payment ofinterest at a rate in excess of the maximum interest rate allowed by anyapplicable state or federal usury laws. If Lender receives sums which constitute interest that would otherwiseincrease the effective interest rate on this Note to a rate in excess of that permittedby any applicable law, then all such sums constituting interest in excess ofthe maximum lawful rate shall at Lender’s option either be credited to thepayment of principal or returned to Borrower. The provisions of this Section 16 control the other provisions ofthis Note and any other agreement between Borrower and Lender

 

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# *(17)*         SEVERABILITY.  All provisions hereof are severable.  If any provision hereof is declared invalidfor any reason, that invalidity shall not affect any other provision of thisNote, all of which shall remain in full force and effect

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# *(18)*         NO IMPAIRMENT.  No provision of this Note or of the otherLoan Documents shall alter or impair the obligation of Borrower, which isabsolute and unconditional, to pay the principal amounts and the interestpayable thereon at the place, time and in the currency prescribed in thisNote.  Borrower agrees that to the extentBorrower makes any payment to Lender in connection with the indebtednessevidenced by the Note, and all or any part of such payment is subsequentlyinvalidated, declared-to be fraudulent or preferential, set aside or requiredto be repaid by Lender or paid over to a trustee, receiver or any other entity,whether under any bankruptcy act or otherwise (any such payment is hereinafterreferred to as a “**Preferential Payment**”),then the indebtedness of Borrower under the Note shall continue or shall bereinstated, as the case may be, and, to the extent of such payment or repaymentby Borrower, the indebtedness evidenced by the Note or part thereof intended tobe satisfied by such Preferential Payment shall be revived and continued infull force and effect as if said Preferential Payment had not been made.

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# *(19)*         CERTAIN DEFINITIONS.  For purposes ofthis Note, the following terms shall have the following meanings:

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

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## (b)   “**Borrowing Conditions**” means that the amount of the InitialAdvance plus the amount of any proposed Subsequent Advance does not exceed theBorrowing Base.

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## (c)   “**Business Day**” means any day other than Saturday, Sunday orother day on which commercial banks in the city of Los Angeles are authorizedor required by law to remain closed

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## (d)   “**Inventory**” means all inventory of the Company carried on theCompany’s financial statements, to the extent the same qualify as “goods” underthe UCC.

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## (e)   “**Lender**” shall have the meaning set forth in the firstparagraph hereof.

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## (f)    The “**Loan Documents**” are this Note, the Loan and SecurityAgreement, the Deposit Account Control Agreement, all financing statementsfiled or to be filed against Borrower in favor of Lender and any and all otherinstruments, certificates, agreements, and other documents executed by Borrowerat the direction or request of Lender in connection with the loan evidenced bythis Note, and any amendments thereto.

 

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## (g)           The “**Loan and Security Agreement**” is that certain Loan andSecurity Agreement entered into by and between Borrower and Lender, executed onor about even date herewith, whereby Borrower grants to Lender a lien andsecurity interest on that certain personal property described in detail in theLoan and Security Agreement (collectively, the “**Collateral**”) and shall secure performance of this Note and allObligations of Borrower to Lender, as such term is defined in the Loan andSecurity Agreement.

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## (h)           “**Note**” means this secured promissory note and shall includeall notes issued in exchange thereof or replacement thereof.

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## (i)            “**Person**” means an individual or legal entity, including butnot limited to a corporation, a limited liability company, a partnership, ajoint venture, a trust, an unincorporated organization and a government or anydepartment or agency thereof.

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## (j)            “**Qualified Accounts Receivable**” shall mean all accounts receivableof Borrower reflected in its financial records from time to time, to the extentsuch accounts receivable meet one or more of the following qualifications:

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## (i)         accountsreceivable from Borrower’s customers that have not been outstanding for morethan sixty (60) days from the applicable invoice date;

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## (ii)        rebates from theCalifornia Solar Initiative that have been assigned to Borrower in connectionwith sales of its products and reserved with the State of California; and

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## (iii)       rebates that have notbeen reserved with the State of California, if the applicable customer ofBorrower has guaranteed the payment of such Rebate or receipt by Borrower ofall necessary documentation and information to submit a claim for such Rebateon or prior to a date within 180 days of the later of April 10, 2008 orthe applicable invoice date.  Section 13(b) and(c) shall together be referred to herein as “**Rebates**”.

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# *(20)*         DISCLOSURE. Upon receipt or delivery by Borrower of any notice inaccordance with the terms of this Note, unless Borrower has in good faithdetermined that the matters relating to such notice do not constitute material,nonpublic information relating to Borrower or its Subsidiaries, Borrower shallcomply with the disclosure requirements under the U.S. federal securities laws.

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**[Signature Page Follows]**

 

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IN WITNESSWHEREOF, Borrower has caused this Note to be duly executed as of the set forthabove.

 

 
|   |   OPEN ENERGY CORPORATION |
|--------|-------------------------------------|
|   |                                |   |
|   |                                |   |
|   | By:                                 |   |
|   |                                |   |
|   |                                | Name: |   |
|   |                                | Title: |   |

 

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