THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR SUCH SHARES OF COMMON STOCK MAY BE SOLD, OFFERED...
Exhibit
4.5
|
THIS
NOTE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
NEITHER THIS NOTE NOR SUCH SHARES OF COMMON STOCK MAY BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUING
CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
|
| Principal Amount: $________ |
Issue
Date: August __,
2007
|
7.5%
CONVERTIBLE PROMISSORY NOTE DUE DECEMBER 31, 2007
FOR
VALUE
RECEIVED, ThermoEnergy Corporation, a Delaware corporation (the “Borrower”),
hereby promise to pay to the order of ___________ (the “Holder”), the sum of
__________ Dollars ($_________) on December 31, 2007 (the “Maturity Date”).
Interest
on the outstanding principal balance shall be paid at the rate of seven and
one-half percent (7.5%) per annum, payable semi-annually on the Maturity 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 (a “Deferral Notice”)
and payment to the Holder of a deferral fee in an amount equal to ten percent
(10%) of the principal amount then outstanding (the “Deferral Fee”) no later
than five business days after the Maturity Date, the Maturity Date may be
extended to March 31, 2008. At the election of the Borrower, the Deferral Fee
may be paid by adding such amount of to the principal amount of this
Note.
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
principal and any interest and Deferral Fee due under this Note into shares
of
the Borrower’s Common Stock, par value $0.001 per share (the “Common Stock”). If
the Holder exercises its right of conversion, the Holder shall give the Borrower
a Notice of Conversion in the form annexed to this Note, setting forth the
amount of principal, interest and Deferral Fee which the Holder is converting
into Common Stock (the “Conversion Amount”) at the Conversion Price in effect on
the date of such notice. The date of such notice is referred to as the
“Conversion Date.” Upon delivery to the Borrower of a completed Notice of
Conversion, the Borrower shall deliver, within five (5) business days after
the
Conversion Date (such fifth day being the “Delivery Date”), irrevocable
instructions to the transfer agent for the Common Stock to issue and deliver
to
the Holder a certificate for that number of shares of Common Stock into which
the Conversion Amount is being converted. 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.
This
Note
may be prepaid, in whole or in part, at any time without premium or penalty
upon
ten (10) days’ prior written notice to the Holder. Partial prepayments shall be
applied (i) first to any unpaid Deferral Fee, (ii) then to accrued and unpaid
interest, and (iii) the balance to principal.
1.1. Conversion
Price.
The
Conversion Price shall be $0.75 per share of Common Stock; provided,
however, that
in
the event this Note remains outstanding and unpaid on and after March 31, 2008,
the Conversion Price shall be reduced on April 1, 2008 to $0.50
per
share of Common Stock. In any event, the Conversion Price is subject to
adjustment as set forth in Section 1.2 of this Note. The number of shares of
Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount by the Conversion Price in effect on the
Conversion Date.
1.2. Adjustment
to the Conversion Price.
The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding,
as
follows:
1.2.1. Stock
Dividends, Subdivisions and Combinations.
If the
Borrower shall at any time:
(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 securities convertible into shares
of Common Stock (“Convertible Securities”); or
(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 into which this Note is convertible
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 into which this Note is convertible immediately prior
to
the occurrence of such event would own or be entitled to receive after the
occurrence of such event, and (ii) the then-current Conversion Price shall
be
adjusted to equal (A) the then-current Conversion Price multiplied by the number
of shares of Common Stock into which this Note is convertible immediately prior
to the adjustment divided by (B) the number of shares into which this Note
is
convertible immediately after such adjustment.
1.2.2. Certain
Other Distributions.
If at
any time the Borrowers 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 conversion of this Note, the Holder shall be entitled to receive such
dividend or distribution as if the Holder had converted the Conversion Amount
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 1.2.1 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 1.2.1.
-2-
1.2.3 Reorganization,
Reclassification, Merger, Consolidation or Disposition of Assets.
In case
the Borrower shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another Person (where the Borrower is not
the
survivor or where there is a change in or distribution with respect to the
Common Stock), 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 Borrower 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,
then the Holder shall have the right thereafter to receive, upon conversion
of
this Note, such number of shares of common stock of the successor or acquiring
corporation or of the Borrower, if it is the surviving corporation, and Other
Property as is receivable upon or as a result of such
Fundamental Corporate Change by a holder of the number of shares of Common
Stock
into which this Note is convertible immediately prior to such Fundamental
Corporate Change. In case of any such Fundamental Corporate Change, the
successor or acquiring corporation (if other than the Borrower) shall expressly
assume the due and punctual observance and performance of each and every
covenant and condition of this Note to be performed and observed by the Borrower
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 Borrower) in order to provide for adjustments of shares of
Common Stock into which this Note is convertible which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 1.2.
For purposes of this Section 1.2.3, “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
a specified date or upon 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 1.2 shall similarly apply to any successive
Fundamental Corporate Change of the successor corporation.
1.2.4 Other
Action Affecting Common Stock.
In case
at any time or from time to time the Borrower shall take any action in respect
of the Common Stock, other than any action described in this Section 1.2, which
would have a materially adverse effect upon the rights of the Holder, the number
of shares of Common Stock into which this Note is convertible and/or the
Conversion Price 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
Borrower.
1.2.5
Certain
Limitations.
Notwithstanding anything herein to the contrary, the Borrower agrees not to
enter into any transaction which, by reason of any adjustment hereunder, would
cause the Conversion Price to be less than the par value per share of Common
Stock.
1.3. Notice
of Adjustment.
Whenever the Conversion Price is adjusted pursuant to Section 1.2 of this Note,
the Borrower shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a statement of the
facts requiring such adjustment.
1.4. Mechanics
of Conversion.
1.4.1. Delivery
of Certificate Upon Conversion.
Except
as otherwise set forth herein, not later than the Delivery Date, the Borrower
shall deliver to the Holder (a) a certificate or certificates representing
the
number of shares of Common Stock being acquired upon the conversion of the
Note
(which certificate or certificates shall bear a legend indicating that such
shares have been issued in reliance on an exemption from the registration
requirements of the Securities Act of 1933 (the “Securities Act” and may not be
sold, transferred or otherwise disposed of except pursuant to an effective
registration statement under the Securities Act or in reliance on an exemption
to the registration requirements of the Securities Act), and (b) a bank check
in
the amount of accrued and unpaid interest on the portion of the Note being
converted unless the Holder converts such interest into Common Stock. If in
the
case of any Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the Delivery Date,
the
Holder shall be entitled to elect by written notice to the Borrower at any
time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the conversion shall be deemed void
ab
initio.
-3-
1.4.2. Obligation
Absolute.
The
Borrower’s obligations to issue and deliver the Common Stock upon conversion of
this Note in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Borrower
or
any violation or alleged violation of law by the Holder or any other Person,
and
irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with the issuance of
such
shares. In the event the Holder shall elect to convert any or all of this Note,
The Borrower may not refuse conversion based on any claim that such Holder
or
any one associated or affiliated with the Holder of has been engaged in any
violation of law, agreement or for any other reason unless an injunction from
a
court, on notice, restraining and or enjoining conversion of all or part of
this
Note shall have been sought and obtained. In the absence of an injunction
precluding the same, the Borrower shall issue the Common Stock or, if
applicable, cash, upon a properly noticed conversion.
1.4.3.
Fractional Shares.
Upon a
conversion hereunder, the Borrower shall not be required to issue stock
certificates representing fractions of shares of the Common Stock. All
fractional shares shall be carried forward and any fractional shares which
remain after a Holder converts all of this Note shall be rounded up to the
next
whole number of shares.
1.4.4. Transfer
Taxes.
The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Borrower shall not be required to pay
any
tax that may be payable in respect of any transfer involved in the issuance
and
delivery of any such certificate upon conversion in a name other than that
of
the Holder of this Note and the Borrower shall not be required to issue or
deliver such certificates unless or until the person or persons requesting
the
issuance thereof shall have paid to the Borrower the amount of such tax or
shall
have established to the satisfaction of the Borrower that such tax has been
paid.
Section
2. Events
of Default.
2.1. 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.
-4-
2.2. The
occurrence of any one or more of the following events or conditions shall
constitute an “Event
of Default”
under
this Agreement:
2.2.1. 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, unless the Borrower timely
gives a Deferral Notice and pays the required Deferral Fee with respect to
such
payment; or
2.2.2. 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
2.2.3. 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
2.2.4. 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
2.2.5. 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
2.2.6. 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.
Section
3. Miscellaneous
3.1. Usury
Saving Provision.
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.
3.2. Failure
or Indulgence Not Waiver.
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.
-5-
3.3. Governing
Law.
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
Pulaski County, Arkansas in
any
action that may be brought pursuant to this Agreement, 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 Section
3.5
of this Note (other than by telecopier) or (ii) in any other manner permitted
by
law.
3.4. Waiver
of Right to Trial by Jury.
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.
3.5. Notice.
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 ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (fax: ▇▇▇-▇▇▇-▇▇▇▇) or to the Holder at its principal place
of
business.
Either
party may, be 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.
3.6. Amendment.
This
Note may be amended or supplemented only by the written agreement of the Holder
and the Borrower.
3.7. Assignability.
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.
3.8. Cost
of Collection.
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.
3.9. Stockholder
Status.
The
Holder shall not have rights as a stockholder of the Borrower with respect
to
unconverted portions of this Note. However, from and after the Conversion Date,
the Holder will have all the rights of a shareholder of the Borrower with
respect to the shares of Common Stock to be received by Holder after delivery
by
the Holder of a Conversion Notice to the Borrower regardless of whether physical
certificates shall have been delivered.
-6-
IN
WITNESS WHEREOF, the
parties have caused this Agreement to be duly executed and delivered by the
proper and duly authorized officers as of the date and year first above
written.
| ThermoEnergy Corporation | ||
| By: | ||
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ |
||
| Executive Vice President and CFO | ||
-7-
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by ThermoEnergy Corporation on August
___, 2007 into shares of Common Stock of ThermoEnergy Corporation according
to
the conditions set forth in such Note, as of the date written
below.
Date
of
Conversion:__________________________________
Conversion
Price:____________________________________
Number
of
Shares To Be Delivered:_______________________________
Signature:________________________________________
Print
Name and
Title:______________________________________________________________
Address:____________________________________________________________________________
____________________________________________________________________________