applied_8k-ex1002.htm


    Exhibit
10.2

     

    
      SECURED
PROMISSORY NOTE

       

      APPLIED
SOLAR, INC.

       

      
        	
                Date:  May 18,
      2009

              	
                U.S.
      $698,000

              


      

      


      FOR VALUE RECEIVED, in cash
and other consideration,
Applied Solar, Inc., a Nevada corporation (“Borrower”), hereby promises to
pay to The Quercus Trust, or its registered assigns (“Lender”), the sum of Six
Hundred Ninety Eight Thousand ($698,000) (the “Loan”).

      
 

      (1)           PAYMENTS OF
PRINCIPAL.  On the Maturity Date, unless an Event of Default
shall have sooner occurred, Borrower shall pay to Lender, in cash, all
outstanding principal under this Secured Promissory Note (this “Note”).  The “Maturity Date” shall be June 15,
2009.  Borrower may prepay all or any portion of the amounts owing
under this Note at any time without fee, charge or premium.

       

      (2)           INTEREST.  This
Note shall bear interest at the rate of 10% per annum payable , in cash, on the
Maturity Date.

       

      (3)           SECURITY.  Borrower’s
performance of the obligations and covenants of this Note, including but not
limited to repayment, shall be secured by the lien and security interest in the
Collateral, as set forth in that certain  Loan and Security Agreement
between Lender and Borrower executed on even date herewith, describing all of
the assets of Borrower, wherever located, subject only to existing perfected
liens and encumbrances.

       

      (4)           EVENT OF
DEFAULT.

       

      (a)           Event of
Default.  Each of the following events shall constitute an
“Event of Default”
hereunder:

       

      (i)  Borrower's
failure to pay to the Lender any amount when and as due under this Note;
or

       

      (ii)  any
Event of Default (as defined in the Loan and Security Agreement) under the Loan
and Security Agreement including but not limited to the filing of any case or
proceeding under any bankruptcy law or similar provision of state law, or any
effort by Borrower to impose a lien senior to that of Lender in any Collateral
held by Lender.

       

      (b)           Acceleration.  Upon
the occurrence of an Event of Default under this Note, Lender shall have, at its
option, the right, without further notice or demand, which Borrower hereby
expressly waives, to declare the unpaid principal and interest immediately due
and payable and to exercise any other rights and remedies that Lender may
have.  Lender’s failure to accelerate the payment of this Note upon
the occurrence of one or more events of default shall not constitute a waiver of
Lender’s right to exercise such options at any subsequent time with respect to
the same or any other event of default.  Lender’s acceptance of any
payment under this Note which is less than payment in full of all amounts then
due and payable shall not constitute a waiver by Lender of any right to declare
a default hereunder or to pursue any remedy available under this Note, at law or
in equity, or under any other agreement, instrument or document entered into by
and between Borrower and Lender.

       


      
        
           


        

        
          1

          
            

          

        

        
           


        

      


      (5)           LOST, STOLEN OR
MUTILATED
NOTE.  Upon receipt by Borrower of evidence reasonably
satisfactory to Borrower of the loss, theft, destruction or mutilation of this
Note, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Lender to Borrower in customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, Borrower shall execute
and deliver to the Lender a new Note representing the outstanding
principal.

       

      (6)           CUMULATIVE
RIGHTS AND
INJUNCTIVE RELIEF.  The remedies provided in this Note shall be
cumulative and in addition to all other remedies 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 other injunctive relief) and nothing
herein shall limit the Lender's right to pursue actual and consequential damages
for any failure by Borrower to comply with the terms of this
Note.  Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Lender and that the remedy at law
for any such breach may be inadequate.  Borrower therefore agrees
that, in the event of any such breach or threatened breach, the Lender shall be
entitled, upon posting a bond and demonstrating economic loss, in addition to
all other available remedies, to an injunction restraining any
breach.

       

      (7)           PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS.  If (a) this Note is placed in the
hands of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Lender otherwise takes action to collect
amounts due under this Note or to enforce the provisions of this Note or (b)
there occurs any bankruptcy, reorganization, receivership of Borrower or other
proceedings affecting Borrower’s creditors' rights and involving a claim under
this Note, then Borrower shall pay the costs incurred by the Lender for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited to,
financial advisory fees and attorneys' fees and disbursements.

       

      (8)           CONSTRUCTION;
HEADINGS.  This Note shall be deemed to be jointly drafted by
Borrower and the Lender and shall not be construed against any person as the
drafter hereof.  The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note.

       

      (9)           FAILURE OR INDULGENCE NOT
WAIVER.  No failure or delay on the part of the Lender in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

       

      (10)           NOTICES;
PAYMENTS.

       


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      (a)           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (Pacific time) on a
Business Day, (b) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Business Day
or later than 5:30 p.m. (Pacific time) on any Business Day, (c) the 2nd
Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given.  The address for such
notices and communications shall be as set forth below:

       

      If to Lender:

       

      The Quercus Trust

      1835 Newport Blvd.

      A109 - PMB 467

      Costa Mesa, CA 92627

      Facsimile No: (949)
631-2325

      Attention: David Gelbaum

      


      With a copy to:

      


      Joseph Bartlett, Esq.

      1900 Avenue of the Stars

      19th
Floor

      Los Angeles, CA 90067

      Facsimile No: (310)
388-1055

      


       

      If to Borrower:

       

      Applied
Solar, Inc.

       

      3560
Dunhill Street

      San
Diego, California 92101

      Facsimile
No.: (858) 909-4099

      Attention:
General Counsel

       

      (b)            Payments.  Whenever
any payment of cash is to be made by Borrower to any Person pursuant to this
Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of Borrower and sent via overnight courier
service to such Person at the address provided for notice pursuant to Section
10(a) above, or as subsequently provided to the other party in writing; provided
that the Lender may elect to receive a payment of cash via wire transfer of
immediately available funds by providing Borrower with prior written notice
setting out such request and the Lender's wire transfer
instructions.  Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day.

       


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


      (11)           CANCELLATION.  After
all principal, interest and other
amounts at any time owed on this Note have been indefeasibly paid in full, this
Note shall automatically be deemed canceled, shall be surrendered to Borrower
for cancellation and shall not be reissued, and the security interest granted in
the Collateral shall terminate.  The Lender agrees to promptly
execute, file and/or deliver any and all documents reasonably required or
requested to further evidence such termination, including a UCC termination
statement.

       

      (12)           WAIVERS BY BORROWER.
 Borrower (a) waives diligence, grace, demand, presentment for payment,
exhibition of 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 all exemption rights against the indebtedness evidenced by this Note;
(b) agrees to any and all extensions or renewals from time to time without
notice and to any partial payments of this Note; (c) consents to offsets of any
sums owed to Borrower by Lender at any time and to any release of all or any
part of the security for this Note, or to any release of any party liable for
payment of this Note; and (d) agrees that any such waiver, extension, renewal,
release, consent, or partial payment may be made without notice to Borrower or
any other party and shall not release or discharge any one or all of them from
the obligation of payment of this Note or any installment of this Note or any
other liability under this Note.  Any security given for the
obligations of Borrower may be waived, exchanged, surrendered or otherwise dealt
with by Lender without affecting the liability of Borrower or any other party
who might subsequently become liable hereon.

       

      (13)           GOVERNING LAW; JURISDICTION;
SEVERABILITY; JURY TRIAL.  This Note shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note 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 (whether of the State of California or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California.  Borrower hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Los Angeles County, California, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper.  Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by
law.  In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Note.  Nothing contained herein shall be deemed or
operate to preclude the Lender from bringing suit or taking other legal action
against Borrower in any other jurisdiction to collect on Borrower's obligations
to the Lender, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Lender.  BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY.

       


      
        
           


        

        
          4

          
            

          

        

        
           


        

      


      (14)           RECORDS OF
PAYMENT.  The records of Lender shall be prima facie evidence
of the amount owing on this Note.

       

      (15)           USURY
SAVINGS.  Borrower and Lender intend to contract in compliance
with all state and federal usury laws governing the loan evidenced by this
Note.  Lender and Borrower agree that none of the terms of this Note
shall be construed to require payment of interest at a rate in excess of the
maximum interest rate allowed by any applicable state or federal usury
laws.  If Lender receives sums which constitute interest that would
otherwise increase the effective interest rate on this Note to a rate in excess
of that permitted by any applicable law, then all such sums constituting
interest in excess of the maximum lawful rate shall at Lender’s option either be
credited to the payment of principal or returned to Borrower.  The
provisions of this Section 16 control the other provisions of this Note and any
other agreement between Borrower and Lender.

       

      (16)           SEVERABILITY.  All
provisions hereof are severable.  If any provision hereof is declared
invalid for any reason, that invalidity shall not affect any other provision of
this Note, all of which shall remain in full force and effect

       

      (17)           NO
IMPAIRMENT.  No provision of this Note or of the other Loan
Documents shall alter or impair the obligation of Borrower, which is absolute
and unconditional, to pay the principal amounts and the interest payable thereon
at the place, time and in the currency prescribed in this
Note.  Borrower agrees that to the extent Borrower makes or has
previously made any payment to Lender in connection with the indebtedness
evidenced by the Note, and all or any part of such payment is subsequently
invalidated, declared-to be fraudulent or preferential, set aside or required to
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 hereinafter
referred to as a “Voidable
Payment”), then the indebtedness of Borrower under the Note shall
continue, be increased or shall be reinstated, as the case may be, and, to the
extent of such payment or repayment by Borrower, the indebtedness evidenced by
the Note or part thereof intended to be satisfied by such Preferential Payment
shall be revived and continued in full force and effect as if said Voidable
Payment had not been made.

       

      (18)           CERTAIN
DEFINITIONS.  For purposes of this Note, the following terms
shall have the following meanings:

       

      (a)           “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in the city
of Los Angeles are authorized or required by law to remain closed

       

      (b)           
“Lender” shall have the
meaning set forth in the first paragraph hereof.

       

      (c)           
The “Loan Documents” are
this Note, the Loan and Security Agreement, all financing statements filed or to
be filed against Borrower in favor of Lender and any and all other instruments,
certificates, agreements, and other documents executed by Borrower at the
direction or request of Lender in connection with the loan evidenced by this
Note, and any amendments thereto.

       


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      (d)          The
“Loan and Security
Agreement” is that certain Loan and Security Agreement entered into by
and between Borrower and Lender, executed on or about even date herewith,
whereby Borrower grants to Lender a lien and security interest on that certain
personal property described in detail in the Loan and Security Agreement
(collectively, the “Collateral”) and shall secure
performance of this Note and all Obligations of Borrower to Lender, as such term
is defined in the Loan and Security Agreement.

       

      (e)           “Note” means this secured
promissory note and shall include all notes issued in exchange thereof or
replacement thereof.

       

      (f)           “Person” means an individual or
legal entity, including but not limited to a corporation, a limited liability
company, a partnership, a joint venture, a trust, an unincorporated organization
and a government or any department or agency thereof.

       

      (19)           DISCLOSURE. Upon receipt or
delivery by Borrower of any notice in accordance with the terms of this Note,
unless Borrower has in good faith determined that the matters relating to such
notice do not constitute material, nonpublic information relating to
Borrower or its Subsidiaries, Borrower shall comply with the disclosure
requirements under the U.S. federal securities laws.

       

      [Signature
Page Follows]

       


      
        
           


        

        
          6

          
            

          

        

        
           


        

      


      


      IN
WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the set
forth above.

       

      
        
          
            
              
                	 
      APPLIED
      SOLAR, INC.
	 
	 
	
                        By:   /s/David
      Field                                               
      

                      
	
                        Name:
      David Field

                      
	
                        Title:
      President and Chief Executive
Officer

                      


              

            

          

        

      

      


       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      7