ThermoEnergy Corporation
 
Executive Employment Agreement
 
AGREEMENT, dated the 27th  day of January 2010, by and between ThermoEnergy
Corporation, a Delaware corporation (together with all of its subsidiaries, the
“Company”) and Cary G. Bullock (the “Executive”).
 
WHEREAS, the Company desires to engage the services of the Executive as
President and Chief Executive Officer of the Company on the terms herein set
forth and the Executive is willing to be employed by the Company in such
capacities on such terms;
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
 
ARTICLE I
EMPLOYMENT DUTIES AND BENEFITS
 
Section 1.1 Employment.  The Company hereby employs the Executive as President
and Chief Executive Officer as of the date hereof.  The Executive accepts such
employment and agrees to perform the duties and responsibilities assigned to him
pursuant to this Agreement.
 
Section 1.2 Duties and Responsibilities.  The Executive shall perform such
lawful duties and have such responsibilities as are customarily associated with
the office in which he is employed.  In addition thereto, the Executive shall
undertake such duties as may reasonably be assigned to him from time to time by
the Board of Directors of the Company.  The Executive shall devote his full
professional time and attention to the business of the Company and shall not be
engaged in any other business activity; provided, however, that the Executive
may, with the prior consent of the Board of Directors of the Company (which
consent shall not be unreasonably withheld), engage in uncompensated charitable,
religious or civic activities and/or serve as a non-executive director for up to
one other company (whether or not compensated), so long as such activities do
not materially interfere with the Executive’s performance of his
responsibilities as Chief Executive Officer of the Company.  The Executive will
serve as a member of the Board of Directors of the Company and of the Board of
Managers of the Company’s subsidiary, Babcock - Thermo Carbon Capture LLC.
 
Section 1.3 Office Facilities.  The Company will provide to the Executive an
appropriate office, which shall initially be located at the Company’s facilities
in Worcester, Massachusetts.
 
ARTICLE II
COMPENSATION AND BENEFITS
 
Section 2.1 Base Salary.  During the calendar year ending December 31, 2010, the
Company shall pay to the Executive a salary of $200,000 (the “Base Salary”)
payable in equal installments in accordance with the Company’s payroll and
withholding policies.  The Base Salary shall be reviewed annually and shall be
subject to adjustment from time to time to reflect the Executive’s performance
of his responsibilities hereunder, employment market conditions, the Company’s
financial condition and such other factors as the Compensation Committee of the
Company’s Board of Directors deems relevant.
 
 

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Section 2.2 Performance Bonus.  In addition to the Base Salary, the Executive
shall be eligible to receive performance bonuses, from time to time, in
accordance with incentive compensation arrangements to be established by the
Compensation Committee of the Company’s Board of Directors (the “Compensation
Committee”) in consultation with the Executive.  Such performance bonuses shall
be payable in cash, in shares of the Company’s Common Stock, in options to
purchase shares of the Company’s Common Stock, or in a combination thereof, at
the discretion of the Compensation Committee of the Company’s Board of
Directors; provided, however, that, except under extraordinary
circumstances,  the Company will not pay performance bonuses in cash until such
time as the Company’s business operations are cash flow positive.
 
Section 2.3 Expense Reimbursement.  The Company will, in accordance with the
Company’s general policies with respect to business expenses, reimburse the
Executive for all expenses (including travel and lodging) reasonably incurred by
the Executive in the performance of this duties under this Agreement.
 
Section 2.4 Benefit Plans.  From and after the date of this Agreement, the
Executive shall be entitled to receive, during the term of the Executive’s
employment and at the expense of the Company, health insurance for himself and
his family and to participate in any and all other benefit plans (including life
and disability insurance plans and retirement programs) provided generally to
executive employees of the Company.  The Executive may, in lieu of participation
in the Company’s health insurance plan, elect to have the Company reimburse him
for premiums paid to continue in force the health insurance carried by the
Executive for himself and his family on the date of this Agreement.
 
Section 2.5 Equity Incentive.  Effective as of the date of this Agreement, the
Executive shall be granted a stock option for the purchase of 8,159,401 shares
of the Company’s common stock at an exercise price per share equal to the
closing price of a share of such common stock in the over-the-counter market on
the trading day immediately preceding the date of this Agreement (the “Stock
Option”).  The shares subject to the Stock Option represent 5% of the Company’s
fully-diluted capital stock on the date of this Agreement.  The Stock Option
shall have a term of ten years, subject to the Executive’s continued employment
by the Company, and will include a net surrender cashless exercise
provision.  To the extent that the Stock Option may be treated as an Incentive
Stock Option (an “ISO”) under the Internal Revenue Code and the Treasury
Regulations promulgated thereunder (the “ISO Rules”), the Stock Option shall be
granted under the Company’s 2008 Incentive Stock Plan (the “Plan”).  The right
to exercise the Stock Option shall vest, with respect to 2,039,851 shares, on
December 31, 2010, and thereafter, with respect to an additional 509,962.5
shares on the last day of each subsequent calendar quarter through and including
December 31, 2013, subject to the Executive’s continued employment by the
Company; provided, however, that if, prior to December 31, 2010, a Change of
Control occurs and the Executive remains employed by the Company through the day
immediately preceding the date of such Change of Control, then, effective
immediately prior to such Change of Control, the Stock Option shall vest with
respect to 2,039,851 shares; and provided, further, that in the event the
Executive’s employment is terminated prior to December 31, 2010 for any reason
other than (i) by the Company during the Probationary Period (as such term is
hereinafter defined), (ii) by the Company for Cause (as such term is hereinafter
defined) or (iii) voluntarily by the Executive without Good Reason (as such term
is hereinafter defined), then, effective as of the date on which the Executive’s
employment is terminated, the Stock Option shall vest with respect to 2,039,851
shares.  Except to the extent that the Plan or the ISO Rules limit the right to
exercise the ISO portion of the Stock Option following termination of the
Executive’s employment, the vested portion of the Stock Option may be exercised
at any time prior to January 26, 2020 notwithstanding the earlier termination of
the Executive’s employment.  As used herein, the term “Change of Control” shall
mean any of the following: (i) the completion by the Company of a
reorganization, merger, consolidation, share exchange, or a sale, lease,
exchange or other disposition of all or substantially all of the Company’s
assets, unless immediately following such transaction the holders of the
Company’s voting stock immediately prior to the transaction own voting
securities representing a majority of the votes entitled to be cast for the
election of directors of the successor entity; (ii) the acquisition, after the
date of this Agreement, by any person or “group” (as defined under the federal
securities laws) of “beneficial ownership” (as defined under the federal
securities laws) of a majority of (a) the outstanding shares of the Company’s
common stock or (b) the combined voting power of the then outstanding voting
securities of the Company which are entitled to elect a majority of the members
of the Board of Directors of the Company; or (iii) the approval by the Company’s
shareholders of a complete liquidation or dissolution of the Company; provided,
however, that if an event that otherwise would constitute a Change of Control
results from or arises out of a purchase or other acquisition of the Company,
directly or indirectly, by a corporation or other entity in which the Executive
has a greater than five percent (5%) direct or indirect equity interest, such
event shall not constitute a Change of Control.
 
 
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Section 2.6 Vacation.  The Executive shall be entitled to four weeks of paid
vacation per calendar year.  The Executive may roll over up to one week per year
of unused vacation time.
 

 
ARTICLE III
TERM OF EMPLOYMENT AND TERMINATION
 
 
Section 3.1 Term.  The term of the Executive’s employment hereunder shall
commence on the date of this Agreement and shall continue indefinitely, subject
to a probationary period of ninety days commencing on the date of this Agreement
(the “Probationary Period”).
 
Section 3.2 Termination of Employment.  The Executive’s employment hereunder may
be terminated, at any time, by either party upon thirty days’ written notice;
provided, however, that the Company may terminate the Executive’s employment
immediately for Cause and the Executive may terminate his employment immediately
with Good Reason.  As used herein, the term “Cause” for termination of the
Executive’s employment by the Company shall mean any of the following: (a)
willful disloyalty to the Company; (b) substantial inattention to or neglect of
duties and responsibilities consistent with the terms of this Agreement that
have been reasonably assigned to the Executive by the Company's Board of
Directors, which inattention or neglect continues for a period of at least ten
days after the Executive receives written notice thereof from the Company’s
Board of Directors; (c) failure to comply with lawful directives of the
Company's Board of Directors not inconsistent with the terms of this Agreement;
or (d) commission by the Executive of a crime involving deceit, dishonesty or
fraud; provided, however, that any action taken by the Executive in his capacity
as an officer of the Company will not be deemed to constitute Cause even if
subsequently determined to be criminal if, prior to taking such action, the
executive consulted with the Company’s Board of Directors or legal counsel and
was advised that such action was permissable. As used herein, the term “Good
Reason” for the Executive’s voluntary termination of his employment shall mean
either of the following: (a)  the Company’s failure to perform the terms of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and remedied by the Company promptly (but not later than
ten days) after receiving written notice thereof from the Executive; (b) the
assignment to the Executive of any duty or to any position inconsistent with the
Executive’s training and experience; or (c) a material reduction of the Base
Salary.
 
 
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In the event the Executive’s employment is terminated for any reason other than
(i) by the Company during the Probationary Period, (ii) by the Company for Cause
or (iii) voluntarily by the Executive without Good Reason, the Executive shall
be entitled to receive, in addition to any unpaid salary and accrued and unused
vacation pay through the last day of the month in which such termination occurs,
as the Executive’s sole and exclusive entitlement upon termination of his
employment under such circumstances, (i) severance payments in the amount of
$16,667 per month for a period of six months commencing on the first day of the
month immediately following the date of termination, payable in accordance with
the Company’s standard payroll and withholding policies and (ii) continuation of
health insurance benefits as set forth in the following sentence.  For a period
of six months commencing on the first day of the month immediately following the
date of termination of the Executive’s employment (other than termination (i) by
the Company during the Probationary Period, (ii) by the Company for Cause or
(ii) voluntarily by the Executive without Good Reason) the Company shall keep in
full force and effect all health insurance benefits afforded to the Executive
and his family at the time of the termination of his employment, which benefits
shall be provided on terms identical to those provided to full time employees of
the Company who are in good standing; provided, however, that the Company’s
obligation to provide continuing health insurance benefits to the Executive and
his family shall terminate at such time as the Executive becomes eligible to
receive from another source, at a cost to the Executive no greater than the cost
that would have been borne by the Executive had he remained a full time employee
of the Company, health insurance benefits with equivalent or better coverage.
 

 
ARTICLE IV
COVENANTS
 

 
Section 4.1                                Confidentiality and Non-Use of
Proprietary Information.  To protect the Company’s proprietary interest in the
Company’s intellectual property and proprietary information and to protect the
goodwill and value of the Company, the Executive hereby agrees that the
Executive will preserve as confidential all Confidential Information pertaining
to the Company’s business that has been or may be obtained or learned by him by
reason of his employment or otherwise.  The Executive will not, without the
written consent of the Company either use for his own benefit or for the benefit
of any third parties, either during the term of his employment hereunder or
thereafter (except as required in fulfilling the duties of his employment), any
Confidential Information pertaining to the business of the Company.   As used
herein, the term “Confidential Information” shall include without limitation any
and all financial, cost and pricing information and any and all information
contained in any drawings, designs, plans, proposals, customer lists, records of
any kind, data, formulas, specifications, concepts or ideas related to the
business of the Company.  Confidential Information shall not include information
which (a) is disclosed in a publication available to the public, is otherwise in
the public domain at the time of disclosure, or becomes publicly known through
no wrongful act on the part of the Executive, (b) is obtained by the Executive
lawfully from a third party who is not under an obligation of secrecy to the
Company and is not under any similar restrictions as to use, or (c) is generally
disclosed to third parties by the Company without similar restrictions on such
third parties.   The Executive acknowledges that all documents, reports, files,
analyses, drawings, designs tools, equipment, plans (including, without
limitation, marketing and sales plans), proposals, customer lists, computer
software or hardware, patents, license agreements, and similar materials that
are made by him or come into his possession by reason of his employment by the
Company are the property of the Company and shall not be used by him in any way
adverse to the Company’s interests.  The Executive will not cause any such
documents or other things, or any copies, reproductions or summaries thereof, to
by delivered to or used by any third party without the specific consent of the
Company.  The Executive will deliver to the Chief Executive Officer  of the
Company, or his designee, upon demand, and in any event upon the termination of
the Executive’s employment, all such documents and other things which are in the
Executive’s possession or under his control.
 
 
 
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Section 4.2                                Non-Competition and
Non-Solicitation.  To protect the Company’s proprietary interest in the
Company’s intellectual property and proprietary information and to protect the
goodwill and value of the Company, the Executive hereby agrees that during his
employment by the Company and, following the date on which his employment is
terminated, for a period of (i) one year if the Executive’s employment is
terminated by the Company for Cause or  voluntarily by the Executive without
Good Reason or (ii) six months if the Executive’s employment is terminated for
any other reason (in either case, the “Non-Compete Term”), the Executive will
not, individually, or in association or in combination with any other person or
entity, directly or indirectly, as proprietor or owner, or officer, director or
shareholder of any corporation, or as an employee, agent, independent
contractor, consultant, advisor, joint venturer, partner or otherwise, whether
or not for monetary benefit, except on behalf of the Company, solicit, sell to,
provide services to, or assist the solicitation of, sale to, or providing to, or
encourage, induce or entice any other person or entity to solicit, sell to or
provide services to, any person or entity who is a customer of the Company or
who, at any time within 18 months prior to the date of termination of the
Executive’s employment, or whom the Company has, within six months prior to the
date of such termination, solicited to become a customer of Company, for the
purpose of (a) providing such customer with any product or service which
directly competes with the products or services provided by the Company to such
customer or is in substitution for or in replacement of such products or
services; (b) altering, modifying or precluding the development of such
customer’s business relationship with the Company; or (c) reducing the volume of
business which such customer transacts with the Company.  To further protect the
Company’s proprietary interest in the Company’s intellectual property and
proprietary information and to protect the goodwill of the Company (including
the Company’s beneficial business relationships with the Company’s employees),
the Executive hereby agrees that, during the Non-Compete Term, the Executive
will not, individually or in association or in combination with any other person
or entity, directly or indirectly, encourage, induce or entice any employee or
independent contractor of the Company to terminate or modify such person’s or
entity’s employment, engagement or business relationship with the Company or,
without the prior written consent of the Company, hire or retain any employee or
independent contractor then performing services for the Company to perform the
same or substantially similar services.
 
Section 4.3                                Scope of Covenants.  The Executive
agrees that the products and services of the Company can be, and are being
designed and developed to be, manufactured, distributed and/or sold throughout
the world.  Consequently, the Executive and the Company agree that it is not
possible to limit the geographic scope of the non-competition covenant contained
in this Article IV to particular countries, states, cities or other geographic
subdivisions.  Further, the Executive agrees that the length of the Non-Compete
Term is reasonable, in light of the position in which the Executive is being
employed by the Company and the amount and duration of severance payments
payable to him under this Agreement.
 

 
ARTICLE V
 
GENERAL MATTERS
 
Section 5.1 Governing Law.  This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts and shall be construed in accordance therewith.
 
Section 5.2 No Waiver.  No provision of this Agreement may be waived except by
an agreement in writing signed by the waiving party.  A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.
 
 
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Section 5.3 Amendment.  This Agreement may be amended, altered or revoked at any
time, in whole or in part, only by a written instrument setting forth such
changes, signed by each of the parties.
 
Section 5.4 Benefit.  This Agreement shall be binding upon the Executive and the
Company, and shall not be assignable by either party without the other party’s
written consent.
 
Section 5.5 Text to Control.  The headings of articles and sections are included
solely for convenience in reference.  If any conflict between any heading and
the text of this Agreement exists, the text shall control.
 
Section 5.6 Severability.  If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions.  On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions had not been included in the Agreement.
 
Section 5.6 Entire Agreement.  This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the Executive’s employment
by the Company and supersedes any and all prior agreements and understandings
(whether written or oral) between the parties with respect to such employment.
 
In Witness Whereof, the Company and the Executive have executed this Agreement
as of the date first above written.
 

 
ThermoEnergy Corporation
 
 
  /s/  Cary G. Bullock                                
By:
   /s/  Dennis C. Cossey                                 
     Cary G. Bullock
 
Dennis C. Cossey
   
Chairman of the Board of Directors

 
 
 
 
 
 
 
 
 
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