PAYMENT OF THIS NON-REVOLVING LINE OF CREDIT NOTE AND THE RIGHTS AND REMEDIES OF
THE NOTEHOLDER HEREOF ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SUBORDINATION
AGREEMENT DATED AS OF JUNE 15, 2015 AMONG THE BORROWER, THE NOTEHOLDER AND
MICHAELSON CAPITAL SPECIAL FINANCE FUND LP. ANY SUCCESSORS AND ASSIGNS OF THE
NOTEHOLDER HEREOF SHALL BE SUBJECT TO AND BOUND BY THE TERMS AND CONDITIONS OF
SUCH SUBORDINATION AGREEMENT. A COPY OF SUCH SUBORDINATION AGREEMENT MAY BE
OBTAINED, UPON WRITTEN REQUEST OF ANY NOTEHOLDER HEREOF, FROM TECOGEN INC.

NON-REVOLVING LINE OF CREDIT NOTE
June 15, 2015
FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein,
Tecogen Inc., a Delaware Corporation with a principal business address of 45
First Avenue, Waltham, MA 02451 (the “Borrower”), hereby unconditionally
promises to pay to the order of John N. Hatsopoulos of 3 Woodcock Lane, Lincoln,
Massachusetts 01773 or his assigns (the “Noteholder”, and together with the
Borrower, the “Parties”), the principal amount of Two Million Dollars
($2,000,000) (the “Maximum Non-Revolving Credit”), or so much of the Maximum
Non-Revolving Credit as has been advanced from time to time by the Noteholder
pursuant to Section 2.2 hereof, together with interest on all unpaid balances
under this Non-Revolving Line of Credit Note (as may be amended, modified or
extended from time to time, this “Note”) at the applicable interest rate set
forth in this Note.
1.
Definitions. Capitalized terms used herein shall have the meanings set forth in
this Section 1.

“Advance” means each disbursement made by the Noteholder to the Borrower
pursuant to Section 2.2.
“Applicable Rate” means six percent (6%).
“Borrower” has the meaning set forth in the introductory paragraph.
“Borrowing Notice” has the meaning set forth in Section 2.2.
“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

1

--------------------------------------------------------------------------------

“Commitment Period” means the period from July 1, 2015 to the Maturity Date.
“Default” means any of the events specified in Section 9 which constitutes an
Event of Default or which, upon the giving of notice, the lapse of time, or both
pursuant to Section 9 would, unless cured or waived, become an Event of Default.
“Default Rate” means, at any time, the Applicable Rate plus two percent (2%).
“Event of Default” has the meaning set forth in Section 9.
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time.
“Governmental Authority” means the government of any nation or any political
subdivision thereof, whether at the national, state, territorial, provincial,
municipal or any other level, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of, or pertaining to, government (including any supranational bodies such as the
European Union or the European Central Bank).
“Interest Payment Date” means the last day of each quarter commencing on the
first such date to occur after the execution of this Note.
“Law” as to any Person, means any law (including common law), statute,
ordinance, treaty, rule, regulation, policy or requirement of any Governmental
Authority and authoritative interpretations thereon, whether now or hereafter in
effect, in each case, applicable to or binding on such Person or any of its
properties or to which such Person or any of its properties is subject.
“Lien” means any mortgage, pledge, hypothecation, encumbrance, lien (statutory
or other), charge or other security interest.
“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, properties, liabilities (actual or contingent), operations, or condition
(financial or otherwise) of the Borrower; (b) the validity or enforceability of
the Note; (c) the rights or remedies of the Noteholder hereunder; and (d) the
Borrower’s ability to perform any of its material payment obligations hereunder.
“Maturity Date” means the earlier of (a) July 1, 2017, and (b) the date on which
all amounts under this Note shall become due and payable pursuant to Section 10.

2

--------------------------------------------------------------------------------

“Maximum Non-Revolving Line of Credit” has the meaning set forth in the
introductory paragraph.
“Note” has the meaning set forth in the introductory paragraph.
“Noteholder” has the meaning set forth in the introductory paragraph.
“Order” as to any Person, means any order, decree, judgment, writ, injunction,
settlement agreement, requirement or determination of an arbitrator or a court
or other Governmental Authority, in each case, applicable to or binding on such
Person or any of its properties or to which such Person or any of its properties
is subject.
“Parties” has the meaning set forth in the introductory paragraph.
“Person” means any individual, corporation, limited liability company, trust,
joint venture, association, company, limited or general partnership,
unincorporated organization, Governmental Authority or other entity.
2.
Note Disbursement Mechanics.

1.Commitment. Subject to Section 2.2, the Noteholder shall make available to the
Borrower one or more Advances during the Commitment Period in an aggregate
principal amount not to exceed the Maximum Non-Revolving Credit.
2.Advances. As a condition to the disbursement of any Advance, the Borrower
shall, at least three (3) Business Days prior to the requested disbursement
date, provide the Noteholder with written or electronic notice (the “Borrowing
Notice”) setting out (a) the amount of such Advance, which amount may not exceed
Two Hundred and Fifty Thousand Dollars ($250,000) per quarter of the financial
calendar starting with the third quarter of 2015; and (b) the date on which such
Advance is to be disbursed. Each Borrowing Notice shall be deemed to repeat the
Borrower’s representations and warranties in Section 6 as of the date of such
Borrowing Notice. Upon receipt of the Borrowing Notice, the Noteholder shall
make available to the Borrower on the disbursement date specified in such
Borrowing Notice the principal amount set out in such Borrowing Notice in
immediately available funds.
3.Final Payment Date; Optional Prepayments.
1.Final Payment Date. The aggregate unpaid principal amount of the Maximum
Non-Revolving Credit, all accrued and unpaid interest and all other amounts
payable under this Note shall be due and payable on the Maturity Date.
2.Optional Prepayment. The Borrower may prepay the Note in whole or in part at
any time or from time to time without penalty or premium by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment. No prepaid amount may be reborrowed.

3

--------------------------------------------------------------------------------

4.Interest.
1.Interest Rate. Except as otherwise provided herein, the outstanding principal
amount of each Advance made hereunder shall bear interest at the Applicable Rate
from the date such Advance was made until the aggregate principal amount of the
Maximum Non-Revolving Credit is paid in full, whether at maturity, upon
acceleration, by prepayment or otherwise.
2.Interest Payment Dates. Interest shall be payable quarterly in arrears to the
Noteholder on each Interest Payment Date.
3.Default Interest. If any amount payable hereunder is not paid when due
(without regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, such overdue amount shall bear interest at the
Default Rate from the date of such non-payment until such amount is paid in
full.
4.Computation of Interest. The interest on the outstanding principal balance of
each Advance shall at all times be calculated on a 365-day year but shall accrue
and be payable on the actual number of days elapsed.
5.Payment Mechanics.
1.Manner of Payments. All payments of interest and principal shall be made in
lawful money of the United States of America no later than 4:00 PM New York, New
York time on the date on which such payment is due by cashier’s check, certified
check or by wire transfer of immediately available funds to the Noteholder at
his business address or to the Noteholder’s account at a bank specified by the
Noteholder in writing to the Borrower from time to time, whichever the
Noteholder prefers.
2.Application of Payments. All payments made hereunder shall be applied (i)
first to the payment of any fees or charges outstanding hereunder, (ii) second
to accrued interest and (iii) third to the payment of the principal amount
outstanding under the Note.
3.Business Day Convention. Whenever any payment to be made hereunder shall be
due on a day that is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension will be taken into account in
calculating the amount of interest payable under this Note.
4.Evidence of Debt. The Noteholder is authorized to record on the grid attached
hereto as Exhibit A each Advance made to the Borrower and each payment or
prepayment thereof. The entries made by the Noteholder shall, to the extent
permitted by applicable Law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, however,
that the failure of the Noteholder to record such payments or prepayments, or
any inaccuracy therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Advances in accordance with the
terms of this Note.
5.Rescission of Payments. If at any time any payment made by the Borrower under
this Note is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy or reorganization of

4

--------------------------------------------------------------------------------

the Borrower or otherwise, the Borrower’s obligation to make such payment shall
be reinstated as though such payment had not been made.
6.Representations and Warranties. The Borrower hereby represents and warrants to
the Noteholder on the date hereof as follows:
1.Existence; Compliance With Laws. The Borrower is (a) a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite power and authority, and the legal right, to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted and (b) in compliance with all Laws and Orders except
to the extent that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
2.Power and Authority. The Borrower has the power and authority, and the legal
right, to execute and deliver this Note and to perform its obligations
hereunder.
3.Authorization; Execution and Delivery. The execution and delivery of this Note
by the Borrower and the performance of its obligations hereunder have been duly
authorized by all necessary action in accordance with all applicable Laws. The
Borrower has duly executed and delivered this Note.
4.No Approvals. Except as set forth in Section 10(a)(iv) of the Michaelson
Capital Special Finance Fund LP Senior Convertible Note dated December 23, 2013,
issued by the Borrower in favor of Michaelson Capital Special Finance Fund LP, a
limited partnership organized under the laws of the State of Delaware, no
consent or authorization of, filing with, notice to or other act by, or in
respect of, any Governmental Authority or any other Person is required in order
for the Borrower to execute, deliver, or perform any of its obligations under
this Note.
5.No Violations. The execution and delivery of this Note and the consummation by
the Borrower of the transactions contemplated hereby do not and will not (a)
violate any provision of the Borrower’s organizational documents; (b) violate
any Law or Order applicable to the Borrower or by which any of its properties or
assets may be bound; or (c) constitute a default under any material agreement or
contract by which the Borrower may be bound.
6.Enforceability. The Note is a valid, legal and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
7.No Litigation. No action, suit, litigation, investigation or proceeding of, or
before, any arbitrator or Governmental Authority is pending or, to the knowledge
of the Borrower, threatened by or against the Borrower or any of its properties
or assets (a) with respect to the Note or any of the transactions contemplated
hereby or (b) that would be expected to materially adversely affect the
Borrower’s financial condition or the ability of the Borrower to perform its
obligations under the Note.

5

--------------------------------------------------------------------------------

7.Affirmative Covenants. Until all amounts outstanding in this Note have been
paid in full, the Borrower shall:
1.Maintenance of Existence. (a) Preserve, renew and maintain in full force and
effect its corporate or organizational existence and (b) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business, except, in each case, where the failure
to do so would not reasonably be expected to have a Material Adverse Effect.
2.Compliance. Comply with (a) all of the terms and provisions of its
organizational documents, (b) its obligations under its material contracts and
agreements and (c) all Laws and Orders applicable to it and its business, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
3.Payment Obligations. Pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, and reserves
in conformity with GAAP with respect thereto have been provided on its books.
4.Notice of Events of Default. As soon as possible and in any event within two
(2) Business Days after it becomes aware that a Default or an Event of Default
has occurred, notify the Noteholder in writing of the nature and extent of such
Default or Event of Default and the action, if any, it has taken or proposes to
take with respect to such Default or Event of Default.
5.Further Assurances. Upon the request of the Noteholder, promptly execute and
deliver such further instruments and do or cause to be done such further acts as
may be necessary or advisable to carry out the intent and purposes of this Note.
8.Death or Incapacity of Noteholder. If the Noteholder dies or becomes
incapacitated, then the entire principal amount of this Note, together with all
accrued interest thereon and all other amounts payable hereunder, shall
immediately become due and payable.
9.Events of Default. The occurrence and continuance of any of the following
shall constitute an Event of Default hereunder:
1.Failure to Pay. The Borrower fails to pay (a) any principal amount of the Note
when due or (b) interest or any other amount when due and such failure continues
for two (2) business days after written notice is provided to the Borrower.
2.Breach of Representations and Warranties. Any representation or warranty made
or deemed made by the Borrower to the Noteholder herein is incorrect in any
material respect on the date as of which such representation or warranty was
made or deemed made.
3.Breach of Covenants. The Borrower fails to observe or perform (a) any
covenant, condition or agreement contained in Section 7.4 or (b) any other
material covenant, obligation, condition or agreement

6

--------------------------------------------------------------------------------

contained in this Note other than those specified in clause (a) and Section 9.1
and such failure continues for 30 days after written notice to the Borrower.
4.Bankruptcy.  
(a)the Borrower commences any case, proceeding or other action (i) under any
existing or future Law relating to bankruptcy, insolvency, reorganization, or
other relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts or (ii) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or the
Borrower makes a general assignment for the benefit of its creditors;
(b)there is commenced against the Borrower any case, proceeding or other action
of a nature referred to in Section 9.4(a) above which (i) results in the entry
of an order for relief or any such adjudication or appointment or (ii) remains
undismissed, undischarged or unbonded for a period of 60 days;
(c)there is commenced against the Borrower any case, proceeding or other action
seeking issuance of a warrant of attachment, execution or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which has not been vacated, discharged, or stayed
or bonded pending appeal within 60 days from the entry thereof;
(d)the Borrower takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in Section
9.4(a), Section 9.4(b) or Section 9.4(c) above; or
(e)the Borrower is generally not, or shall be unable to, or admits in writing
its inability to, pay its debts as they become due.
5.Judgments. One or more judgments or decrees shall be entered against the
Borrower and all of such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof.
10.Remedies. Upon the occurrence of any Event of Default and at any time
thereafter during the continuance of such Event of Default, the Noteholder may
at its option, by written notice to the Borrower (a) terminate its commitment to
make any Advances hereunder; (b) declare the entire principal amount of this
Note, together with all accrued interest thereon and all other amounts payable
hereunder, immediately due and payable; and (c) exercise any or all of its
rights, powers or remedies under applicable Law; provided, however that, if an
Event of Default described in Section 9.4 shall occur, the principal of and
accrued interest on the Maximum Non-Revolving Credit shall become immediately
due and payable without any notice, declaration or other act on the part of the
Noteholder.
11.Miscellaneous.

7

--------------------------------------------------------------------------------

1.Notices.  
(a)All notices, requests or other communications required or permitted to be
delivered hereunder shall be delivered in writing, including via e-mail, in each
case to the address specified below or to such other address as such Party may
from time to time specify in writing in compliance with this provision:
(i)
If to the Borrower:

Tecogen Inc. (see address listed above)
Attn: Chief Financial Officer
Telephone: (781) 466-6400, Facsimile: (781) 466-6466
E-mail: david.garrison@tecogen.com
(ii)
If to the Noteholder:

John N. Hatsopoulos (see address listed above)
Telephone: (781) 622-1120, Facsimile: (781) 622-1027
E-mail: Jhatsopoulos@tecogen.com
(b)Notices if (i) mailed by certified or registered mail or sent by hand or
overnight courier service shall be deemed to have been given when received; (ii)
sent by facsimile during the recipient’s normal business hours shall be deemed
to have been given when sent (and if sent after normal business hours shall be
deemed to have been given at the opening of the recipient’s business on the next
business day); and (iii) sent by e-mail shall be deemed received upon the
sender’s receipt of an acknowledgment from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgment).
2.Expenses. The Borrower agrees to pay on demand the costs and expenses of the
Noteholder, and fees and disbursements of counsel, in connection with any Event
of Default, the enforcement or attempted enforcement of, and preservation of any
rights or interests under, this Note, and any out-of-court workout or other
refinancing or restructuring or any bankruptcy or insolvency case or
proceeding..
3.Governing Law. This Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
4.Submission to Jurisdiction. The Borrower hereby (a) submits to the
non-exclusive jurisdiction of the courts of the Commonwealth of Massachusetts
and the Federal courts of the United States sitting in the District of
Massachusetts (collectively, the “Massachusetts Courts”), for the purpose of any
action or proceeding arising out of or relating to this Note, (b) irrevocably
waives (to the extent permitted by applicable law) any objection which it now or
hereafter may have to the laying of venue of any such

8

--------------------------------------------------------------------------------

action or proceeding brought in any of the Massachusetts Courts, and any
objection on the ground that any such action or proceeding in any Massachusetts
Court has been brought in an inconvenient forum, and (c) agrees that (to the
extent permitted by applicable law) a final judgment in any such action or
proceeding brought in a Massachusetts Court shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
permitted by law.
5.Counterparts; Integration; Effectiveness. This Note and any amendments,
waivers, consents or supplements hereto may be executed in counterparts, each of
which shall constitute an original, but all taken together shall constitute a
single contract. This Note and the Subordination Agreement dated as of June 15,
2015, among the Borrower, the Noteholder and Michaelson Capital Special Finance
Fund LP constitutes the entire contract between the Parties with respect to the
subject matter hereof and supersede all previous agreements and understandings,
oral or written, with respect thereto. Delivery of an executed counterpart of a
signature page to this Note by facsimile or electronic (i.e., “pdf” or “tif”)
format shall be effective as delivery of a manually executed counterpart of this
Note.
6.Successors and Assigns. This Note shall be binding on the Borrower and its
successors and assigns, and shall be binding upon and inure to the benefit of
the Noteholder, any future holder of this Note and their respective successors
and assigns. The Borrower may not assign or transfer this Note or any of its
obligations hereunder without Noteholder’s prior written consent.
7.Interpretation. For purposes of this Note (a) the words “include,” “includes”
and “including” shall be deemed to be followed by the words “without
limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,”
“hereof,” “hereby,” “hereto” and “hereunder” refer to this Note as a whole. The
definitions given for any defined terms in this Note shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. Unless the context otherwise requires, references herein: (x) to
Exhibits and Sections mean the Exhibits and Sections of this Note; (y) to an
agreement, instrument or other document means such agreement, instrument or
other document as amended, supplemented and modified from time to time to the
extent permitted by the provisions thereof; and (z) to a statute means such
statute as amended from time to time and includes any successor legislation
thereto and any regulations promulgated thereunder. This Note shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted.
8.Amendments and Waivers. No term of this Note may be waived, modified or
amended except by an instrument in writing signed by both of the parties hereto.
Any waiver of the terms hereof shall be effective only in the specific instance
and for the specific purpose given.

9

--------------------------------------------------------------------------------

9.Headings. The headings of the various Sections and subsections herein are for
reference only and shall not define, modify, expand or limit any of the terms or
provisions hereof.
10.No Waiver. No single or partial exercise of any power under this Note shall
preclude any other or further exercise of such power or exercise of any other
power. No delay or omission on the part of the Noteholder in exercising any
right under this Note shall operate as a waiver of such right or any other right
thereunder
11.Electronic Execution. The words “execution,” “signed,” “signature,” and words
of similar import in the Note shall be deemed to include electronic or digital
signatures or the keeping of records in electronic form, each of which shall be
of the same effect, validity and enforceability as manually executed signatures
or a paper-based recordkeeping system, as the case may be, to the extent and as
provided for under applicable law, including the Electronic Signatures in Global
and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic
Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), or any
other similar state laws based on the Uniform Electronic Transactions Act.
12.Severability. If any term or provision of this Note is invalid, illegal or
unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Note or
invalidate or render unenforceable such term or provision in any other
jurisdiction. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Note so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

[SIGNATURE PAGE FOLLOWS]

10

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Borrower has executed this Note as of July 1, 2015.

 
Tecogen, Inc.
 
By_____________________

Name:
Title:

Acknowledged and agreed:
 
By:_____________________
Name:John N. Hatsopoulos
 

11