3% SECURED CONVERTIBLE PROMISSORY NOTE
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Principal
Amount: $__________
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Issue
Date: March 1, 2010
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3% SECURED CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, ThermoEnergy
Corporation, a Delaware corporation (the “Borrower”), hereby promise to pay to
the order of _________________ (the “Holder”) on February 28, 2011 (the
“Maturity Date”) the sum of ________________ Dollars ($___________) (or such
lesser amount as may be advanced by the Holder to the Borrower as Draws or
Advances (as such terms are defined in the Bridge Loan Agreement hereinafter
described).
Interest
on the outstanding principal balance shall accrue at the rate of three percent
(3.0%) per annum, and shall be due and payable on the Maturity
Date. Interest shall be computed on the basis of a 365-day year,
using the number of days actually elapsed.
This Note
is one of several substantially identical promissory notes in the initial
aggregate principal amount of $2,700,000 issued by the Borrower on or about the
date hereof pursuant to that certain Bridge Loan Agreement of even date herewith
by and among the Borrower, the Holder and certain other persons (the “Bridge
Loan Agreement”) (which promissory notes are referred to herein as the “Series
Notes”). So long as this Note is outstanding the Holder shall be entitled to the
benefit of, and subject to the provisions of, the Bridge Loan
Agreement.
Pursuant
to the Bridge Loan Agreement, the Holder shall surrender this Note (or such
portion thereof as may be necessary to satisfy the Holder’s purchase
obligations) in payment of the purchase price for the securities to be purchased
by the Holder pursuant to the Securities Purchase Agreement dated as of November
19, 2009 by and among the Borrower, the Holder and the holders of the other
Series Notes (the “Series B Agreement”) at the Third Tranche Closing and/or the
Fourth Tranche Closing (as such terms are defined in the Series B
Agreement).
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
outstanding principal amount of this Note, and any accrued and unpaid interest
thereon, into shares of the Common Stock, par value $0.001 per share, of the
Borrower (“Common Stock”) at a price of $0.24 per share. If the
Holder desires to exercise its right of conversion, the Holder shall give the
Borrower a written notice, setting forth the amount of principal and interest
which the Holder desires to convert. Should the Holder elect to
convert less than the entire amount of the principal balance and accrued and
unpaid interest under this Note, the amount being converted shall be credited
first against accrued and unpaid interest and the balance, if any, shall be
credited against principal. 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. Conversion of the principal and interest on this Note into
shares of Common Stock shall not relieve the Holder of his or its obligation to
purchase securities pursuant to the Series B Agreement.
The
Borrower and the holders of the Series Notes (including the Holder) have,
contemporaneously herewith, entered into a Security Agreement (the “Security
Agreement”) securing the obligations of the Borrower to the Holder and the other
holders of the Series Notes under such Series Notes, and so long as this Note is
outstanding the Holder shall be entitled to the benefit of, and subject to the
provisions of, the Security Agreement.
This Note
may not be prepaid, in whole or in part, without the prior written consent of
the Holder. Partial prepayments, if any, shall be applied first to
accrued and unpaid interest, and the balance to principal.
Subject
to the provisions of the Security Agreement, 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.
The
occurrence of any one or more of the following events or conditions shall
constitute an “Event of Default” under this Note:
(i) The
Borrower’s failure to make any payment of principal or interest or any other
sums within fifteen (15) days of the date when due under this Note;
or
(ii) Any
representation or warranty or other statement made by the Borrower in the Bridge
Loan Agreement or the Security Agreement proves to have been false or misleading
in any material respect when made or furnished; or
(iii) 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, the Bridge Loan Agreement or the Security
Agreement, 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
(iv) 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
(v) If
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
ninety (90) consecutive days or an order for relief in connection therewith
shall be entered; or
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(vi) 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.
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.
No
failure or delay on the part of the Holder 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.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. Each party agrees that any action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened. (a “Proceeding”) concerning the interpretation, enforcement and of
the transactions contemplated by this Note or the Security Agreement shall be commenced exclusively in the state or
federal courts sitting in, or having jurisdiction over, Wilmington, Delaware
(the “Delaware Courts” ). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Delaware Courts 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 Proceeding, any claim that it is not personally subject to the
jurisdiction of any such Delaware Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Note or the
Security Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
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THE
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. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE HOLDER TO ACCEPT THIS NOTE.
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, by overnight courier service with evidence of delivery or
attempted delivery, or by facsimile, e-mail or other means of electronic
transmission (provided such transmission generates evidence of delivery), to the
Borrower or to the Holder at their respective principal places of
business. Either party may, by like notice, change the address to
whom notice is to be given.
This Note
may be amended or supplemented, or any provision hereof waived, only by the
written agreement of the Holder and the Borrower.
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.
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.
IN WITNESS WHEREOF, the
Borrower has caused this Note to be executed and delivered by its duly
authorized President and Chief Executive Officer as of the date and year first
above written.
