UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 8-K
CURRENT
REPORT Pursuant
to
Section 13 or 15(d) of the
Securities
Exchange Act of 1934
| Date of Report (Date of earliest event reported): |
June 23, 2014 |
| ThermoEnergy Corporation |
| (Exact name of registrant as specified in its charter) |
| Delaware |
| (State or other jurisdiction of incorporation) |
| 33-46104-FW |
71-0659511 |
| (Commission File Number) |
(IRS Employer Identification No.) |
| 10 New Bond Street, Worcester, Massachusetts |
01606 |
| (Address of principal executive offices) |
(Zip Code) |
| (508) 854-1628 |
| (Registrant’s telephone number, including area code) |
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant
On June 23, 2014, we entered into a Loan Agreement (the “Loan
Agreement”) with the group of lenders identified below (the “Lenders”), all of whom are holders of our Common
Stock and our Series B-1 and Series C Convertible Preferred Stock, and who, in the aggregate, made loans to us in the principal
amount of $4,000,000 in August 2013 (the “2013 Loans”). Pursuant to the Loan Agreement (which was amended by Agreements
of Amendment on July 28, 2014 and August 18, 2014), the Lenders have made further loans to us (the “2014 Loans”) in
the aggregate principal amount of $240,000, as set forth below:
| Lender |
Loan Amount |
| Robert S. Trump |
$120,000 |
| Empire Capital Partners, L.P. |
$52,800 |
| Empire Capital Partners, Ltd |
$31,200 |
| Empire Capital Partners Enhanced Master Fund, Ltd |
$36,000 |
The proceeds from the Loans may be used for general corporate purposes.
Pursuant to the Loan Agreement, as amended, the Lenders may, but are not obligated to, make additional loans to us on or before
September 15, 2014 at such times and in such amounts as such Lenders and the Corporation may agree, subject to certain limitations.
As evidence of our obligation to repay the Loans we have issued
to the Lenders Promissory Notes due September 15, 2014 (the “Notes”). The Notes bear interest at the rate of 12% per
annum; amounts unpaid following the occurrence of an event of default (as set forth in the Notes) or after maturity bear interest
at the default rate of 18% per annum. The Notes may be prepaid, in whole or in part, without premium or penalty, provided that
all prepayments must be made pro rata among all outstanding Notes in proportion to their then-outstanding principal balances.
In connection with the Loan Agreement, on June 23, 2014, we entered
into a Security Agreement (the “Security Agreement”) with the Lenders pursuant to which we granted to the Lenders a
first-priority security interest in substantially all of our assets as security for the prompt and complete payment and performance
of all of our obligations under the Loan Agreement, the Notes and the Security Agreement. In the Loan Agreement, the Lenders agreed
that the 2013 Loans would be subordinated in all respects, including in right of payment, to the 2014 Loans.
The Loan Agreement, the Notes, and the Security Agreement contain
other, conventional terms, including representations and warranties regarding our business and assets and our authority to enter
into such agreements, and provisions for acceleration of our obligations upon the occurrence of certain specified events of default.
The Loan Agreement (as amended), the form of the Notes, and the Security
Agreement are filed herewith as Exhibits 10.1, 10.2, and 10.3, respectively, and the foregoing descriptions of such documents are
qualified in their entirety by reference to such Exhibits.
Item 5.02. Departure
of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain
Officers
On July 22, 2014, Joseph P. Bartlett resigned as a member of our
Board of Directors. Mr. Bartlett had been a member of our Board of Directors since May 2012. He previously served as a member of
our Board of Directors from October 2009 until December 2009. He has served as one of the four directors elected by the holders
of our Series B Convertible Preferred Stock, Series B-1 Convertible Preferred Stock and Series C Convertible Preferred Stock (voting
together as a single class). Mr. Bartlett served as a member of the Audit Committee of our Board of Directors and as a member of
the Board of Directors of our subsidiary, CASTion Corporation. Mr. Bartlett’s resignation was not due to a disagreement with
our Board of Directors or our management on any matter relating to our operations, policies or practices.
On August 11, 2014, our Board of Directors
elected Arthur S. Reynolds as Chairman of the Board, to fill the vacancy created by the resignation of our former Chief Executive
Officer, James F. Wood. Mr. Reynolds will serve as a non-executive chairman and will not assume any of Mr. Wood’s responsibilities
as Chief Executive Officer. Mr. Reynolds has been a member of our Board of Directors since October 2008, serving as one of the
three directors elected by the holders of our Common Stock and Series A Convertible Preferred Stock (voting together as a single
class). From August 3, 2009 through November 16, 2009, Mr. Reynolds served as our interim Chief Financial Officer,
and except during that period, has been Chairman of the Audit Committee of the Board of Directors. Mr. Reynolds has been
designated by the Board of Directors as independent lead director.
Item 9.01
Financial Statements and Exhibits
| Exhibit No. |
|
Description |
| 10.1 |
|
Loan Agreement dated as of June 23, 2014 by and among ThermoEnergy Corporation and the Lenders party thereto, as amended. |
| 10.2 |
|
Form of Promissory Note issued pursuant to the Loan Agreement dated as of June 23, 2014 by and among ThermoEnergy Corporation and the Lenders party thereto. |
| 10.3 |
|
Security Agreement dated as of June 23, 2014 by and among ThermoEnergy Corporation, the Secured Parties party thereto and Empire Capital Partners, LP, one of the Secured Parties, as agent for itself and the other Secured Parties. |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: September 2, 2014
| |
THERMOENERGY CORPORATION |
| |
(Registrant) |
| |
|
|
| |
By: |
/s/ Gregory M. Landegger |
| |
Name: |
Gregory M. Landegger |
| |
Title: |
Chief Operating Officer and |
| |
|
Interim Chief Financial Officer |
ThermoEnergy
Corporation
Loan
Agreement
(as
amended through August 18, 2014)
This Agreement is made by and among ThermoEnergy
Corporation, a Delaware corporation (the “Corporation”) and the individuals and entities identified on Schedule I hereto
(each, a “Lender”) as of the 23rd day of June 2014.
Whereas each of the Lenders is willing to
make a loan to the Corporation on the terms set forth herein in the minimum principal amount set forth opposite the name of such
Lender on Schedule I hereto;
Now, therefore, in consideration of the
foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Corporation
and the Lenders hereby agree as follows:
1. Loans. Each of the Lenders,
severally and not jointly, hereby agrees to make a loan to the Corporation in the minimum principal amount set forth opposite the
name of such Lender on Schedule I hereto (each, a “Loan”). The Loans shall be evidenced by 12% Secured Promissory Notes
in substantially the form attached hereto as Exhibit A (each, a “Note”) and the Corporation’s obligations with
respect thereto shall be secured by the grant of a lien on substantially all of the assets of the Corporation in favor of the Lenders
pursuant to a Security Agreement in substantially the form attached hereto as Exhibit B (the “Security Agreement”).
On or before September 15, 2014, each of the Lenders may, but shall not be obligated to, make one or more additional loans to the
Corporation at such times and in such amounts as such Lender and the Corporation may agree and all such additional loans shall
be deemed to be Loans for purposes of this Agreement, shall be evidenced by Notes, and shall be entitled to the all of the benefits
of this Agreement and the Security Agreement; provided, however, that the aggregate principal amount of all such additional Loans
shall not exceed $500,000.
2. Representations and Warranties
of the Corporation. The Corporation hereby represents and warrants to the Lenders as follows:
| (a) | Organization and Qualification. The Corporation is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite power and authority to own and use its properties and assets and to carry
on its business as currently conducted. The Corporation is not in violation of any of the provisions of its Certificate of Incorporation
or By-Laws. The Corporation is duly qualified to conduct its business and is in good standing as a foreign corporation in the Commonwealth
of Massachusetts, the only jurisdiction where the failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. For purposes of this Agreement,
the term “Material Adverse Effect” shall mean any of (i) a material and adverse effect on the legality, validity or
enforceability of any of this Agreement, the Notes, or the Security Agreement (collectively, the “Transaction Documents”),
(ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise)
of the Corporation, or (iii) a material impairment of the Corporation’s ability to perform on a timely basis its obligations
under any Transaction Document. |
| (b) | Authorization; Enforcement. The Corporation has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Corporation and the consummation by the Corporation of the transactions
contemplated thereby have been duly authorized by all necessary action on the part of the Corporation and no further action is
required by the Corporation in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly
executed by the Corporation and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation
of the Corporation enforceable against the Corporation in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally
the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. |
| (c) | No Conflicts. The execution, delivery and performance of the Transaction Documents by the Corporation and the
consummation by the Corporation of the transactions contemplated thereby do not and will not conflict with or violate any provision
of the Borrower’s Certificate of Incorporation or By-Laws. |
| (d) | SEC Reports; Financial Statements. The Corporation has filed all periodic reports required to be filed by it under the
Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) for the twenty-four months preceding the date of this Agreement (the foregoing materials, being collectively
referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Securities and Exchange
Commission (the “SEC”) promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Corporation
included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved and fairly present in all material respects the financial position
of the Corporation and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. |
| (e) | Brokerage Fees. No brokerage or finder’s fees or commissions are or will be payable by the Corporation
to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to
the transactions contemplated by any of the Transaction Documents. The Lenders shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by the Lenders pursuant to written agreements executed
by the Lenders which fees or commissions shall be the sole responsibility of the Lenders) made by or on behalf of other persons
for fees that may be due in connection with the transactions contemplated by the Transaction Documents. |
3. Representations and Warranties
of the Lenders. Each Lender, severally and not jointly, hereby represents and warrants to the Corporation as follows, with
respect only to herself, himself or itself and not the other Lenders, that this Agreement has been duly executed by such Lender
and constitutes the valid and legally binding obligation of such Lender, enforceable against her, him or it in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable
principles of general application.
4 Use of Proceeds. The proceeds
from the Loans shall be used by the Corporation for general corporate purposes.
5. Subordination of 2013 Loans.
The Lenders made loans to the Corporation in the aggregate principal amount of $4,000,000 (the “2013 Loans”) pursuant
to that certain Loan Agreement dated as of August 22, 2013 by and among the Corporation and the Lenders (the “2013 Loan Agreement”)
and, to secure its obligations with respect to the 2013 Loans, the Corporation granted to the Lenders a lien on substantially all
of the assets of the Corporation pursuant to a certain Security Agreement dated as of August 22, 2013 by and among the Corporation,
Empire Capital Partners, L.P., as agent for itself and the other secured parties, and the Lenders (as secured parties) (the “2013
Security Agreement”). The parties acknowledge that the Corporation is currently in financial distress and the Lenders agree
that there is greater risk in making the Loans to the Corporation at this time and forward than there was in making the 2013 Loans,
given the Corporation’s change in financial circumstances, such that it is justifiable and appropriate that the Lenders who
make Loans to the Corporation pursuant to this Agreement should be repaid first from payments by or on behalf of the Corporation
and that, vis-à-vis the 2013 Loans, all obligations of the Corporation relating to or arising from the Loans made pursuant
to this Agreement shall be deemed to have priority (the “Senior Priority Obligations”). Accordingly, the Lenders agree
that, to the extent that payment is made on or after June 20, 2014, by or on behalf of the Corporation (from any source whatsoever,
including, without limitation, payment by a Trustee appointed under Title 11 of the United States Code, an Assignee for the Benefit
of Creditors under state law, or any other receiver or fiduciary or agent), such payment(s), whether in cash or other form of property
of any kind, shall be distributed (1) first to the Lenders, in proportion to the respective sum(s) advanced to the Corporation
constituting Senior Priority Obligations, in repayment of the Senior Priority Obligations until the Senior Priority Obligations
are satisfied in full, and then (2) to the Lenders, in repayment of the 2013 Loans, repayment of which to the Lenders is hereby
subordinated to the extent provided in this Section 5.
6. Entire Agreement. The Transaction
Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect to such matters. No provision of any Transaction
Document may be waived or amended except in a written instrument signed by the Corporation and by Lenders holding at least 66⅔%
of the principal amount of the then outstanding Notes. No waiver of any default with respect to any provision, condition or requirement
of any of the Transaction Documents shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default
or a waiver of any other provision, condition or requirement of such Transaction Document or of any other Transaction Document,
nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
No consideration shall be offered or paid to any Lender to amend or consent to a waiver or modification of any provision of any
Transaction Document unless the same consideration is also offered to all Lenders.
7. Governing Law and Jurisdiction.
This Agreement and the rights of the parties hereunder shall be construed and enforced in accordance with the laws of the Commonwealth
of Massachusetts 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 Massachusetts
in any action that may be brought for the enforcement of 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.
8. Execution. This Agreement may
be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that
all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such delivery
shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof, notwithstanding any subsequent failure or refusal
to deliver an original signed in ink.
9. Severability.
If any provision of this Agreement is held to be invalid or unenforceable in any respect, the parties will attempt to agree upon
a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby.
[Signature Page follows]
In witness whereof, the Borrower and the
Lenders have caused this Agreement to be duly executed as of the date first above written.
| ThermoEnergy Corporation |
|
Empire Capital Partners, lp |
| |
|
|
|
By:
Empire gp, llc, its General Partner |
| |
|
|
|
|
| By: |
/s/ Gregory M. Landegger |
|
By: |
/s/ Peter J. Richards |
| |
Gregory M. Landegger |
|
|
Peter J. Richards |
| |
Chief Operating Officer |
|
|
Managing Member |
| |
and Interim Chief Financial Officer |
|
and |
| |
|
|
|
|
| |
|
|
By: |
/s/ Scott A. Fine |
| |
|
|
|
Scott A. Fine |
| |
|
|
|
Managing Member |
| |
|
|
|
|
| Empire Capital Partners, ltd |
|
Empire
Capital Partners Enhanced Master |
| By: |
Empire Capital Management, llc, |
|
|
Fund, ltd |
| |
its Investment Manager |
|
By: |
Empire Capital Management, llc, |
| |
|
|
|
its Investment Manager |
| By: |
/s/ Peter J. Richards |
|
|
|
| |
Peter J. Richards |
|
By: |
/s/ Peter J. Richards |
| |
Managing Member |
|
|
Managing Member |
| and |
|
and |
| |
|
|
|
|
| By: |
/s/ Scott A. Fine |
|
By: |
/s/ Scott A. Fine |
| |
Scott A. Fine |
|
|
Scott A. Fine |
| |
Managing Member |
|
|
Managing Member |
| |
|
|
|
|
| |
|
|
/s/ Robert S.
Trump |
| |
|
|
Robert S. Trump |
ThermoEnergy
Corporation
Loan Agreement
Schedule I
| Investor |
Loan Amount |
| Robert S. Trump |
$45,000 |
| Empire Capital Partners, LP |
$19,800 |
| Empire Capital Partners, Ltd. |
$11,700 |
| Empire Capital Partners Enhanced Master Fund Ltd. |
$13,500 |
Exhibit A
| Principal Amount: $__________ |
June 23, 2014 |
12% SECURED PROMISSORY NOTE
For Value Received, ThermoEnergy Corporation,
a Delaware corporation (the “Borrower”), hereby promise to pay to the order of ______________(the “Holder”)
the sum of ___________ Dollars ($__________) (or such lesser amount as may be then outstanding) together with interest on the unpaid
principal hereof from the date hereof at the rate of twelve percent (12%) per annum, compounded quarterly.
The entire principal amount of this Note,
plus interest accrued thereon, shall be due and payable in a single installment (i) on July 11, 2014 or (ii) upon demand following
the occurrence of an Event of Default, as defined below (in either event, “Maturity”). In the event the Borrower shall
not have paid the outstanding principal balance and accrued interest thereon at Maturity, then interest shall accrue from and after
the date of Maturity at the lower of (i) eighteen percent (18%) per annum, and (ii) the highest interest rate acceptable under
applicable usury laws, compounded monthly (the “Default Rate”). Interest shall be calculated on the basis of actual
days elapsed and a 360-day year consisting of four quarters of 90 days each and twelve months of 30 days each.
This Note is one of several substantially
identical promissory notes issued by the Borrower pursuant to that certain Loan Agreement dated as of June 23, 2014 by and among
the Borrower, the Holder and certain other persons (the “Loan Agreement”) (which promissory notes, including the Note,
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 Loan 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 be prepaid, in whole or in
part, at any time without premium or penalty; provided, however, that no Series Note may be prepaid unless simultaneous with such
prepayment, the same portion of all outstanding Series Notes are also prepaid. Partial prepayments shall be credited first to accrued
and unpaid interest, and the balance, if any, shall reduce principal.
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 any Series Note; or
(ii) Any
representation or warranty or other statement made by the Borrower in the 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 Loan Agreement or the Security Agreement, and the failure
to cure (if curable) any such breach or failure within ten (10) 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 thirty (30) consecutive days or
an order for relief in connection therewith shall be entered; or
(vi) If
the Borrower shall dissolve or liquidate, or be dissolved or liquidated, or cease to legally exist, or, without the prior written
consent of the holders of Series Notes representing at least 66⅔% in aggregate outstanding principal amount of the Series
Notes, 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 Commonwealth of Massachusetts, 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 shall be commenced exclusively in the state or federal courts sitting in, or
having jurisdiction over, Boston, Massachusetts (the “Massachusetts Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the Massachusetts 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 Massachusetts Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. If either party shall commence a Proceeding to enforce any
provisions of this Note, 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.
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.
This Note may be amended or supplemented,
or any provision hereof waived, only if all of the other Series Notes are amended or supplemented or provisions thereof waived
in like manner and only if such amendment, supplement or waiver is approved by the written agreement of the Borrower and of the
holders of Series Notes representing at least 66⅔% in aggregate outstanding principal amount of the Series Notes.
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 Chief Operating Officer and Interim Chief Financial Officer
as of the 23rd day of June 2014.
| |
ThermoEnergy Corporation |
| |
|
|
| |
By: |
|
| |
|
Gregory M. Landegger |
| |
|
Chief Operating Officer |
| |
|
and Interim Chief Financial Officer |
Exhibit B
ThermoEnergy
Corporation
Security
Agreement
This Security Agreement (this “Agreement”)
is dated as of June 23, 2014, and is entered into by and among ThermoEnergy Corporation, a Delaware corporation having its principal
place of business in Worcester, Massachusetts (the “Borrower”) and the persons and entities named on Schedule I hereto
(collectively, the “Secured Parties) and Empire Capital Partners, LP, one of the Secured Parties, as agent for itself and
the other Secured Parties (the “Agent”). Capitalized terms not otherwise defined herein are used as defined in the
Massachusetts Uniform Commercial Code on the date of this Agreement (the “UCC”).
Whereas, the Borrower is, on or about the
date hereof, executing and delivering to the Secured Parties a series of 12% Secured Promissory Notes of even date herewith in
the initial aggregate principal amount of $90,000 (the “Notes”); and
Whereas, the Secured Parties have, as a
condition to the making of the loans evidenced by the Notes, required that the Borrower execute and deliver to the Secured Parties
a security agreement in substantially the form hereof; and
Whereas, the Borrower wishes to grant a
security interest in favor of the Secured Parties 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:
I. Grant
of Security Interest. The Borrower hereby grants and otherwise pledges to the Secured Parties a continuing security interest
in all of the present and future rights, title and interests of the Borrower in and to the following property, and each item thereof,
all whether now or hereafter existing, or owned or acquired by the Borrower, or now or hereafter arising or due or to become due,
wherever such property may be located, together with all substitutions for, replacements of, additions to, accessions to, and products,
Proceeds and records of any and all of the following (collectively, the “Collateral”):
| 1. |
all Accounts; |
| 2. |
all Inventory; |
| 3. |
all Equipment; |
| 4. |
all Fixtures; |
| 5. |
all Contracts; |
| 6. |
all Chattel Papers; |
| 7. |
all Documents; |
| 8. |
all Instruments; |
| 9. |
all Investment Property; |
| 10. |
all Deposit Accounts; |
| 11. |
all General Intangibles; |
| 12. |
all Supporting Obligations |
| 13. |
all Commercial Tort Claims; |
| 14. |
all Intellectual Property; and |
| 15. |
all other items of tangible and intangible personal property of any and every kind and description which are not otherwise described herein. |
II. Security
for Obligations. This Agreement secures, and the Collateral is collateral security for the prompt payment 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 Notes,
as well as the Borrower’s performance and observance of all covenants contained herein and in the Notes (the “Obligations”).
III. Agent
as Agent of Secured Parties.
A. The
Agent shall serve and act as agent for all Secured Parties and shall take such action on their behalf under the provisions of this
Agreement and shall exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement,
together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere
in this Agreement, the Agent shall not have any duties or responsibilities except those expressly set forth herein.
B. The
Secured Parties, the Agent and the Borrower acknowledge and agree that each Note is secured by a security interest in the Collateral
and that the priorities of the security interests which secure each Secured Party’s respective Note and its or his rights
in and to the Collateral which secures such Notes shall at all times be equal and that each Secured Party shall share and be equal
in priority and rights with the other Secured Parties in proportion to the then outstanding principal amounts of, plus the accrued
but unpaid interest on, their respective Notes.
C. In
the event that an Event of Default occurs, and a Secured Party gives the Agent notice thereof, the Agent shall immediately thereafter
(i) give written notice of the Event of Default to all Secured Parties, and (ii) commence enforcement, collection (including judicial
or nonjudicial foreclosure) or similar proceeding with respect to the Collateral; provided that while the Agent may take immediate
action in its discretion in order to attempt to preserve the rights of the Secured Parties hereunder, the Agent (a) shall not be
required to take any action hereunder unless and until, if requested by the Agent, the Agent receives direction from 66⅔%
in interest of the Secured Parties (determined on the basis of the outstanding principal amounts of the Notes), and (b) shall take
such all such actions to enforce this Agreement and to realize upon, collect and dispose of the Collateral or any portion thereof
as may be directed by 66⅔% in interest of the Secured Parties; provided that the Agent shall not be required to take any
action that is contrary to law or to the terms of this Agreement, or that would subject it or any of its employees or agents to
liability.
D. The
Agent acknowledges and agrees that this Agreement and the terms and provisions hereof are solely for the benefit of the Secured
Parties and shall not benefit in any way any other person or entity, including, without limitation, the Borrower or any of its
guarantors. Nothing in this Agreement is intended to affect, limit or in any way diminish the security interests which the Secured
Parties claim in the assets of the Borrower insofar as the rights of the Borrowers and third parties are concerned. The Agent,
on behalf of all Secured Parties, specifically reserves any and all of their respective rights, security interests and rights to
assert security interests against the Borrowers and any third parties, including guarantors.
E. The
Borrower, the Secured Parties and the Agent acknowledge and agree that each Secured Party’s respective rights and priorities
with respect to the Collateral shall exist and be enforceable against the Collateral only by the Agent on behalf of all Secured
Parties in accordance with the terms hereof, independent of the time or order of attachment or perfection of such Secured Party’s
respective security interest, or the time or order of filing of financing statements. The subordinations, agreements and priorities
set forth in this Agreement shall remain in full force and effect regardless of whether any Secured Party in the future seeks to
rescind, amend, terminate or reform, by liquidation or otherwise, its or his respective agreements with the Borrower.
F. The
Borrower, the Secured Parties and the Agent acknowledge and agree that the indebtedness and payment obligations of the Borrower
with respect to each Note shall be of equal priority, no Note shall have a priority of payment over or be subordinate to any other
Note, and any and all property, Proceeds or other payments received by the Agent in connection with its enforcement of the Secured
Parties’ security interests as contemplated herein shall be applied promptly by the Agent to the payment to the Secured Parties
pari passu of all outstanding amounts owed under their respective Notes.
G. Subject
to the shared priority and respective rights of the Secured Parties set forth in this Agreement, the Agent, on behalf of the Secured
Parties, shall be entitled to obtain loss payee endorsements and additional insured status with respect to any and all policies
of insurance now or hereafter obtained by the Borrower insuring against casualty or other loss to any property of the Borrower
in which any Secured Party may have a security interest, and, in connection therewith, may file claims, settle disputes, make adjustments
and take any and all other action otherwise then permitted to each Secured Party with regard thereto, which it may deem advisable
with respect to any assets of the Borrower.
H. Neither
the Agent nor any officer or agent thereof shall be liable to the Borrower or the Secured Parties for monetary damages for any
action taken or omitted to be taken by the Agent except for liability (i) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or (ii) for any transaction from which the Agent or such officer or agent
thereof derived an improper personal benefit.
I. The
Borrower shall indemnify and hold harmless the Agent for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable attorneys’ fees) of any kind whatsoever which may
be imposed on, incurred by or asserted against the Agent in connection with or in any way arising out of this Agreement; provided,
however, that the Borrower shall not be liable to the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s gross negligence or willful
misconduct as determined by a final judgment of a court of competent jurisdiction. The Borrower shall upon demand pay to the Agent
the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and
agents, that the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Agent or the Secured Parties hereunder, or (iv) the failure by the Borrower to perform or observe any
of the provisions hereof. In the event the Borrower fails to comply with its obligations under this Section 3(i), after commercially
practicable efforts by the Agent to obtain such compliance, each of the Secured Parties agrees to contribute and pay to the Agent
its or his pro rata share of all such obligations
IV. Representations,
Warranties and Covenants. The Borrower represents, warrants and covenants as follows:
A. The
Borrower is a corporation existing and in good standing under the laws of the State of Delaware.
B. The
Borrower is duly empowered and authorized to enter into and perform its obligations under this Agreement and all other instruments
and transactions contemplated hereby or relating hereto. The Borrower is duly empowered and authorized to own and to grant security
interests in the Collateral. The execution, delivery and performance by the Borrower of this Agreement, of the Notes and of all
other instruments contemplated hereby 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 the Borrower, including without limitation, the Borrower’s
Certificate of Incorporation, By-Laws and any other loan or security agreements to which the Borrower is a party or by which the
Borrower or its property is bound.
C. Assuming
the due filing of a financing statement in proper form with the Secretary of State of the State of Delaware, the security interest
granted to the Secured Parties pursuant to this Agreement is a valid, perfected security interest in the that portion of the Collateral
in which a security interest may be perfected by filing under the UCC.
D. The
Borrower shall not hereafter transfer, assign or otherwise dispose of the Collateral, except in the ordinary course of business,
without the Agent’s prior written consent. The Borrower 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 shall defend the right, title and interest
of the Secured Parties 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.
V. Agent’s Appointment
as Attorney-in-Fact. The Borrower hereby irrevocably constitutes and appoints, from and after the occurrence of a default by
the Borrower in the Obligations, the Agent and any officer or agent thereof, with full power of substitution, as the Borrower’s
true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name
of the Borrower or in the Agent’s own name as agent hereunder for the Secured Parties, from time to time in the Agent’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 grant to the Agent the power and right, on behalf of the Borrower, without notice
to or assent by the Borrower 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 the Agent may deem necessary or desirable to protect, perfect
and validate the Secured Parties’ security interest.
The Borrower 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 so long as any amount of principal or accrued interest under the Notes remains unpaid.
The powers conferred upon the Agent hereunder
are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Agent to exercise
any such powers. The Agent shall be accountable only for amounts that the Agent actually receives as a result of the exercise of
such powers and neither the Agent nor any of its partners, officers, directors, employees or agents shall be responsible to the
Borrowers or the other Secured Parties for any act or failure to act, except for the Agent’s own gross negligence or willful
misconduct.
VI. Remedies.
If a default by the Borrower in the Obligations shall have occurred and be continuing (an “Event of Default”), the
Agent shall have all of the rights and remedies which secured parties may have under the UCC 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 the Borrower:
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 the Agent may determine; and/or
C. Foreclose
the security interest created under this Agreement or under any other agreement relating to the Collateral by any procedure permitted
under the UCC, with or without judicial process.
VII. Termination
of Security Interest. The Secured Parties’ security interest in the Collateral shall be extinguished when the Borrower
completes performance of all Obligations.
VIII. Governing
Law; Venue. This Agreement and the rights of the parties shall be construed and enforced in accordance with the laws of the Commonwealth
of Massachusetts 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 or having
jurisdiction over Boston, Massachusetts in any action that may be brought for the enforcement of 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 the Notes or (ii) in any other manner permitted by law.
IX. 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.
X. General.
No Secured Party shall be deemed to have waived any of its respective rights hereunder or under any other agreement, instrument
or paper signed by the Borrower unless such waiver be in writing and signed by the Agent (with respect to the Secured Parties’
rights and interest under the Notes or under this Agreement) or by such Secured Party (with respect to any other rights). No delay
or omission on the part of the Agent in exercising any right shall operate as a waiver of such right or any other right. All of
the Secured Parties’ 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 the Borrower, the Agent and the Secured
Parties.
XI. Amendments.
This Agreement may be amended or modified only by a written instrument executed by each party hereto.
XII. 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.
[Signature Page follows]
In witness whereof, the Borrower, the Agent
and the other Secured Parties have caused this Agreement to be duly executed as of the date first above written.
| |
|
For itself and as Agent for the other Secured Parties: |
| ThermoEnergy Corporation |
|
|
| |
|
|
Empire Capital Partners, lp |
| By |
|
|
|
By: Empire gp, llc, its General Partner |
| |
Gregory M. Landegger |
|
|
|
| |
Chief Operating Officer |
|
By |
|
| |
and Interim Chief Financial Officer |
|
|
Peter J. Richards |
| |
|
|
|
Managing Member |
| |
|
and |
| |
|
|
| |
|
By |
|
| |
|
|
Scott A. Fine |
| |
|
|
Managing Member |
| |
|
|
| Empire Capital Partners, ltd |
|
Empire Capital Partners Enhanced Master Fund, ltd |
| By: |
Empire Capital Management, llc, |
|
|
| |
its Investment Manager |
|
By: |
Empire Capital Management, llc, |
| |
|
|
|
its Investment Manager |
| By |
|
|
|
|
| |
Peter J. Richards |
|
By |
|
| |
Managing Member |
|
|
Managing Member |
| and |
|
and |
| |
|
|
|
|
| By |
|
|
By |
|
| |
Scott A. Fine |
|
|
Scott A. Fine |
| |
Managing Member |
|
|
Managing Member |
| |
|
|
| |
|
|
| |
|
Robert S. Trump |
ThermoEnergy
Corporation
Security
Agreement
Schedule I
Secured Parties
Robert S. Trump
Empire Capital Partners, LP
Empire Capital Partners, Ltd.
Empire Capital Partners Enhanced Master Fund Ltd.
| Principal Amount: $__________ |
June 23, 2014 |
12% SECURED PROMISSORY NOTE
For Value Received, ThermoEnergy Corporation,
a Delaware corporation (the “Borrower”), hereby promise to pay to the order of ______________ (the “Holder”)
the sum of ___________ Dollars ($__________) (or such lesser amount as may be then outstanding) together with interest on the unpaid
principal hereof from the date hereof at the rate of twelve percent (12%) per annum, compounded quarterly.
The entire principal amount of this Note,
plus interest accrued thereon, shall be due and payable in a single installment (i) on September 15, 2014 or (ii) upon demand following
the occurrence of an Event of Default, as defined below (in either event, “Maturity”). In the event the Borrower shall
not have paid the outstanding principal balance and accrued interest thereon at Maturity, then interest shall accrue from and after
the date of Maturity at the lower of (i) eighteen percent (18%) per annum, and (ii) the highest interest rate acceptable under
applicable usury laws, compounded monthly (the “Default Rate”). Interest shall be calculated on the basis of actual
days elapsed and a 360-day year consisting of four quarters of 90 days each and twelve months of 30 days each.
This Note is one of several substantially
identical promissory notes issued by the Borrower pursuant to that certain Loan Agreement dated as of June 23, 2014 by and among
the Borrower, the Holder and certain other persons (the “Loan Agreement”) (which promissory notes, including the Note,
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 Loan 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 be prepaid, in whole or in
part, at any time without premium or penalty; provided, however, that no Series Note may be prepaid unless simultaneous with such
prepayment, the same portion of all outstanding Series Notes are also prepaid. Partial prepayments shall be credited first to accrued
and unpaid interest, and the balance, if any, shall reduce principal.
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 any Series Note; or
(ii) Any
representation or warranty or other statement made by the Borrower in the 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 Loan Agreement or the Security Agreement, and the failure
to cure (if curable) any such breach or failure within ten (10) 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 thirty (30) consecutive days or
an order for relief in connection therewith shall be entered; or
(vi) If
the Borrower shall dissolve or liquidate, or be dissolved or liquidated, or cease to legally exist, or, without the prior written
consent of the holders of Series Notes representing at least 66⅔% in aggregate outstanding principal amount of the Series
Notes, 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 Commonwealth of Massachusetts, 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 shall be commenced exclusively in the state or federal courts sitting in, or
having jurisdiction over, Boston, Massachusetts (the “Massachusetts Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the Massachusetts 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 Massachusetts Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. If either party shall commence a Proceeding to enforce any
provisions of this Note, 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.
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.
This Note may be amended or supplemented,
or any provision hereof waived, only if all of the other Series Notes are amended or supplemented or provisions thereof waived
in like manner and only if such amendment, supplement or waiver is approved by the written agreement of the Borrower and of the
holders of Series Notes representing at least 66⅔% in aggregate outstanding principal amount of the Series Notes.
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 Chief Operating Officer and Interim Chief Financial Officer
as of the 23rd day of June 2014.
| |
ThermoEnergy Corporation |
| |
|
|
| |
By: |
|
| |
|
Gregory M. Landegger |
| |
|
Chief Operating Officer |
| |
|
and Interim Chief Financial Officer |
ThermoEnergy
Corporation
Security
Agreement
This Security Agreement (this “Agreement”)
is dated as of June 23, 2014, and is entered into by and among ThermoEnergy Corporation, a Delaware corporation having its principal
place of business in Worcester, Massachusetts (the “Borrower”) and the persons and entities named on Schedule I hereto
(collectively, the “Secured Parties) and Empire Capital Partners, LP, one of the Secured Parties, as agent for itself and
the other Secured Parties (the “Agent”). Capitalized terms not otherwise defined herein are used as defined in the
Massachusetts Uniform Commercial Code on the date of this Agreement (the “UCC”).
Whereas, the Borrower is, on or about the date
hereof, executing and delivering to the Secured Parties a series of 12% Secured Promissory Notes of even date herewith in the initial
aggregate principal amount of $90,000 (the “Notes”); and
Whereas, the Secured Parties have, as a condition
to the making of the loans evidenced by the Notes, required that the Borrower execute and deliver to the Secured Parties a security
agreement in substantially the form hereof; and
Whereas, the Borrower wishes to grant a security
interest in favor of the Secured Parties 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 Interest. The Borrower hereby grants and otherwise pledges to the Secured Parties a continuing security
interest in all of the present and future rights, title and interests of the Borrower in and to the following property, and each
item thereof, all whether now or hereafter existing, or owned or acquired by the Borrower, or now or hereafter arising or due or
to become due, wherever such property may be located, together with all substitutions for, replacements of, additions to, accessions
to, and products, Proceeds and records of any and all of the following (collectively, the “Collateral”):
| (ix) | all Investment Property; |
| (xi) | all General Intangibles; |
| (xii) | all Supporting Obligations |
| (xiii) | all Commercial Tort Claims; |
| (xiv) | all Intellectual Property; and |
| (xv) | all other items of tangible and intangible personal property
of any and every kind and description which are not otherwise described herein. |
Section 2. Security
for Obligations. This Agreement secures, and the Collateral is collateral security for the prompt payment 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 Notes,
as well as the Borrower’s performance and observance of all covenants contained herein and in the Notes (the “Obligations”).
Section 3. Agent
as Agent of Secured Parties.
(a) The
Agent shall serve and act as agent for all Secured Parties and shall take such action on their behalf under the provisions of this
Agreement and shall exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement,
together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere
in this Agreement, the Agent shall not have any duties or responsibilities except those expressly set forth herein.
(b) The
Secured Parties, the Agent and the Borrower acknowledge and agree that each Note is secured by a security interest in the Collateral
and that the priorities of the security interests which secure each Secured Party’s respective Note and its or his rights
in and to the Collateral which secures such Notes shall at all times be equal and that each Secured Party shall share and be equal
in priority and rights with the other Secured Parties in proportion to the then outstanding principal amounts of, plus the accrued
but unpaid interest on, their respective Notes.
(c) In
the event that an Event of Default occurs, and a Secured Party gives the Agent notice thereof, the Agent shall immediately thereafter
(i) give written notice of the Event of Default to all Secured Parties, and (ii) commence enforcement, collection (including judicial
or nonjudicial foreclosure) or similar proceeding with respect to the Collateral; provided that while the Agent may take immediate
action in its discretion in order to attempt to preserve the rights of the Secured Parties hereunder, the Agent (a) shall not be
required to take any action hereunder unless and until, if requested by the Agent, the Agent receives direction from 66⅔%
in interest of the Secured Parties (determined on the basis of the outstanding principal amounts of the Notes), and (b) shall take
such all such actions to enforce this Agreement and to realize upon, collect and dispose of the Collateral or any portion thereof
as may be directed by 66⅔% in interest of the Secured Parties; provided that the Agent shall not be required to take any
action that is contrary to law or to the terms of this Agreement, or that would subject it or any of its employees or agents to
liability.
(d) The
Agent acknowledges and agrees that this Agreement and the terms and provisions hereof are solely for the benefit of the Secured
Parties and shall not benefit in any way any other person or entity, including, without limitation, the Borrower or any of its
guarantors. Nothing in this Agreement is intended to affect, limit or in any way diminish the security interests which the Secured
Parties claim in the assets of the Borrower insofar as the rights of the Borrowers and third parties are concerned. The Agent,
on behalf of all Secured Parties, specifically reserves any and all of their respective rights, security interests and rights to
assert security interests against the Borrowers and any third parties, including guarantors.
(e) The
Borrower, the Secured Parties and the Agent acknowledge and agree that each Secured Party’s respective rights and priorities
with respect to the Collateral shall exist and be enforceable against the Collateral only by the Agent on behalf of all Secured
Parties in accordance with the terms hereof, independent of the time or order of attachment or perfection of such Secured Party’s
respective security interest, or the time or order of filing of financing statements. The subordinations, agreements and priorities
set forth in this Agreement shall remain in full force and effect regardless of whether any Secured Party in the future seeks to
rescind, amend, terminate or reform, by liquidation or otherwise, its or his respective agreements with the Borrower.
(f) The
Borrower, the Secured Parties and the Agent acknowledge and agree that the indebtedness and payment obligations of the Borrower
with respect to each Note shall be of equal priority, no Note shall have a priority of payment over or be subordinate to any other
Note, and any and all property, Proceeds or other payments received by the Agent in connection with its enforcement of the Secured
Parties’ security interests as contemplated herein shall be applied promptly by the Agent to the payment to the Secured Parties
pari passu of all outstanding amounts owed under their respective Notes.
(g) Subject
to the shared priority and respective rights of the Secured Parties set forth in this Agreement, the Agent, on behalf of the Secured
Parties, shall be entitled to obtain loss payee endorsements and additional insured status with respect to any and all policies
of insurance now or hereafter obtained by the Borrower insuring against casualty or other loss to any property of the Borrower
in which any Secured Party may have a security interest, and, in connection therewith, may file claims, settle disputes, make adjustments
and take any and all other action otherwise then permitted to each Secured Party with regard thereto, which it may deem advisable
with respect to any assets of the Borrower.
(h) Neither
the Agent nor any officer or agent thereof shall be liable to the Borrower or the Secured Parties for monetary damages for any
action taken or omitted to be taken by the Agent except for liability (i) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or (ii) for any transaction from which the Agent or such officer or agent
thereof derived an improper personal benefit.
(i) The
Borrower shall indemnify and hold harmless the Agent for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable attorneys’ fees) of any kind whatsoever which may
be imposed on, incurred by or asserted against the Agent in connection with or in any way arising out of this Agreement; provided,
however, that the Borrower shall not be liable to the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s gross negligence or willful
misconduct as determined by a final judgment of a court of competent jurisdiction. The Borrower shall upon demand pay to the Agent
the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and
agents, that the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Agent or the Secured Parties hereunder, or (iv) the failure by the Borrower to perform or observe any
of the provisions hereof. In the event the Borrower fails to comply with its obligations under this Section 3(i), after commercially
practicable efforts by the Agent to obtain such compliance, each of the Secured Parties agrees to contribute and pay to the Agent
its or his pro rata share of all such obligations
Section 4. Representations,
Warranties and Covenants. The Borrower represents, warrants and covenants as follows:
(a) The
Borrower is a corporation existing and in good standing under the laws of the State of Delaware.
(b) The
Borrower is duly empowered and authorized to enter into and perform its obligations under this Agreement and all other instruments
and transactions contemplated hereby or relating hereto. The Borrower is duly empowered and authorized to own and to grant security
interests in the Collateral. The execution, delivery and performance by the Borrower of this Agreement, of the Notes and of all
other instruments contemplated hereby 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 the Borrower, including without limitation, the Borrower’s
Certificate of Incorporation, By-Laws and any other loan or security agreements to which the Borrower is a party or by which the
Borrower or its property is bound.
(c) Assuming
the due filing of a financing statement in proper form with the Secretary of State of the State of Delaware, the security interest
granted to the Secured Parties pursuant to this Agreement is a valid, perfected security interest in the that portion of the Collateral
in which a security interest may be perfected by filing under the UCC.
(d) The
Borrower shall not hereafter transfer, assign or otherwise dispose of the Collateral, except in the ordinary course of business,
without the Agent’s prior written consent. The Borrower 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 shall defend the right, title and interest
of the Secured Parties 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.
Section 5. Agent’s
Appointment as Attorney-in-Fact. The Borrower hereby irrevocably constitutes and appoints, from and after the occurrence
of a default by the Borrower in the Obligations, the Agent and any officer or agent thereof, with full power of substitution, as
the Borrower’s true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower
and in the name of the Borrower or in the Agent’s own name as agent hereunder for the Secured Parties, from time to time
in the Agent’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 grant to the Agent the power and right, on behalf of the Borrower,
without notice to or assent by the Borrower 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 the Agent may deem necessary or desirable
to protect, perfect and validate the Secured Parties’ security interest.
The Borrower 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 so long as any amount of principal or accrued interest under the Notes remains unpaid.
The powers conferred upon the Agent hereunder
are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Agent to exercise
any such powers. The Agent shall be accountable only for amounts that the Agent actually receives as a result of the exercise of
such powers and neither the Agent nor any of its partners, officers, directors, employees or agents shall be responsible to the
Borrowers or the other Secured Parties for any act or failure to act, except for the Agent’s own gross negligence or willful
misconduct.
Section 6. Remedies.
If a default by the Borrower in the Obligations shall have occurred and be continuing (an “Event of Default”), the
Agent shall have all of the rights and remedies which secured parties may have under the UCC 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 the Borrower:
(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 the Agent may determine; and/or
(c) Foreclose
the security interest created under this Agreement or under any other agreement relating to the Collateral by any procedure permitted
under the UCC, with or without judicial process.
Section 7. Termination
of Security Interest. The Secured Parties’ security interest in the Collateral shall be extinguished when the Borrower
completes performance of all Obligations.
Section 8. Governing
Law; Venue. This Agreement and the rights of the parties shall be construed and enforced in accordance with the laws of the Commonwealth
of Massachusetts 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 or having
jurisdiction over Boston, Massachusetts in any action that may be brought for the enforcement of 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 the Notes 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.
No Secured Party shall be deemed to have waived any of its respective rights hereunder or under any other agreement, instrument
or paper signed by the Borrower unless such waiver be in writing and signed by the Agent (with respect to the Secured Parties’
rights and interest under the Notes or under this Agreement) or by such Secured Party (with respect to any other rights). No delay
or omission on the part of the Agent in exercising any right shall operate as a waiver of such right or any other right. All of
the Secured Parties’ 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 the Borrower, the Agent and the Secured
Parties.
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.
[Signature Page follows]
In witness whereof, the Borrower, the Agent
and the other Secured Parties have caused this Agreement to be duly executed as of the date first above written.
| ThermoEnergy Corporation |
|
For itself and as Agent for the other Secured Parties: |
| |
|
|
|
|
| |
|
|
Empire Capital Partners, lp |
| By: |
/s/ Gregory M. Landegger |
|
|
By: Empire gp, llc, its General Partner |
| |
Gregory M. Landegger |
|
|
|
| |
Chief Operating Officer |
|
By: |
/s/ Peter J. Richards |
| |
and Interim Chief Financial Officer |
|
|
Peter J. Richards |
| |
|
|
|
Managing Member |
| |
|
|
|
| |
|
|
and |
| |
|
|
|
|
| |
|
|
By: |
/s/ Scott A. Fine |
| |
|
|
|
Scott A. Fine |
| |
|
|
|
Managing Member |
| |
|
|
|
|
| Empire Capital Partners, ltd |
|
Empire Capital Partners Enhanced Master Fund, ltd |
| By: |
Empire Capital Management, llc, |
|
By: |
Empire Capital Management, llc, |
| |
its Investment Manager |
|
|
its Investment Manager |
| |
|
|
|
|
| By: |
/s/ Peter J. Richards |
|
|
|
| |
Peter J. Richards |
|
By: |
/s/ Peter J. Richards |
| |
Managing Member |
|
|
Managing Member |
| |
|
|
|
|
| and |
|
and |
| |
|
|
| By: |
/s/ Scott A. Fine |
|
By: |
/s/ Scott A. Fine |
| |
Scott A. Fine |
|
|
Scott A. Fine |
| |
Managing Member |
|
|
Managing Member |
| |
|
|
|
|
| |
|
|
/s/
Robert S. Trump |
| |
|
|
Robert S. Trump |
ThermoEnergy
Corporation
Security
Agreement
Schedule I
Secured Parties
Robert S. Trump
Empire Capital Partners, LP
Empire Capital Partners, Ltd.
Empire Capital Partners Enhanced Master Fund Ltd.
ThermoEnergy (CE) (USOTC:TMEN)
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From Apr 2024 to May 2024
ThermoEnergy (CE) (USOTC:TMEN)
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From May 2023 to May 2024
