Exhibit 10.1
SECURITY AGREEMENT
THIS SECURITY
AGREEMENT (this “Agreement”) is dated as of July 31,
2009, and is entered into by and between ThermoEnergy Corporation,
a Delaware corporation having its principal place of business in
Little Rock, Arkansas (the “Debtor”), and Focus Fund,
L.P. (the “Secured Party”). Capitalized
terms not otherwise defined herein are used as defined in the
Arkansas Uniform Commercial Code on the date of this
Agreement.
WHEREAS, the
Debtor is borrowing up to Six Hundred Thousand Dollars ($600,000)
from the Secured Party pursuant to that certain 8% Secured
Convertible Promissory Note of even date herewith in favor
of the Secured Party (the “Note”);
and
WHEREAS, it is
a condition precedent to the Secured Party’s making any
advances to the Debtor under the Note that the Debtor execute and
deliver to the Secured Party a security agreement in substantially
the form hereof; and
WHEREAS, the
Debtor wishes to grant a security interest in favor of the Secured
Party as herein provided.
NOW, THEREFORE,
in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
SECTION
1. Grant of Security . As
consideration for the Secured Party’s loan to
the Debtor pursuant to the Note, the Debtor hereby
grants to the Secured Party a security interest in the entirety of
the Debtor’s Membership Interest (representing an 85%
beneficial ownership) in ThermoEnergy Power Systems, LLC, a
Delaware limited liability company (“TEPS”) and any and
all proceeds from the transfer, assignment or other permitted
disposition thereof (the
“Collateral”). Notwithstanding the
foregoing, the security interest in the Collateral granted hereby
shall attach only to a portion of the Debtors’ membership
Interest in TEPS representing a 42% beneficial ownership until such
time as the aggregate amount advanced by the Secured Party to the
Debtor under the Note equals $600,000, whereupon the security
interest in the entirety of the Collateral shall attach.
SECTION
2. Security for Obligations . This
Agreement secures and the Collateral is collateral security for the
prompt payment or performance in full (including, without
limitation, amounts that would become due but for the filing of a
petition in bankruptcy), of all amounts when due under the Note, as
well as the Debtor’s performance and observance of all
covenants contained herein and in the Note (the
“Obligations”).
SECTION
3. Further Assurances . The Debtor
hereby authorizes the Secured Party to execute and file any and all
financing statements necessary to carry out this
Agreement. The Debtor further agrees that from time to
time, at the expense of the Debtor, the Debtor will promptly
execute and deliver all further instruments and documents, and take
all further action that the Secured Party may reasonably request,
in order to perfect, protect and maintain or establish the priority
of any security interest granted or purported to be granted hereby
or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to the Collateral.
SECTION 4. Representations,
Warranties and Covenants . The Debtor represents, warrants and
covenants as follows:
(a) The Debtor is a
corporation existing and in good standing under the laws of the
State of Delaware.
(b) TEPS is a limited
liability company existing and in good standing under the laws of
the State of Delaware.
(c) The Debtor is
duly empowered and authorized to enter into and perform its
obligations under this Agreement and all other instruments and
transactions contemplated hereby or relating hereto. The
Debtor is duly empowered and authorized to own and to grant
security interests in the Collateral. The execution,
delivery and performance by the Debtor of this Agreement, of the
Note and of all other instruments contemplated hereby do not and
will not violate any law or any provision of, nor be grounds for
acceleration under, any agreement, indenture, note or instrument
which is binding upon the Debtor, including without limitation, the
Debtor’s Certificate of Incorporation, By-Laws and any other
loan or security agreements to which the Debtor is a party or by
which the Debtor or its property is bound.
(d) Assuming the
due filing of financing statements in proper form with the
Secretary of State of the State of Delaware, the security interest
granted to the Secured Party pursua
