ThermoEnergy
Corporation
Bridge Loan
Agreement
This Bridge
Loan Agreement (this “ Agreement ” ) made
this 10 th
day of March 2010 but effective as
of March 1, 2010 by and among ThermoEnergy Corporation, a Delaware
corporation having its principal place of business in Little Rock,
Arkansas (the “Borrower”) and the individual and
entities named on Schedule I hereto (collectively, the
“Lenders”).
WHEREAS, the
Borrower and certain of the Lenders are parties to a certain
Securities Purchase Agreement dated as of November 19, 2009 (the
“Series B Agreement”) pursuant to which such Lenders
have purchased from the Borrower shares of the Series B Convertible
Preferred Stock of the Borrower (the “Series B Stock”)
and Common Stock Purchase Warrants entitling the holders thereof to
purchase shares of the Common Stock of the Borrower (the
“Warrants”); and
WHEREAS, pursuant to the Series B Agreement,
certain of the Lenders are obligated, upon the satisfaction of
certain conditions set forth in the Series B Agreement (the
“Third and Fourth Tranche Conditions”), to purchase
from the Borrower additional shares of Series B Stock and
additional Warrants (the “Third and Fourth Tranche
Securities”); and
WHEREAS, the Borrower requires cash to fund
their operations prior to the satisfaction of the Third and Fourth
Tranche Conditions; and
WHEREAS, the Lenders are prepared to make loans
to the Borrower on the terms and conditions herein set
forth;
NOW, THEREFORE,
IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the
Borrowers and the Lenders agree as follows:
ARTICLE 1
Loans
Section 1.1. Issuance of
Notes . The Borrower hereby agrees to issue to
each Lender a Convertible Promissory Note in substantially the form
attached here to Exhibit A (the “Notes”) in the
original principal amount set forth opposite the name of such
Lender on Schedule I attached hereto under the heading
“Commitment”.
Section 1.2. Draw Downs
. No later than 5 business days prior to the end of each
month, the Borrower will deliver to the Lenders an operating budget
for the succeeding month (the “Monthly
Budgets”) indicating the amount of cash that the Borrower
desires to be advanced by the Lenders under the Notes to fund
operations for such month (the
“Draw”). Unless the Lenders (acting by the
vote of the holders of at least 66⅔% of the then outstanding
principal amounts of the Notes) reject a Monthly Budget no later
than 3 business days after delivery, on the first business day of
such succeeding month each Lender shall deliver to the Borrower, by
wire transfer, its applicable percentage of the Draw, as calculated
in accordance with the Lenders’ respective Participation
Percentages as set forth on Schedule I attached hereto under the
heading “Participation Percentage”). Notwithstanding
the foregoing, any Lender may, but shall not be obligated to,
advance under the Notes an amount greater than its respective
Participation Percentage of any Draw (an “Advance”) and
the amount of any such Advance shall be credited against subsequent
Draws.
Section 1.3. Security Interest
in Collateral . The obligation of the Lenders to
advance funds against any Draw is expressly conditioned on the
Borrower’s execution and delivery of a Security Agreement in
substantially the form attached hereto as Exhibit B (the
“Security Agreement” and, together with this Agreement
and the Notes, the “Transaction Documents”) granting to
the lenders a security interest in substantially all of the assets
of the Borrower.
Section 1.4.
Additional Closing Deliveries . At the
Closing, the Borrower shall deliver or cause to be delivered to
each Lender the following:
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The Security
Agreement; and
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Copies of
resolutions of the board of directors of the Borrower approving the
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby, in each case certified
by the Secretary of the Borrower to be in full force and effect on
the Closing Date.
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ARTICLE 2
Representations and
Warranties
Section
2.1. Representations and Warranties of the
Borrower . The Borrower hereby makes the following
representations and warranties to the Lenders:
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Organization and Qualification
. The Borrower is duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The Borrower is not in violation of any of the
provisions of its certificate of incorporation, bylaws or other
organizational or charter documents. The Borrower is duly qualified
to conduct its respective business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, and no proceedings have been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, such power and authority or qualification. For
purposes of this Agreement, the term “Material Adverse
Effect” shall mean any of (i) a material and adverse effect
on the legality, validity or enforceability of any Transaction
Document, (ii) a material and adverse effect on the results of
operations, assets, prospects, business or condition (financial or
otherwise) of the Borrower, taken as a whole, or (iii) a material
impairment of the Borrower’s ability to perform on a timely
basis their obligations under any Transaction Document.
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Authorization; Enforcement
. The Borrower has the requisite corporate power
and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Borrower and the
consummation by the Borrower of the transactions contemplated
thereby have been duly authorized by all necessary action on the
part of the Borrower and no further action is required by the
Borrower in connection therewith. Each Transaction Document has
been (or upon delivery will have been) duly executed by the
Borrower and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable
principles of general application.
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No
Conflicts . The
execution, delivery and performance of the Transaction Documents by
the Borrower and the consummation by the Borrower of the
transactions contemplated thereby do not and will not (i) conflict
with or violate any provision of the Borrower’s certificate
of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, or (except as contemplated by the
Security Agreement) result in the imposition of any lien upon any
of the material properties or assets of the Borrower pursuant to,
any agreement, credit facility, debt or other instrument or other
understanding to which the Borrower is a party or by which any
property or asset of the Borrower is bound or affected, or (iii)
result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Borrower is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Borrower is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
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Filings,
Consents and Approvals . The
Borrower is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority (a “Governmental
Authority”) or other Person in connection with the execution,
delivery and performance by the Borrower of the Transaction
Documents and the consummation of the transactions contemplated
thereby, other than the filing of a financing statement on Form
UCC-1 with the Secretary of State of the State of
Delaware.
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Issuance
of the Notes . The
Notes have been duly authorized. Each Note, when issued
in accordance with this Agreement, will be duly and validly
issued.
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SEC
Reports; Financial Statements . The Borrower has filed all reports
required to be filed by it under the Securities Act of 1933 (the
“Securities Act”) and the Securities Exchange Act of
1934 (the “Exchange Act”) for the twelve months
preceding the date hereof (or such shorter period as the Borrower
was required by law to file such reports) (the foregoing materials,
being collectively referred to herein as the “ SEC
Reports ” ). As of their respective dates,
the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The
financial statements of the Borrower included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, except
as may be otherwise specified in such financial statements or the
notes thereto, and fairly present in all material respects the
financial position of the Borrower and its consolidated
subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
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Compliance . Except as has been disclosed to the Lenders in
writing, the Borrower (i) is not in default under or in violation
of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Borrower under), nor has the Borrower received notice of a claim
that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has
been waived), (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not and has not been
in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
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Title to
Assets . Except as has been disclosed to the Lenders in
writing, the Borrower has good and marketable title in fee simple
to all real property owned by it that is material to its businesses
and good and marketable title in all personal property owned by it
that is material to its businesses, in each case free and clear of
all liens, except for liens as do not materially affect the value
of such property and do not materially interfere with the use made
and proposed to be made of such property by the Borrower. Any real
property and facilities held under lease by the Borrower and its
subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Borrower and its subsidiaries are
in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
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Patents
and Trademarks . The
Borrower and its subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, tr
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