Document:

Secured Promissory Note

 Exhibit 10.1 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. 
  
 SECURED PROMISSORY NOTE 
  

			
	$700,000.00	 	July 14, 2005
	 	 	Clearwater, Florida

  
 For value received,
Digital Lightwave, Inc., a Delaware corporation (the “Company”), promises to pay to Optel Capital, LLC, a Delaware limited liability company (the “Holder”), or its registered assigns, the principal sum of Seven
Hundred Thousand Dollars ($700,000.00). Interest shall accrue from the date of this Note on the unpaid principal amount at a rate equal to 10.0% per annum, compounded annually. The interest rate shall be computed on the basis of the actual number of
days elapsed and a year of 360 days. This Note is subject to the following terms and conditions. 
  
 1. Maturity. 
  
 (a) Principal and any accrued but unpaid interest under this Note shall be due and payable upon demand by the Holder at any time after September 30, 2005.

  
 (b) Notwithstanding the foregoing, the entire unpaid principal
sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon demand by the Holder at any time on or following the occurrence of any of the following events: 
  
 (i) the sale of all or substantially all of the Company’s assets, or
any merger or consolidation of the Company with or into another corporation; other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction
continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such
surviving entity, outstanding immediately after such transaction; 
  
 (ii) the inability of the Company to pay its debts as they become due; 

 (iii) the dissolution, termination of existence, or appointment of a receiver, trustee or custodian, for
all or any material part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; 
  
 (iv) the
execution by the Company of a general assignment for the benefit of creditors; 
  
 (v) the commencement of any proceeding against the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not
cured by the dismissal thereof within ninety (90) days after the date commenced; or 
  
 (vi) the appointment of a receiver or trustee to take possession of the property or assets of the Company. 
  
 2. Payment; Prepayment. All payments shall be made in lawful money of the United States of America at such place as the Holder hereof may
from time to time designate in writing to the Company. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of this Note may be made at any time without penalty. 

 
 3. Transfer; Successors and Assigns. The terms and
conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. This Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed,
or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and accrued interest will be issued to, and registered in the name of, the transferee. Interest
and principal are payable only to the registered holder of this Note. 
  
 4. Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Florida,
without giving effect to principles of conflicts of law. 
  
 5.
Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after
being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written
notice. 
  
 6. Amendments and Waivers. Any term of
this Note may be amended only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this Section 6 shall be binding upon the Company, each Holder and each transferee of this Note.

  

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 7. Officers and Directors Not Liable. In no event shall any officer or director of the
Company be liable for any amounts due or payable pursuant to this Note. 
  
 8. Security Interest. This Note is secured by all of the assets of the Company in accordance with the Twenty Second Amended and Restated Security Agreement by and between the Company and the Holder dated as of September 16,
2004 (the “Security Agreement”). In case of an Event of Default (as defined in the Security Agreement), the Holder shall have the rights set forth in the Security Agreement. 
  
 9. Counterparts. This Note may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which together will constitute a single agreement. 
  
 10. Action to Collect on Note. If action is instituted to collect on this Note, the Company promises to pay all costs and expenses,
including reasonable attorney’s fees, incurred in connection with such action. 
  
 11. Loss of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity satisfactory to the
Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor. 
  
 [Remainder of this page intentionally left blank.] 
  

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 This Note was entered into as of the date set forth above. 
  

			
	COMPANY:
	
	DIGITAL LIGHTWAVE, INC.
		
	By:	 	 /s/ Robert F. Hussey

	 	 	Robert F. Hussey
	 	 	Interim President and Chief Executive Officer

  

			
	AGREED TO AND ACCEPTED:
	
	OPTEL CAPITAL, LLC
		
	By:	 	 /s/ Paul Ragaini

	Name:	 	Paul Ragaini
	 	 	     (print)
	Title:	 	Chief Financial OfficerForm of Warrant

 EXHIBIT 4.1 
  

THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT. 
  
 Number of Shares of Common Stock:              
 Warrant No. W05-     
  
 COMMON STOCK PURCHASE WARRANT 
  
 To Purchase Common Stock of 
 THERMOENERGY CORPORATION 
  
 THIS IS TO CERTIFY THAT
                    , or registered assigns, is entitled, at any time from the Closing Date (as hereinafter defined) to the Expiration Date
(as hereinafter defined), to purchase from ThermoEnergy Corporation, an Arkansas corporation (the “Company”),
                     shares of Common Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part,
including fractional parts, at a purchase price per share of $1.50, subject to adjustment as provided herein (the “Exercise Price”), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 

 
 1. DEFINITIONS 
  
 As used in this Common Stock Purchase Warrant (this
“Warrant”), the following terms shall have the respective meanings set forth below: 
  
 “Acceleration Notice” shall have the meaning set forth in Section 2.4. 
  
 “Business Day” shall mean any day that is not a Saturday or Sunday or a day on which banks are required or
permitted to be closed in the City of New York. 
  
 “Closing Date” shall mean July 14, 2005. 
  
 “Commission” shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. 
  
 “Common Stock” shall mean (except where the context
otherwise indicates) the Common Stock, par value $0.001 per share, of the Company as constituted on the Closing Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets over any other class of stock of the Company and which
is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.4. 
  
 “Convertible Securities” shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into or exchangeable, with or without payment of additional consideration in cash or property, for shares of Common Stock, either immediately or upon the occurrence of a
specified date or a specified event. 

 “Early Expiration Date” shall have the meaning set forth in Section 2.4. 
  
 “Event” shall have the meaning set forth in Section 4.3.

  
 “Event Date” shall have the meaning set forth
in Section 4.3. 
  
 “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 
  
 “Exercise Period” shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1. 
  
 “Expiration Date” shall mean July 15, 2008 or such earlier date as may be determined pursuant to Section 2.4. 
  
 “Fundamental Corporate Change” shall have the meaning set forth in Section 4.4. 
  
 “Holder” shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company maintained for such purpose. 
  
 “Market Price” shall mean, on any date of determination,(i) the closing price of a share of Common Stock on such day as reported on the
principal Trading Market on which the Common Stock is listed or traded, or (ii) if the Common Stock is not listed on a Trading Market, the closing bid price for a share of Common Stock on such day in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not then listed or quoted on the OTC Bulletin Board, the closing bid price for a share of Common Stock on such day in the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions of reporting prices). 
  
 “Other Property” shall have the meaning set forth in Section 4.4. 
  
 “Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or
department thereof). 
  
 “Securities Act” shall
mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 
  
 “Securities Purchase Agreement” shall mean that certain Securities Purchase Agreement dated as of the
Closing Date between the Company and the several Investors named therein (including the initial Holder of this Warrant). 
  
 “Subsequent Adjustment Date” shall have the meaning set forth in Section 4.3. 
  

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 “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market,
or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not then quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then the term “Trading Day” shall mean a Business Day. 
  

“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, or the
Nasdaq Small Cap Market on which the Common Stock is listed or quoted for trading on the date in question. 
  
 “Transfer” shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act. 
  
 “Warrant Stock” shall mean the shares of Common Stock issued or issuable to the Holders of the Warrants upon the exercise thereof. 
  
 “Warrants” shall mean this Warrant and all other warrants issued pursuant to the Securities Purchase Agreement and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.

  
 2. EXERCISE OF WARRANT 
  
 2.1 Manner of Exercise 
  
 From and after the Closing Date and until 6:00 p.m., New York time, on the
Expiration Date, the Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder. 
  

In order to exercise this Warrant, in whole or in part, the Holder shall surrender this Warrant to the Company at its principal office at 1300 Tower
Building, 323 Center Street, Little Rock, Arkansas, or at the office or agency designated by the Company pursuant to Section 12, together with a written notice of the Holder’s election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased, and shall be accompanied by payment of the Exercise Price (a) in cash or wire transfer or cashier’s check drawn on a United States bank or (b) written direction to the Company to cancel a
portion of this Warrant sufficient to satisfy the “cashless exercise” provisions of this Section 2.1. Such notice shall be substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit A, duly executed
by the Holder or its agent or attorney. Upon receipt of the items referred to above, the Company shall, as promptly as practicable, and in any event within three Business Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate
or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the Holder shall request in the notice and shall be registered in the name of the Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have
become the holder of record of such shares for all purposes, as of the date the notice, together with the cash or check 

  

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or wire transfer of funds (or direction to cancel a portion of this Warrant pursuant to the “cashless exercise” provisions) and this Warrant, is
received by the Company as described above and all taxes required to be paid by the Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares have been paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant Stock, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. Notwithstanding any provision herein to the contrary, the
Company shall not be required to register shares in the name of any Person who acquired this Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with this Warrant. 
  
 In lieu of payment of the Exercise Price in cash, the Holder may direct the Company to cancel a portion of this Warrant
having a value equal to the Exercise Price for the number of shares of Warrant Stock as to which the Holder exercises this Warrant, determined by multiplying the number of shares of Warrant Stock as to which this Warrant is directed to be cancelled
by an amount equal to the difference between (i) the Market Price on the date of exercise and (ii) the Exercise Price then in effect. Payment by such cancellation is referred to herein as “cashless exercise.” 
  
 2.2 Payment of Taxes and Charges 
  
 All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, freely tradable and without any preemptive rights. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, unless such tax or charge is a tax on income imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. 
  
 2.3 Fractional Shares 
  
 The Company shall not be required to issue a fractional share of Common
Stock upon exercise of any Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same
fraction of the Market Price per share of Common Stock as of the date of exercise of the Warrant giving rise to such fraction of a share. 
  

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 2.4 Early Expiration 
  
 If at any time the Market Price for the Common Stock equals or exceeds 125% of the Exercise Price for a period of thirty
(30) consecutive Trading Days, then the Company may, by notice to the Holders of the Warrants (the “Acceleration Notice”), accelerate the Expiration Date of all of the Warrants to such date as shall be determined by the Company in
its sole discretion and set forth in the Acceleration Notice (the “Early Expiration Date”), which Early Expiration Date shall be not less than sixty (60) days, nor more than ninety (90) days, after the date of the Acceleration
Notice. From and after the date of the Acceleration Notice, the term “Expiration Date”, wherever used in this Warrant, shall mean and refer to the Early Expiration Date. 
  
 3. TRANSFER, DIVISION AND COMBINATION 
  
 3.1 Transfer 
  
 Subject to compliance with Section 9, transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company referred to in Section 2.1 or the office or agency designated by the Company pursuant to Section 12, together with a written assignment
of this Warrant substantially in the form of Exhibit B hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall, subject to Section 9, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 9, may be exercised by a new the Holder for the purchase of shares of Common
Stock without having a new warrant issued. 
  
 3.2 Division and
Combination 
  
 Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Sections 3.1 and 9, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. 
  
 3.3 Expenses 
  
 The Company shall prepare, issue
and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 3. 
  
 3.4 Maintenance of Books 
  
 The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants.

  

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 4. ADJUSTMENTS 
  
 The number of shares of Common Stock for which this Warrant is exercisable, or the price at which such shares may be
purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Section 4. The Company shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4
at the time of such event. 
  
 4.1 Stock Dividends,
Subdivisions and Combinations 
  
 If at any time the Company
shall: 
  
 (a) Declare or pay to the holders of its Common Stock
a dividend payable in, or other distribution of, shares of Common Stock or in Convertible Securities; 
  
 (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock; or 
  
 (c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock; 
  
 then (i) the number of shares of Common Stock for
which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the then-current Exercise Price shall be adjusted to equal (A) the then-current Exercise Price multiplied
by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares for which this Warrant is exercisable immediately after such adjustment. 
  
 4.2 Certain Other Distributions 
  
 If at any time the Company shall declare or pay to the holders of its Common
Stock any dividend or other distribution of: 
  
 (a) cash;

  
 (b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash, Convertible Securities or additional shares of Common Stock); or 
  
 (c) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or additional shares of Common Stock); 
  
 then, upon exercise of this Warrant, the Holder shall be entitled to receive such dividend or distribution as if the Holder had exercised this Warrant prior to the date
of such dividend or distribution. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall
be deemed a distribution by the Company to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4.2 and, if the outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4.1. 
  

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 4.3 Adjustments Pursuant to Section 4.8 of the Securities Purchase Agreement 
  
 On each Event Date (as such term is defined in the Securities Purchase
Agreement, an “Event Date”) and on the same date of each month thereafter (if the applicable Event (as such term is defined in the Securities Purchase Agreement, an “Event”) shall not have been cured by such date)(each, a
“Subsequent Adjustment Date”) until the applicable Event is cured, the Exercise Price shall be reduced by an amount determined by multiplying (i) the Exercise Price in effect immediately prior to such adjustment by (ii) 0.10; provided,
however, that upon the cure of an Event on any date other than a Subsequent Adjustment Date, the Exercise Price shall be further reduced by an amount determined by multiplying (i) the Exercise Price in effect immediately prior to such adjustment by
(ii) the product of (x) 0.10 times (y) a fraction, (i) the numerator of which shall be 30 less the number of days remaining until the next Subsequent Adjustment Date and (ii) the denominator of which shall be 30; and provided, further, that
in no event shall the Exercise Price be reduced pursuant to this Section 4.3 to a price less than $0.75 (equitably adjusted, to reflect adjustments made prior thereto pursuant to Sections 4.1 and 4.2 ). 
  
 4.4 Other Provisions Applicable to Adjustments under this Section

  
 The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the current Exercise Price provided for in this Section 4: 
  
 (a) When Adjustments to be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. 
  
 (b) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall
be taken into account to the nearest 1/10th of a share. 
  
 (c)
When Adjustment not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before
the distribution to the holders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled. 
  
 (d) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing selected by the Company and acceptable to the Holder. The fees and expenses of such
investment banking firm shall be paid by the Company. 
  
 4.5
Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 
  
 In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another Person (where the Company is not the survivor or where there is a change 

  

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in or distribution with respect to the Common Stock of the Company), or sell, convey, transfer or otherwise dispose of all or substantially all its property,
assets or business to another Person, or effectuate a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each, a “Fundamental Corporate Change”) and, pursuant to
the terms of such Fundamental Corporate Change, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have
the right thereafter to receive, upon exercise of the Warrant, such number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property as is receivable upon or as a
result of such Fundamental Corporate Change by a the holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Corporate Change. In case of any such Fundamental Corporate Change, the
successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, “common stock of the successor or acquiring corporation” shall include
stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such
stock. The foregoing provisions of this Section 4.4 shall similarly apply to any successive Fundamental Corporate Change. 
  
 4.6 Other Action Affecting Common Stock 
  
 In case at any time or from time to time the Company shall take any action in respect of its Common Stock, other than any action described in this Section
4, which would have a materially adverse effect upon the rights of the Holder, the number of shares of Common Stock and/or the purchase price thereof shall be adjusted in such manner as may be equitable in the circumstances, as determined in good
faith by the Board of Directors of the Company. 
  
 4.7 Certain
Limitations 
  
 Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. 
  
 5. NOTICES TO THE HOLDER 
  
 5.1 Notice of Adjustments 
  
 Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be purchased upon exercise of the Warrants, shall be adjusted pursuant to Section 4, the Company shall forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a 
  

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description of the basis on which the Board of Directors of the Company determined the fair value of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights referred to in Section 4.2), specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.2
or 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any change in the purchase price or prices thereof, after giving effect to such adjustment or change. The Company shall
promptly cause a signed copy of such certificate to be delivered to the Holder in accordance with Section 14.2. The Company shall keep at its office or agency designated pursuant to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the Holder or any prospective purchaser of a Warrant designated by the Holder. 
  
 5.2 Notice of Corporate Action 
  
 If at any time: 
  
 (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right; or 
  
 (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock
of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation; or 
  
 (c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company; 
  
 then, in any one or more of such cases, the Company
shall give to Holder (i) at least 10 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution,
liquidation or winding up, at least 10 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to the Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 14.2. 
  
 6. NO IMPAIRMENT 
  
 The Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or other voluntary action, avoid or seek to avoid the observance or 
  

 9 

 
performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant. 
  
 Upon the request of the Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder. 
  
 7. RESERVATION AND
AUTHORIZATION OF COMMON STOCK 
  
 From and after the Closing
Date, the Company shall at all times reserve and keep available for issuance upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and fully paid and nonassessable and not
subject to preemptive rights. 
  
 Before taking any action which
would cause an adjustment reducing the then-current Exercise Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Company shall take any corporate action which may be necessary in order
that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted current Exercise Price. 
  
 Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the
then-current Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 
  
 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 
  
 In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of record of such holders, the Company will in each case take such a record and will take such record as of the close of business on a Business Day.
The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant.

  
 9. RESTRICTIONS ON TRANSFERABILITY 
  
 The Warrants and the Warrant Stock shall not be transferred, hypothecated or
assigned before satisfaction of the conditions specified in Section 5.1 of the Securities Purchase Agreement, which conditions are intended, in part, to ensure compliance with the provisions of the Securities Act with respect to the Transfer of any
Warrant or any Warrant Stock. The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 9. 
  

 10 

 10. SUPPLYING INFORMATION 
  
 The Company shall cooperate with the Holder in supplying such information as may be reasonably necessary for the Holder to
complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrant or Warrant Stock. 
  
 11. LOSS OR MUTILATION 
  
 Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to it (it being understood that the written agreement of the Holder shall be sufficient indemnity), and in
case of mutilation upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, in the case of mutilation no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation. 
  
 12. OFFICE OF THE COMPANY 
  
 As long as any of
the Warrants remain outstanding, the Company shall maintain an office or agency (which may be the principal executive offices of the Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as
provided in this Warrant. 
  
 13. LIMITATION OF LIABILITY

  
 No provision hereof, in the absence of affirmative action
by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of the Company. 
  
 14. MISCELLANEOUS 
  
 14.1 Nonwaiver and Expenses 
  
 No course of
dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision of this Warrant, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, without limitation, reasonable
attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 
  
 14.2 Notice Generally 
  
 Except as may be otherwise provided herein, any and all notices or other
communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given 
  

 11 

 and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section 14.2 prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

  

			
	 If to the Company:
	  	ThermoEnergy Corporation
	 	  	Attn.: Chairman
	 	  	1300 Tower Building
	 	  	323 Center Street
	 	  	Little Rock, AR 72201
		
	 	  	Telephone: (501) 376-6477
	 	  	Facsimile: (501) 376-3643
		
	 With a copy to:
	  	Nixon Peabody, LLP
	 	  	Attn.: William E. Kelly
	 	  	100 Summer Street
	 	  	Boston, MA 02110-2131
		
	 	  	Telephone: (617) 345-1195
	 	  	Facsimile: (866) 743-4899
		
	 If to the Holder:
	  	To the address set forth under the Holder’s name on the Holder’s Counterpart Signature Page to the Securities Purchase Agreement;

  
 or such other address as may be
designated in writing hereafter, in the same manner, by such addressee. 
  
 14.3 Indemnification 
  
 The Company agrees to
indemnify and hold harmless the Holder from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses and disbursements of any kind which may be imposed upon,
incurred by or asserted against the Holder in any manner relating to or arising out of any failure by the Company to perform or observe in any material respect any of its covenants, agreements, undertakings or obligations set forth in this Warrant;
provided, however, that the Company will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses or disbursements are found in a
final nonappealable judgment by a court to have resulted from the Holder’s gross negligence, bad faith or willful misconduct in its capacity as a stockholder or warrantholder of the Company. 
  
 14.4 Remedies 
  
 The Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of its rights under Section 9 of this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of Section 9 of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 
  

 12 

 14.5 Successors and Assigns 
  
 Subject to the provisions of Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all holders from time to time of this Warrant and, with respect to Section 9 hereof,
the holders of Warrant Stock, and shall be enforceable by any such holder or the holder of Warrant Stock. 
  
 14.6 Amendment 
  
 This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

  
 14.7 Severability 
  
 Wherever possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall only be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions of this Warrant. 
  
 14.8 Headings 
  
 The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 

 
 14.9 Governing Law 
  
 This Warrant shall be governed by the laws of the State of New York, without
regard to the provisions thereof relating to conflicts of law. 
  
 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. 
  
 Dated:
                                     
  

					
	 	 	THERMOENERGY CORPORATION
			
	 Attest:
	 	 	 	 
			
	 	 	By:	 	  

	 	 	 	 	Dennis C. Cossey, Chairman and CEO
			
	  

	 	 	 	 
	 Dennis C. Cossey, Secretary
	 	 	 	 

  

 13 

 EXHIBIT A 
  

SUBSCRIPTION FORM 
  
 [To be executed only upon exercise of Warrant] 
  
 The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of
                     shares of Common Stock of ThermoEnergy Corporation and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to 
  

	
	______________________________________________________________________________________________________________________________

  
 whose address is 
  

	
	______________________________________________________________________________________________________________________________

  
 and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. 
  

			
	 Check here for cashless exercise:             
	 	

	 	 	(Name of Registered Owner)
		
	 	 	

	 	 	(Signature of Registered Owner)
		
	 	 	

	 	 	(Street Address)
		
	 	 	

	 	 	(City) (State) (Zip Code)
		
	 	 	Notice: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.

  
  

 A- 1 

 EXHIBIT B 
  

ASSIGNMENT FORM 
  
 FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto
the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: 
  

			
	 Name and Address of Assignee

	 	 No. of Shares of
 Common Stock

  
 and does hereby irrevocably constitute
and appoint 
  

	
	______________________________________________________________________________________________________________________________

  
 attorney-in-fact to register such
transfer on the books of ThermoEnergy Corporation maintained for the purpose, with full power of substitution in the premises. 
  
 Dated:
                                        

  

	
	
	

	(Print Name)
	
	

	(Signature)
	
	

	(Print Name of Witness)
	
	

	(Witness’s Signature)
	
	Notice: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change
whatsoever.

  

 B- 1

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