Unassociated Document


    Exhibit
10.1

    


    


    


    
      	
              Principal
      Amount:  $250,000.00

            	
              Issue
      Date:  February 11, 2009

            


    

    


    


    10% SECURED CONVERTIBLE
PROMISSORY NOTE

    


     

    FOR VALUE RECEIVED, ThermoEnergy
Corporation, a Delaware corporation (the “Borrower”), hereby promise to pay to
the order of The Quercus Trust (the “Holder”), the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) on the earlier to occur of (i) the closing of an
equity or convertible debt investment in the Borrower yielding gross proceeds to
the Borrower of not less than Two Million Dollars ($2,000,000.00)(a “Financing”)
or December 31, 2009 (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”).

     

    Interest
on the outstanding principal balance shall be paid at the rate of ten percent
(10.0%) per annum, payable in arrears on the last day of each March, June,
September and December, commencing on March 31, 2009 and continuing through the
Maturity Date (each, an “Interest Payment Date”).  Interest shall be
computed on the basis of a 365-day year, using the number of days actually
elapsed.

     

    At the
election of the Borrower by written notice to the Holder, all or any portion of
any payment of interest due under this Note on any particular Interest Payment
Date may be paid by the issuance to the Holder, on such Interest Payment Date,
of shares of the Borrower’s Common Stock, par value $0.001 per share (the
“Common Stock”).  The number of shares of Common Stock to be issued in
payment of interest on any particular Interest Payment Date shall be determined
by dividing (i) the amount of interest to be so paid by (ii) ninety percent
(90%) of the volume weighted average trading price per share of Common Stock for
the ten (10) trading days immediately preceding such Interest Payment Date on
the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global
Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the OTC
Bulletin Board, as reported by Bloomberg Financial Markets, or any successor
performing similar functions.

     

    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 participate
in the Financing by converting the principal amount of this Note into shares of
the Financing Securities at a price per share equal to ninety percent (90%) of
the Financing Price.  If the Holder desires to  exercise its
right of conversion, the Holder shall, within five (5) business days after
delivery of the Financing Notice, give the Borrower a written notice, setting
forth the amount of principal which the Holder will convert in the
Financing.  The Holder’s right to participate in the Financing by
conversion of this Note shall be conditioned on the Holder’s entering into such
purchase agreements and related agreements as shall be executed at the closing
of the Financing by the other investors participating in the
Financing.  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
obligations of the Borrower under this Note are secured by a pledge of certain
assets of the Borrower pursuant to a Security Agreement of even date herewith by
and between the Borrower and the Holder (the “Security Agreement”) and the
holder of this Note shall be entitled to all of the benefits 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)           Borrower’s
failure to make any payment of principal or interest or any other sums within
fifteen (15) days of the date when due on this Note; or

     

    (ii)           Any
representation or warranty or other statement made or furnished to the Holder by
or on behalf of the Borrower in any document or instrument furnished in
connection with this Note proves to have been false or misleading in any
material respect when made or furnished; or

     

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

     

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (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 hereof in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or
privilege.  All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.

     

    This
Agreement and the rights of the parties shall be construed and enforced in
accordance with the laws of the State of New York applicable to agreements
executed and to be performed wholly within such state and without regard to
principles of conflicts of law.  Each party irrevocably (a) consents
to the jurisdiction of the federal and state courts situated in New York, New
York in any action that may be brought for the enforcement of this Note, 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; provided, however, that if
the federal and state courts situated in New York, New York refuse to accept
jurisdiction in any action brought for the enforcement of this Note, each party
irrevocably (a) consents to the jurisdiction of the federal and state courts
situated in Wilmington, Delaware in any such action, 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
this Note (other than by telecopier) or (ii) in any other manner permitted by
law.  

     

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

     

    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 1835 Newport
Boulevard, A-109 – PMB 467, Costa Mesa, California 92627 (fax: 949-631-2325),
with a copy to Joseph P. Bartlett, Esq., 1900 Avenue of the Stars, 19th Floor,
Los Angeles, California, 90067 (fax: 310-388-1055).  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 only by the written agreement of the Holder and
the Borrower.

     

    This Note
shall be binding upon the Borrower and its successors and assigns, and shall
inure to the benefit of the Holder and its successors and
assigns.  The Borrower may not assign any of its obligations under
this Note without the consent of the Holder.

     

    If
default is made in the payment of this Note, the Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys’ fees,
regardless of whether the Holder commenced litigation in order to enforce its
rights under this Note.

     

    IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed and delivered by its duly
authorized Executive Vice President and Chief Financial Officer as of the date
and year first above written.

     

    
      
        
          	 
      	
                  ThermoEnergy
      Corporation

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/  Andrew T.
    Melton

                
	 
      	 
      	
                  Andrew
      T. Melton

                
	 
      	 
      	
                  Executive
      Vice President and CFO