Thermal Energy Provides Update on the Status of Litigation with Thomas Hinke and Elena Shulkov

OTTAWA, Nov. 10, 2011 /CNW/ - In response to a press release issued on November 9, 2011 by Mr. Thomas Hinke, Thermal Energy International Inc. (TSX-V: TMG) (www.thermalenergy.com) ("Thermal Energy" or the "Company") would like to provide the following update on the status of its litigation with Mr. Hinke, a former President and Chief Executive Officer of Thermal Energy, and his spouse, Ms. Shulkov.

On October 25, 2005, the Company was served with a statement of claim from Mr. Hinke and Ms. Shulkov. Among other things, the lawsuit alleges that:

i)     Mr. Hinke was wrongfully dismissed from his employment;
ii)    Amounts are owed to Mr. Hinke in respect of unpaid loans and advances; and,
iii)    Further amounts are owed for among other things lost reputation and defamation, infliction of mental suffering, abuse of process and punitive and aggravated damages.

Total damages are claimed in the amount of approximately $4 million, plus an as yet undetermined value of share options, interest and legal costs. The Company filed a defense and counterclaim seeking damages from Mr. Hinke in the amount of $5 million which stem from alleged breaches of Mr. Hinke's fiduciary obligations to the Company and oppressive conduct toward the Company and its shareholders.

In May, 2010, Mr. Hinke brought a motion for summary judgment, seeking judgment on part of his claim. In the motion, Mr. Hinke sought damages in the amount of $1,105,047 plus interest and costs comprised of:

i)     $398,737 allegedly owing as a result of wrongful dismissal and calculated as 24 months of salary, commissions, and related benefits,
ii)     $618,810 in alleged unpaid loans and advances, and
iii)    $87,500 in stock options which are alleged to have vested.

The motion was heard on September 6 and 7, 2011 and on October 18, 2011 a decision was rendered. In its reasons for decision on the motion for summary judgment the court:

i)     Allowed the plaintiff's claim for wrongful dismissal but assessed the damages for the plaintiff's wrongful dismissal at the equivalent of 18 months of pay in lieu of notice of termination;
ii)     Declined to fix the amount of the damages, suggesting instead that the parties try to agree on the amount;
iii)    Stated that in the absence of the parties' agreement on the amount of damages, the quantification of damages is to be referred to a Master;
iv)     Stayed the execution of the partial summary judgment pending the determination of the outstanding claims at trial;
v)     Dismissed the plaintiff's claim for alleged unpaid loans and advances; 
vi)    Permitted the remainder of the parties' claims and counterclaims to proceed to trial; and
vii)    Reserved the matter of costs on the motion pending either an agreement between the parties or the receipt of written submissions on costs.

To date, the parties have not yet discussed or agreed on the amount of the damages for wrongful dismissal and have not agreed on an award of costs.  There has, as yet, been no reference to a Master.  Written submissions on costs have been provided to the court.

Importantly, given the court ordered stay on execution of the partial summary judgement, Mr. Hinke may not compel Thermal Energy to pay him damages (which damages have yet to be quantified) until the remaining issues have been determined or a court orders otherwise.  Until the remaining issues are determined, it is unclear what the net balance payable between the parties will be and to which party it is to be paid. In its reasons for decision the court did not comment on the validity or likely outcome of any of these other matters.

It is expected that the quantification of a damages amount will require a reference to a Master.  Either party has until November 17, 2011 to file an appeal of the decision with the Court of Appeal for Ontario.

The Company has not disclosed total legal fees related to the claim, counter claim and motion for summary judgement. As disclosed in the Company's financial statements, total legal fees over the last 6 years have averaged approximately $159,000 per year.  In addition to legal fees related to the claim, counter claim and motion for summary judgement, the reported legal fees also include costs related to a wide range of general corporate matters including, but not limited to: the acquisition of Gardner Energy Management, the Company's operations in China and the UK, regulatory matters including matters relating to the TSX Venture Exchange, and a variety of other normal course business matters.

The ultimate net impact of the partial judgment on Thermal Energy remains unknown at present. The Company has made, and continues to make, attempts to settle this action on a reasonable basis including two attempts at mediation. Nonetheless, at this point the Company continues to believe that the $190,000 provision taken during the fiscal quarter ending November 30, 2009, remains a reasonable estimate of the possible net liabilities resulting from the claim and counter claim.

About Thermal Energy
Thermal Energy International Inc. is an innovative cleantech company providing a variety of proprietary and proven energy efficiency, emission reduction, water efficiency, and bioenergy products and solutions to the industrial, commercial and institutional markets worldwide. Thermal Energy is also a fully accredited professional engineering firm, and can offer advanced process and applications engineering services. By providing a unique mix of proprietary products together with process, energy, environmental, and financial expertise Thermal Energy is able to deliver significant financial and environmental benefits to our customers. Thermal Energy's products include; GEM® - Steam traps and condensate return systems, FLU-ACE® - Direct contact condensing heat recovery, and Dry Rex(TM) - Low temperature biomass drying systems. These award winning products have an excellent track record of longevity, proven reliability and performance and have been shown to provide significant energy savings, reduced GHG emissions, improved water efficiency, lower maintenance costs, improved product quality and increased production efficiency. Thermal Energy International Inc. has offices in Ottawa, Canada, Bristol, UK and Guangzhou, China.

To find out more about Thermal Energy International Inc. (TSX-V: TMG), visit our website at www.thermalenergy.com.

NOTE: This press release contains forward-looking statements relating to, and amongst other things, based on management's expectations, estimates and projections with respect to, expected outcomes of the Company's litigation with Mr. Hinke and Ms. Shulkov. These statements are not guarantees of future events and involve a number of risks, uncertainties and assumptions. Many factors, some of which are outside of the Company's control, could cause events and results to differ materially from those stated. The Company disclaims any obligation to publicly update or revise any such statements except as required by law.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

SOURCE Thermal Energy International Inc.

For further information:

William Crossland
Thermal Energy International Inc.
(613) 723-6776
bill.crossland@thermalenergy.com 

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