SECURITY AGREEMENT
Exhibit
10.2
THIS SECURITY AGREEMENT (this
“Agreement”) is dated as of February 11, 2009, and is entered into by and
between ThermoEnergy Corporation, a Delaware corporation having its principal
place of business in Little Rock, Arkansas (“Thermo”) and Thermo’s subsidiary
CASTion Corporation, a Massachusetts corporation having its principal place of
business in Worcester, Massachusetts (“CASTion” and, together with Thermo,
“Debtor”), and The Quercus Trust (“Secured Party”). Capitalized terms
not otherwise defined herein are used as defined in the New York Uniform
Commercial Code on the date of this Agreement.
WHEREAS, the Debtor is borrowing Two
Hundred Fifty Thousand Dollars ($250,000.00) from Secured Party pursuant to that
certain Promissory Note of even date herewith in favor of Secured Party (the
“Note”);
WHEREAS, it is a condition precedent to
Secured Party’s making any payments to Debtor under the Note that the Debtor
execute and deliver to the Secured Party a security agreement in substantially
the form hereof; and
WHEREAS, the Debtor wishes to grant a
security interest in favor of the Secured Party as herein provided.
NOW, THEREFORE, in consideration of the
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Grant of
Security. As consideration for Secured Party’s loan to Debtor
pursuant to the Note, Debtor hereby grants to Secured Party a security interest
in all intellectual property rights of Debtor, including without limitation all
rights under and pursuant to that certain License Agreement between Debtor and
Xxxxxxxxx X. Xxxxxxxxxx dated October 1, 2003, as amended by that certain letter
agreement between Debtor and Xxxxxxxxx X. Xxxxxxxxxx dated December 17, 2007
(the “Fassbender License”) and any and all proceeds from the transfer,
assignment or other permitted disposition thereof (the
“Collateral”). Notwithstanding the foregoing, the Collateral shall
not include any and all rights related to the patents and licenses described on
Exhibit A hereto and related intellectual property used in connection therewith,
including, without limitation, the intellectual property rights used in or
relating to the Debtor’s “TEPS” business (collectively, the “Excluded
Assets”),.
SECTION 2. Security for
Obligations. This Agreement secures and the Collateral is
collateral security for the prompt payment or performance in full (including,
without limitation, amounts that would become due but for the filing of a
petition in bankruptcy), of all amounts when due under the Note, as well as
Debtor’s performance and observance of all covenants contained herein and in the
Note and the Fassbender License (the “Obligations”).
SECTION 3. Further
Assurances. Debtor hereby authorizes Secured Party to execute
any and all financing statements necessary to carry out this
Agreement. Debtor further agrees that from time to time, at the
expense of Debtor, Debtor will promptly execute and deliver all further
instruments and documents, and take all further action that Secured Party may
reasonably request, in order to perfect, protect and maintain or establish the
priority of any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
SECTION
4. Representations, Warranties
and Covenants. Debtor represents, warrants and covenants as
follows:
(a) Thermo
is and will continue to be a corporation existing and in good standing under the
laws of the State of Delaware.
(b) CASTion
is and will continue to be a corporation existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(c) Debtor
is duly empowered and authorized to enter into, and grant security interests in,
its property, and perform its obligations under this Agreement and all other
instruments and transactions contemplated hereby or relating
hereto. The execution, delivery and performance by Debtor of this
Agreement and all other instruments and contemplated transactions do not and
will not violate any law or any provision of nor be grounds for acceleration
under any agreement, indenture, note or instrument which is binding upon Debtor,
including without limitation, Debtor’s Certificate of Incorporation, Articles of
Organization, By-Laws or any other loan or security agreements.
(d) Assuming
the due filing of financing statements in proper form with the proper public
officials, the security interest granted to Secured Party pursuant to this
Agreement is a valid, perfected first-priority security interest in the that
portion of the Collateral in which a security interest may be perfected under
the Uniform Commercial Code.
(e) Debtor
shall not hereafter transfer, assign or otherwise dispose of the Collateral
without Secured Party’s prior written consent. Debtor shall not
create, permit or suffer to exist, and shall take such other action as is
necessary to remove, any claim to or interest in the Collateral, and the
security interest granted hereby, and shall defend the right, title and interest
of Secured Party in and to the Collateral against all claims and demands of all
persons and entities at any time claiming the same or any interest
therein.
(f) Subject
to any limitation stated therein or in connection therewith, all information
furnished by Debtor concerning the Collateral or otherwise in connection with
the Obligations, is or shall be at the time the same is furnished, accurate,
correct and complete in all material respects.
(g) All
representations, warranties and covenants of Debtor contained in this Agreement
and any other agreement with Secured Party shall be true and correct at the time
of the effective date of each such agreement and shall be deemed continuing and
shall remain true, correct and in full force and effect until payment and
satisfaction in full of all of the Obligations.
(g) Debtor
shall not pledge, encumber, hypothecate, or grant a security interest in the
Excluded Assets to any person or entity unless it first makes arrangements
reasonably acceptable to Secured Party to pledge to Secured Party the proceeds
of such transfer as additional Collateral hereunder.
(h) The
Company’s rights in the Collateral are sufficient to conduct the business of the
Company (excluding the TEPS business) as currently conducted and proposed to be
conducted.
SECTION
5. Secured
Party’s Appointment as Attorney-in-Fact. Debtor hereby
irrevocably constitutes and appoints, from and after the occurrence of a default
by Debtor in its obligations under this Agreement, Secured Party and any officer
or agent thereof, with full power of substitution, as Debtor’s true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in Secured Party’s own name, from
time to time in Secured Party’s discretion, for the purpose of carrying out the
terms of this agreement, to take any and all appropriate action and to execute
any and all documents and instruments that may be necessary or desirable to
accomplish the purposes of this agreement and, without limiting the generality
of the foregoing, hereby grants to Secured Party the power and right, on behalf
of Debtor, without notice to or assent by Debtor to execute, file and record all
such financing statements, certificates of title and other certificates of
registration and operation and similar documents and instruments as Secured
Party may deem necessary or desirable to protect, perfect and validate Secured
Party’s security interest.
Debtor
hereby ratifies all that such attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
The
powers conferred upon Secured Party hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Secured Party to
exercise any such powers. The Secured Party shall be accountable only
for amounts that Secured Party actually receives as a result of the exercise of
such powers and neither the Secured Party nor any of its partners, officers,
directors, employees or agents shall be responsible to Debtor for any act or
failure to act, except for Secured Party’s own gross negligence or willful
misconduct.
SECTION 6.
Remedies. If a default by Debtor in its Obligations under
Section 2 of this Agreement shall have occurred and is continuing, Secured Party
shall have all of the rights and remedies which secured parties may have under
the New York Uniform Commercial Code or other applicable law or at equity, and
may do, at its option, one or more of the following, with or without further
notice to Debtor:
(a) Accelerate
and declare all or any part of the Obligations to be immediately due, payable
and performable;
(b) Appropriate,
set off and apply to any or all of the Obligations, any or all Collateral in
such manner as Secured Party may determine; and/or
(c) Foreclose
the security interest created under this Agreement or under any other agreement
relating to the Collateral by any available procedure and with or without
judicial process.
SECTION 7. Termination of Security
Interest. Secured Party’s security interest in the Collateral
shall be extinguished when (a) Debtor completes performance of all Obligations
to Secured Party, and (b) Secured Party has no commitment to Debtor (whether
under the Note or otherwise) that would give rise to an
Obligation. By way of clarification, Secured Party acknowledges that
the Obligations of Debtor under the Fassbender License shall not be deemed to be
“Obligations” for purposes of this Agreement from and after the date on which
(i) the Note shall have been paid in full, (ii) any other payment Obligations of
Debtor under the Note or this Agreement have been satisfied in full and (iii)
Secured Party no longer has any commitment to Debtor that would give rise to an
Obligation, and at such time Secured Party’s security interest in the Collateral
shall be extinguished notwithstanding the existence of continuing Obligations of
Debtor under the Fassbender License.
SECTION 8. Governing
Law. This Agreement and the rights of the parties shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements executed and to be performed wholly within such state
and without regard to principles of conflicts of law. Each party
irrevocably (a) consents to the jurisdiction of the federal and state courts
situated in New York, New York in any action that may be brought for the
enforcement of this Note, and (b) submits to and accepts, with respect to its
properties and assets, generally and unconditionally, the in personam
jurisdiction of the aforesaid courts, waiving any defense that such court is not
a convenient forum; provided,
however, that if the federal and state courts situated in New York, New
York refuse to accept jurisdiction in any action brought for the enforcement of
this Note, each party irrevocably (a) consents to the jurisdiction of the
federal and state courts situated in Wilmington, Delaware in any such action,
and (b) submits to and accepts, with respect to its properties and assets,
generally and unconditionally, the in personam jurisdiction of the aforesaid
courts, waiving any defense that such court is not a convenient
forum. In any such litigation to the extent permitted by applicable
law, each party waives personal service of any summons, complaint or other
process, and agrees that the service thereof may be made either (i) in the
manner for giving of notices provided in this Note (other than by telecopier) or
(ii) in any other manner permitted by law..
SECTION 9. Severability. In
case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation and in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 10. General. Secured
Party shall not be deemed to have waived any of its respective rights hereunder
or under any other agreement, instrument or paper signed by Debtor unless such
waiver be in writing and signed by Secured Party. No delay or
omission on the part of Secured Party in exercising any right shall operate as a
waiver of such right or any other right. All of Secured Party’s
rights and remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised singularly or
concurrently. The provisions hereof shall, as the case may require,
bind or inure to the benefit of, the respective heirs, successors, legal
representatives and assigns of Debtor and Secured Party.
SECTION 11. Amendments. This
Agreement may be amended or modified only by a written instrument executed by
each party hereto.
SECTION 12. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Debtor and Secured
Party have caused this Agreement to be duly executed as of the date first above
written.
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“DEBTOR”
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ThermoEnergy
Corporation,
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a
Delaware corporation
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By:
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/s/ Xxxxxx X.
Xxxxxx
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Xxxxxx
X. Xxxxxx
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Executive
Vice President and CFO
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CASTion
Corporation,
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a
Massachusetts corporation
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By:
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/s/ Xxxxxx X.
Xxxxxx
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Xxxxxx
X. Xxxxxx
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Executive
Vice President and CFO
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“SECURED
PARTY”
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| /s/ Xxxxx Xxxxxxx | ||
| Xxxxx Xxxxxxx, | ||
| Trustee of The Quercus Trust | ||
Exhibit
A
Excluded
Assets
1. License
Agreement between Debtor and Battelle Memorial Institute dated December 30,
1997, as amended
2. License
of US Patent No. 6,196,000 “Power System with Enhanced Thermodynamic Efficiency
and Pollution Control” (Filed: January 14, 2000; Issued: March 6,
2001; Expiration Date: January 14, 2020)
3. License
of US Patent No. 6,918,253 “Power System with Enhanced Thermodynamic Efficiency
and Pollution Control” (Filed: July 22, 2002; Issued: July 19, 2005;
Expiration Date: July 22, 2022)
Agreement, Acknowledgment
and Consent
For good and valuable consideration,
the receipt and sufficiency of which is acknowledged, Xxxxxxxxx X. Xxxxxxxxxx
(“Fassbender”), as licensor under the Fassbender Licensor, hereby agrees as
follows:
1. Fassbender
is not aware of any existing breach under the Fassbender License.
2. Fassbender
hereby consents to (a) the execution of the Security Agreement by Debtor, and
(b) the enforcement by Secured Party of any and all rights under the Security
Agreement, including without limitation the foreclosure on, acquisition of, and
full exercise of Debtor’s rights under the Fassbender License.
3. Fassbender
agrees that if Secured Party shall succeed to Debtor’s interest in the
Fassbender License, Fassbender shall provide Secured Party without additional
consideration all rights and information derivative of the rights under the
Fassbender License that would be reasonably useful by Secured Party in
exercising its rights under the Security Agreement and the Fassbender License,
to the extent Fassbender has established any interest in such
rights.
4. If
Secured Party shall succeed to Debtor’s interest in the Fassbender License, then
during the period of Secured Party’s ownership of such interest, Fassbender
shall continue to be bound by all the terms, covenants, and conditions of the
Fassbender License; provided, however, that notwithstanding any provisions in
the Fassbender License to the contrary, Secured Party shall not be liable for
any act, omission or other failure of Debtor arising under the Fassbender
License, and shall not be subject to any offsets or defenses that Fassbender may
have against Debtor arising under the Fassbender License.
IN WITNESS WHEREOF, the undersigned has
duly executed this Agreement, Acknowledgment and Consent as of February 11,
2009.
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__________________________________
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Xxxxxxxxx
X. Xxxxxxxxxx
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