Exhibit
10.1

    


    
      	
              Principal
      Amount:  $600,000.00

            	
              Issue
      Date:  July 31, 2009

            


    

    


    8% SECURED CONVERTIBLE
PROMISSORY NOTE

     

    FOR VALUE RECEIVED, ThermoEnergy
Corporation, a Delaware corporation (the “Borrower”), hereby promise to pay to
the order of Focus Fund L.P. (the “Holder”), the sum of up to Six Hundred
Thousand Dollars ($600,000.00) on the earlier to occur of (i) the closing of an
equity or convertible debt investment (a “Financing”) in the Borrower yielding
gross proceeds to the Borrower of not less than Two Million Dollars
($2,000,000.00) or (ii) December 31, 2011 (in either case, the “Maturity
Date”).  Unless the Holder is participating as an investor in the
Financing, the Borrower shall, at least ten (10) days prior to the initial
closing of the Financing, give the Holder written notice setting forth the
details of the Financing (including, without limitation, the terms of the
securities to be issued in the Financing (the “Financing Securities”), the price
per share at which such Financing Securities will be issued (the “Financing
Price”) and the expected gross proceeds to the Borrower)(the “Financing
Notice”).  Upon the initial closing of the Financing, the entire
outstanding principal amount of this Note, plus any accrued and unpaid interest
thereon, shall convert automatically in Financing Securities at the Financing
Price.

     

    An
initial advance (an “Advance”) in the amount of $300,000 has been made on or
before the date hereof.  Additional Advances (up to the total amount
hereof) shall be made promptly upon the request of the Borrower, provided that
the Holder shall not be obligated to, but may in the Holder’s sole discretion,
make any Additional Advances unless the Borrower’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 and the Borrower’s Quarterly Report
on Form 10-Q for the period ended March 31, 2009 shall have been filed with the
Securities and Exchange Commission.  Interest on the outstanding
principal balance shall accrue at the rate of eight percent (8.0%) per annum,
and shall be due and payable on the Maturity Date.  Interest shall be
computed on the basis of a 365-day year, using the number of days actually
elapsed.

     

    The
Holder shall have the right at any time and from time to time until the
principal and interest on this Note shall have been paid in full, to convert the
outstanding principal amount of this Note, and any accrued and unpaid interest
thereon, into shares of the Common Stock, par value $0.001 per share, of the
Borrower at a price of $0.30 per share.  If the Holder desires to
exercise its right of conversion, the Holder shall give the Borrower a written
notice, setting forth the amount of principal and interest which the Holder
desires to convert.  Should the Holder elect to convert less than the
entire amount of the principal balance and accrued and unpaid interest under
this Note, the amount being converted shall be credited first against accrued
and unpaid interest and the balance, if any, shall be credited against
principal.  Except to the extent that the entire unpaid principal
balance of this Note is being presented for conversion, the Holder shall not be
required to present this Note in order to effect conversion, and the Holder
shall maintain a ledger setting forth each conversion of principal and interest
on this Note and such ledger shall, absent manifest error, be deemed to be
binding and conclusive on the Borrower.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    The
Borrower and Holder have, contemporaneously herewith, entered into a Security
Agreement (the “Security Agreement”) securing the obligations of the Borrower to
the Holder under this Note, and so long as this Note is outstanding the Holder
shall be entitled to the benefit of the Security Agreement.

     

    This Note
may not be prepaid, in whole or in part, without the prior written consent of
the Holder.  Partial prepayments, if any, shall be applied first to
accrued and unpaid interest, and the balance to principal.

     

    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 Agreement:

     

    (i)        The
Borrower’s failure to make any payment of principal or interest or any other
sums within fifteen (15) days of the date when due under this Note;
or

     

    (ii)      Any
representation or warranty or other statement made by the Borrower in the
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 and the failure to cure (if curable) any such
breach or failure within fifteen (15) days after receipt of written notice
thereof from the Holder; or

     

    (iv)      If
the Borrower shall (a) apply for or consent to the appointment of a receiver,
trustee or liquidator of all or a substantial part of any of its assets; (b) be
unable, or admit in writing its inability, to pay its debts as they mature; (c)
file or permit the filing of any petition, case arrangement, reorganization, or
the like under any insolvency or bankruptcy law, or the adjudication of it as a
bankrupt, or the making of an assignment for the benefit of creditors or the
consenting to any form or arrangement for the satisfaction, settlement or delay
of debt or the appointment of a receiver for all or any part of its properties;
or (d) any action shall be taken by the Borrower for the purpose of effecting
any of the foregoing; or

     

    (v)       If
an order, judgment or decree shall be entered, or a case shall be commenced,
against the Borrower, without its application, approval or consent by any court
of competent jurisdiction, approving a petition or permitting the commencement
of a case seeking reorganization or liquidation of the Borrower or appointing a
receiver, trustee or liquidator of the Borrower, or of all or a substantial part
of the assets of the Borrower, and the Borrower, by any act, indicate its
approval thereof, consent thereto, or acquiescence therein, or such order,
judgment, decree or case shall continue unstayed and in effect for any period of
ninety (90) consecutive days or an order for relief in connection therewith
shall be entered; or


    
      
         


      

      
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    (vi)      If
the Borrower shall dissolve or liquidate, or be dissolved or liquidated, or
cease to legally exist, or merge or consolidate, or be merged or consolidated,
with or into any other corporation.

     

    All
payment obligations arising under this Note are subject to the express condition
that at no time shall the Borrower be obligated or required to pay interest at a
rate which could subject the Holder to either civil or criminal liability as a
result of being in excess of the maximum rate which the Borrower is permitted by
law to contract or agree to pay.  If by the terms of this Note, the
Borrower is at any time required or obligated to pay interest at a rate in
excess of such maximum rate, the applicable rate of interest shall be deemed to
be immediately reduced to such maximum rate, and interest thus payable shall be
computed at such maximum rate, and the portion of all prior interest payments in
excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of principal.

     

    No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or
privilege.  All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.

     

    All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Arkansas, without regard to the
principles of conflicts of law thereof. Each party agrees that any action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened. (a “Proceeding”) concerning the interpretation, enforcement and of
the transactions contemplated by this Note or the Security Agreement shall be
commenced exclusively in the state or federal courts sitting in, or having
jurisdiction over, Little Rock, Arkansas (the “Arkansas Courts” ). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the Arkansas
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 Arkansas Court, or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Note or the Security Agreement, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

     

    
      
         


      

      
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    THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE.  THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE HOLDER TO ACCEPT THIS NOTE.

     

    All
notices, requests or other communications required or permitted to be given
under this Agreement to any party shall be in writing and shall be deemed to
have been sufficiently given when delivered by personal service or sent by
registered mail, overnight courier services with provided evidence of delivery
or attempted delivery, or facsimile, to the Borrower at 124 West Capitol Avenue,
Suite 880, Little Rock, Arkansas 72201 (fax: 501-375-5249), with a copy to
William E. Kelly, Esq., Nixon Peabody LLP, 100 Summer Street, Boston,
Massachusetts 02110 (fax: 866-743-4899) or to the Holder at
[                                          ]
(fax:
[            ]).  Either
party may, by like notice, change the address or telecopy number or the person
to whom notice is to be given.  Notice shall be deemed given when
received or when attempted delivery is made (based on evidence of attempted
delivery by the United States Postal Service or an overnight courier or a
messenger service), provided that notice by telecopier shall be deemed given
when receipt is acknowledged by the recipient.

     

    This Note
may be amended or supplemented, or any provision hereof waived, only by the
written agreement of the Holder and the Borrower.  Neither the
amendment of the Security Agreement, the extension of Advances pursuant hereto
nor any other transaction entered into in connection herewith shall be deemed to
be a waiver of any right or obligation of either party existing prior to the
date hereof, all of which are expressly reserved.

     

    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 Chairman and Chief Executive Officer as of the date and year first
above written.

     

    
      
        	
                ThermoEnergy
      Corporation

              
	 
      	 
      
	
                By:

              	
                /s/  Dennis C.
    Cossey

              
	 
      	
                Dennis
      C. Cossey

              
	 
      	
                Chief
      Executive Officer

              


      

    

     

    
      
         


      

      
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