THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR SUCH SHARES OF COMMON STOCK MAY BE SOLD, OFFERED...
Exhibit
4.2
THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NEITHER THIS NOTE NOR SUCH SHARES OF COMMON STOCK
MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUING CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
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Principal
Amount: $_________
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Issue
Date: _________
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10 % CONVERTIBLE PROMISSORY
NOTE DUE OCTOBER 31, 2009
FOR VALUE RECEIVED, ThermoEnergy
Corporation, a Delaware corporation (the “Borrower”), hereby promise to pay to
the order of ___________ (the “Holder”), the sum of __________ Dollars
($________) on October 31, 2009 (the “Maturity Date”).
Interest
on the outstanding principal balance shall be paid at the rate of ten percent
(10%) per annum, payable on the Maturity Date. Interest shall be
computed on the basis of a 365-day year, using the number of days actually
elapsed.
The
Holder shall have the right at any time and from time to time until the
principal and interest on this Note shall have been paid in full, to convert the
principal and any interest due under this Note into shares of the Borrower’s
Common Stock, par value $0.001 per share (the “Common Stock”). If the
Holder exercises his right of conversion, the Holder shall give the Borrower a
Notice of Conversion in the form annexed to this Note, setting forth the amount
of principal, interest and Deferral Fee which the Holder is converting into
Common Stock (the “Conversion Amount”) at the Conversion Price in effect on the
date of such notice. The date of such notice is referred to as the
“Conversion Date.” Within five (5) business days after the Conversion
Date (such fifth day being the “Delivery Date”), the Borrower shall deliver
irrevocable instructions to the transfer agent for the Common Stock to issue and
deliver to the Holder a certificate for that number of shares of Common Stock
into which the Conversion Amount is being converted. Except to the
extent that the entire unpaid principal balance of this Note is being presented
for conversion, the Holder shall not be required to present this Note in order
to effect conversion, and the Holder shall maintain a ledger setting forth each
conversion of principal and interest on this Note and such ledger shall, absent
manifest error, be deemed to be binding and conclusive on the
Borrower.
This Note
may be prepaid, in whole or in part, at any time without premium or penalty upon
ten (10) days’ prior written notice to the Holder. Partial
prepayments shall be applied (i) first to any unpaid Deferral Fee, (ii) then to
accrued and unpaid interest, and (iii) the balance to principal.
1.1.
Conversion
Price. The Conversion Price shall be $0.40 per share of Common
Stock; provided, however,
that the Conversion Price is subject to adjustment as set forth in
Section 1.2 of this Note. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing the
Conversion Amount by the Conversion Price in effect on the Conversion
Date.
1.2. Adjustment
to the Conversion Price. The Conversion Price and number and kind of
shares or other securities to be issued upon conversion shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
1.2.1.
Stock Dividends,
Subdivisions and Combinations. If the Borrower
shall at any time:
(a) declare
or pay to the holders of its Common Stock a dividend payable in, or other
distribution of, shares of Common Stock or in securities convertible into shares
of Common Stock (“Convertible Securities”); or
(b) subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock; or
(c) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock;
then (i)
the number of shares of Common Stock into which this Note is convertible
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number of
shares of Common Stock into which this Note is convertible immediately prior to
the occurrence of such event would own or be entitled to receive after the
occurrence of such event, and (ii) the then-current Conversion Price shall be
adjusted to equal (A) the then-current Conversion Price multiplied by the number
of shares of Common Stock into which this Note is convertible immediately prior
to the adjustment divided by (B) the number of shares into which this Note is
convertible immediately after such adjustment.
1.2.2. Certain Other
Distributions. If at any time the Borrowers shall declare or
pay to the holders of its Common Stock any dividend or other distribution
of:
(a) cash;
(b) any
evidences of its indebtedness, any shares of its stock or any other securities
or property of any nature whatsoever (other than cash, Convertible Securities or
additional shares of Common Stock); or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or property of any
nature whatsoever (other than cash, Convertible Securities or additional shares
of Common Stock);
then,
upon conversion of this Note, the Holder shall be entitled to receive such
dividend or distribution as if the Holder had converted the Conversion Amount
prior to the date of such dividend or distribution. A
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 1.2.1 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section
1.2.1.
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1.2.3 Reorganization,
Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Borrower shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
Person (where the Borrower is not the survivor or where there is a change in or
distribution with respect to the Common Stock), or sell, convey, transfer or
otherwise dispose of all or substantially all its property, assets or business
to another Person, or effectuate a transaction or series of related transactions
in which more than 50% of the voting power of the Borrower is disposed of (each,
a “Fundamental Corporate Change”) and, pursuant to the terms of such Fundamental
Corporate Change, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any
nature whatsoever (including warrants or other subscription or purchase rights)
in addition to or in lieu of common stock of the successor or acquiring
corporation (“Other Property”), are to be received by or distributed to the
holders of Common Stock, then the Holder shall have the right thereafter to
receive, upon conversion of this Note, such number of shares of common stock of
the successor or acquiring corporation or of the Borrower, if it is the
surviving corporation, and Other Property as is receivable upon or as a result
of such
Fundamental Corporate Change by a holder of the number of shares of Common Stock
into which this Note is convertible immediately prior to such Fundamental
Corporate Change. In case of any such Fundamental Corporate Change,
the successor or acquiring corporation (if other than the Borrower) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Note to be performed and observed by the
Borrower and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Borrower) in order to provide for adjustments of
shares of Common Stock into which this Note is convertible which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
1.2. For purposes of this Section 1.2.3, “common stock of the
successor or acquiring corporation” shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon a specified date or upon the happening of a specified event,
and any warrants or other rights to subscribe for or purchase any such
stock. The foregoing provisions of this Section 1.2 shall similarly
apply to any successive Fundamental Corporate Change of the successor
corporation.
1.2.4 Other Action Affecting
Common Stock. In case at any time or from time to time the
Borrower shall take any action in respect of the Common Stock, other than any
action described in this Section 1.2, which would have a materially adverse
effect upon the rights of the Holder, the number of shares of Common Stock into
which this Note is convertible and/or the Conversion Price shall be adjusted in
such manner as may be equitable in the circumstances, as determined in good
faith by the Board of Directors of the Borrower.
1.2.5 Certain
Limitations. Notwithstanding anything herein to the contrary,
the Borrower agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Conversion Price to be less than the par
value per share of Common Stock.
1.3. Notice of
Adjustment. Whenever the Conversion Price is adjusted pursuant
to Section 1.2 of this Note, the Borrower shall promptly mail to the Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a statement of the facts requiring such adjustment.
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1.4. Mechanics
of Conversion.
1.4.1. Delivery of Certificate Upon
Conversion. Except as otherwise set forth herein, not later than the
Delivery Date, the Borrower shall deliver to the Holder (a) a certificate or
certificates representing the number of shares of Common Stock being acquired
upon the conversion of the Note (which certificate or certificates shall bear a
legend indicating that such shares have been issued in reliance on an exemption
from the registration requirements of the Securities Act of 1933 (the
“Securities Act” and may not be sold, transferred or otherwise disposed of
except pursuant to an effective registration statement under the Securities Act
or in reliance on an exemption to the registration requirements of the
Securities Act), and (b) a bank check in the amount of accrued and unpaid
interest on the portion of the Note being converted unless the Holder converts
such interest into Common Stock. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Delivery Date, the Holder shall be entitled to
elect by written notice to the Borrower at any time on or before its receipt of
such certificate or certificates thereafter, to rescind such conversion, in
which event the conversion shall be deemed void ab initio.
1.4.2. Obligation Absolute.
The Borrower’s obligations to issue and deliver the Common Stock upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Borrower or
any violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with the issuance of such
shares. In the event the Holder shall elect to convert any or all of
this Note, The Borrower may not refuse conversion based on any claim that such
Holder or any one associated or affiliated with the Holder of has been engaged
in any violation of law, agreement or for any other reason unless an injunction
from a court, on notice, restraining and or enjoining conversion of all or part
of this Note shall have been sought and obtained. In the absence of
an injunction precluding the same, the Borrower shall issue the Common Stock or,
if applicable, cash, upon a properly noticed conversion.
1.4.3. Fractional Shares.
Upon a conversion hereunder, the Borrower shall not be required to issue stock
certificates representing fractions of shares of the Common Stock. All
fractional shares shall be carried forward and any fractional shares which
remain after a Holder converts all of this Note shall be rounded up to the next
whole number of shares.
1.4.4. Transfer
Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holder
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Borrower
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note and the Borrower
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Borrower the amount of such tax or shall have established to the satisfaction of
the Borrower that such tax has been paid.
Section
2. Events of
Default.
2.1. The
entire unpaid principal amount of this Note, together with interest thereon
shall, on written notice from the Holder, forthwith become and be due and
payable if any one or more Events of Default shall have occurred (for any reason
whatsoever and whether such happening shall be voluntary or involuntary or be
affected or come about by operation of law pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and be continuing.
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2.2. The
occurrence of any one or more of the following events or conditions shall
constitute an “Event of
Default” under this Agreement:
2.2.1.
Borrower’s failure to make any payment of principal or interest or any other
sums within fifteen (15) days of the date when due on this Note, unless the
Borrower timely gives a Deferral Notice and pays the required Deferral Fee with
respect to such payment; or
2.2.2. Any
representation or warranty or other statement made or furnished to the Holder by
or on behalf of the Borrower in any document or instrument furnished in
connection with this Note proves to have been false or misleading in any
material respect when made or furnished; or
2.2.3. Breach
of or failure in the due observance or performance in any material respect of
any covenant, condition or agreement on the part of the Borrower to be observed
or performed pursuant to this Note and the failure to cure (if curable) any such
breach or failure within fifteen (15) days after receipt of written notice
thereof from the Holder; or
2.2.4. If
the Borrower shall (a) apply for or consent to the appointment of a receiver,
trustee or liquidator of all or a substantial part of any of its assets; (b) be
unable, or admit in writing its inability, to pay its debts as they mature; (c)
file or permit the filing of any petition, case arrangement, reorganization, or
the like under any insolvency or bankruptcy law, or the adjudication of it as a
bankrupt, or the making of an assignment for the benefit of creditors or the
consenting to any form or arrangement for the satisfaction, settlement or delay
of debt or the appointment of a receiver for all or any part of its properties;
or (d) any action shall be taken by the Borrower for the purpose of effecting
any of the foregoing; or
2.2.5. An
order, judgment or decree shall be entered, or a case shall be commenced,
against the Borrower, without its application, approval or consent by any court
of competent jurisdiction, approving a petition or permitting the commencement
of a case seeking reorganization or liquidation of the Borrower or appointing a
receiver, trustee or liquidator of the Borrower, or of all or a substantial part
of the assets of the Borrower, and the Borrower, by any act, indicate its
approval thereof, consent thereto, or acquiescence therein, or such order,
judgment, decree or case shall continue unstayed and in effect for any period of
90 consecutive days or an order for relief in connection therewith shall be
entered; or
2.2.6. If
the Borrower shall dissolve or liquidate, or be dissolved or liquidated, or
cease to legally exist, or merge or consolidate, or be merged or consolidated,
with or into any other corporation.
Section
3. Miscellaneous
3.1. Usury
Saving Provision. All payment obligations arising under this
Note are subject to the express condition that at no time shall the Borrower be
obligated or required to pay interest at a rate which could subject the Holder
to either civil or criminal liability as a result of being in excess of the
maximum rate which the Borrower is permitted by law to contract or agree to
pay. If by the terms of this Note, the Borrower is at any time
required or obligated to pay interest at a rate in excess of such maximum rate,
the applicable rate of interest shall be deemed to be immediately reduced to
such maximum rate, and interest thus payable shall be computed at such maximum
rate, and the portion of all prior interest payments in excess of such maximum
rate shall be applied and shall be deemed to have been payments in reduction of
principal.
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3.2. Failure
or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof 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. All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
3.3. 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 Pulaski County, Arkansas in any action that may be brought pursuant
to this Agreement, 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 Section 3.5 of this Note (other than by
telecopier) or (ii) in any other manner permitted by law.
3.4. Waiver of
Right to Trial by Jury. BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE
AND WAIVE ANY RIGHT TO BRING A COUNTERCLAIM AGAINST THE HOLDER IN ANY ACTION TO
ENFORCE THIS NOTE. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
HOLDER TO ACCEPT THIS NOTE.
3.5. Notice. All
notices, requests or other communications required or permitted to be given
under this Agreement to any party shall be in writing and shall be deemed to
have been sufficiently given when delivered by personal service or sent by
registered mail, overnight courier services with provided evidence of delivery
or attempted delivery, or facsimile, to the Borrower at 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxx 00000 (fax: 000-000-0000) or to the Holder at
its principal place of business. Either party may, be like notice,
change the address or telecopy number or the person to whom notice is to be
given. Notice shall be deemed given when received or when attempted
delivery is made (based on evidence of attempted delivery by the United States
Postal Service or an overnight courier or a messenger service), provided that
notice by telecopier shall be deemed given when receipt is acknowledged by the
recipient.
3.6. Amendment. This
Note may be amended or supplemented only by the written agreement of the Holder
and the Borrower.
3.7. Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns. The Borrower may not assign any of its obligations under
this Note without the consent of the Holder.
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3.8. Cost of
Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys’ fees, regardless of whether the Holder commenced
litigation in order to enforce its rights under this Note.
3.9. Stockholder
Status. The Holder shall not have rights as a stockholder of
the Borrower with respect to unconverted portions of this
Note. However, from and after the Conversion Date, the Holder will
have all the rights of a shareholder of the Borrower with respect to the shares
of Common Stock to be received by Holder after delivery by the Holder of a
Conversion Notice to the Borrower regardless of whether physical certificates
shall have been delivered.
IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed and delivered by its duly
authorized Executive Vice President and Chief Financial Officer as of the date
and year first above written.
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ThermoEnergy Corporation
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By:
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Executive
Vice President and
CFO
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NOTICE OF
CONVERSION
(To be
executed by the Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by ThermoEnergy Corporation on April __,
2009 into shares of Common Stock of ThermoEnergy Corporation according to the
conditions set forth in such Note, as of the date written below.
Date of
Conversion:__________________________________
Conversion
Price:____________________________________
Number of
Shares To Be Delivered:_______________________________
Signature:________________________________________
Print
Name and
Title:___________________________________________________________________________
Address:_____________________________________________________________________________________
_____________________________________________________________________________________
