FORBEARANCE AGREEMENT

This FORBEARANCE AGREEMENT, dated as of June 11, 2009 (this “ Agreement ”), is entered into by and among Applied Solar, Inc. (f/k/a Open Energy Corporation), a Nevada corporation (the “ Borrower ”) and The Quercus Trust, in its capacity as lender under the Loan and Security Agreement dated May 18, 2009 (“ May 2009 LSA ”), the Loan and Security Agreement dated April 29, 2008 (“ April 2008 LSA ”), and holder of the Series B Convertible Note dated September 19, 2007 (the “ Series B Note ”) (in such capacities, the “ Lender ”).

WHEREAS, the Borrower and the Lender are parties to the May 2009 LSA, the April 2008 LSA and the Series B Note, including all annexes, exhibits and schedules thereto (as the same may from time to time have been amended, restated, supplemented or otherwise modified as of the date hereof, the “ Loan Agreements ”);

WHEREAS, the Specified Defaults (as hereinafter defined) have occurred and are continuing as of the date hereof;

WHEREAS, Borrower has requested that Lender forbear from the exercise of its rights and remedies under the Loan Agreements and other instruments and agreements executed and delivered to the Lender in connection therewith (collectively with the Loan Agreements, the “Loan Documents ”) notwithstanding the occurrence of one or more Specified Defaults; and

WHEREAS, subject to the terms and conditions hereof, Lender has agreed to forbear from the exercise of certain of its rights under the Loan Documents;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by all parties hereto, the parties hereto hereby agree as follows:

1.   Defined Terms .  Each capitalized term used herein and not otherwise defined herein shall have the meaning attributed to such term in the applicable Loan Agreement.  Each of the following capitalized terms shall have the meaning set forth below:

(a)   “ Forbearance Default ” means the occurrence of any Default or Event of Default, other than the Specified Defaults.

(b)   “ Forbearance Period ” means the period beginning on the date hereof and ending on the Forbearance Termination Date.

(c)   “ Forbearance Termination Date ” means the earliest to occur of (i) 5:00 p.m. (pacific daylight time) on July 1, 2009, (ii) the date upon which a Forbearance Default occurs, or (iii) the breach by any Borrower of any representation, warranty, covenant, or agreement contained herein.

(d)   “ Specified Defaults ” means the following Defaults and/or Events of Default under the Loan Agreements:

(i)   Borrower’s breach of Section 8.2 of the Series B Note;

(ii)   Borrower’s breach of Sections 8.1, 8.2 and 8.8 (by reason of Borrower’s violation of the covenant in Section 7.10(vi) of the April 2008 LSA) of the April 2008 LSA; and

(iii)   Borrower’s breach of Section 4(a)(vi) of the Series B Note.

2.   Representations, Warranties, Confirmations, and Agreements by Borrower with respect to Specified Defaults and Obligations.

(a)   The Borrower represents and warrants to Lender that (i) the Specified Defaults have occurred and are continuing; and (ii) no Defaults or Events of Defaults other than the Specified Defaults have occurred and are continuing as of the date hereof or, as of the date hereof, are expected to occur prior to the expiration of the Forbearance Period.

(b)   The Borrower acknowledges and agrees that as of the date hereof, the principal balances of the outstanding Obligations under the Loan Agreements (which amount does not include interest (other than interest which has been capitalized and added to the principal balances of the Loans), fees, expenses and other amounts which are chargeable or otherwise reimbursable under the Loan Agreements) are as follows:

The Borrower confirms, acknowledges, and agrees that all of the Obligations, including those set forth above, are valid and ou