Exhibit
10.1

     

    ThermoEnergy
Corporation

     

    Executive
Employment Agreement

     

    AGREEMENT,
dated the 2nd day
of  November 2009, by and between ThermoEnergy Corporation, a Delaware
corporation (together with all of its subsidiaries, the “Company”) and Teodor
Klowan, Jr. (the “Executive”).

     

    WHEREAS,
the Company desires to engage the services of the Executive as Executive Vice
President, Treasurer and Chief Financial 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 Executive Vice President and Treasurer, as of
the date of this Agreement, and as Chief Financial Officer as of the close of
business on the date on which the Company files with the Securities and Exchange
Commission the Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2009, but in no event later than November 30, 2009.  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 offices 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 Chief Executive Officer or 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 Chief Executive Officer of the Company (which
consent shall not be unreasonably withheld), engage in uncompensated charitable,
religious or civic activities so long as such activities do not interfere with
the Executive’s performance of his responsibilities as Chief Financial Officer
of the Company.

     

    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.  From and after
the date of this Agreement, the Company shall pay to the Executive a salary at
the rate of $175,000 per annum (the “Base Salary”) payable during the term of
the Executive’s employment in accordance with the Company’s payroll and
withholding policies.

     

    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 in
consultation with the Executive and the Company’s Chief Executive
Officer.  Such performance bonuses shall be payable in cash, in 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 benefit
plans provided generally to executive employees of the Company.

     

    Section
2.5  Equity
Incentive.  Effective as of
the date of this Agreement, the Executive shall be granted a stock option under
the Corporation’s 2008 Incentive Stock Plan for the purchase of 2,500,000 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 date of this Agreement (the “Stock Option”).  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.  If the Executive’s employment by the Company is terminated
for any reason, the vested portion of the Stock Option may be exercised at any
time prior to the sixtieth day after the date on which the Executive’s
employment is terminated.  The right to exercise the Stock Option
shall vest, with respect to 625,000 shares, on September 30, 2010, and
thereafter, with respect to an additional 156,250 shares on the last day of each
subsequent calendar quarter through and including September 30, 2013, subject to
the Executive’s continued employment by the Company; provided, however, that if,
prior to September 30, 2010, a Change of Control occurs, then, effective
immediately prior to such Change of Control, the Stock Option shall vest with
respect to 625,000 shares. 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 two and one-half percent (2.5%) direct or indirect equity interest,
such event shall not constitute a Change of Control.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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) conviction of a crime which materially adversely
affects the reputation of the Company or any of its affiliates; (b) willful
disloyalty to the Company; (c) 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;
(d) failure to comply with lawful directives of the Company's Board of Directors
not inconsistent with the terms of this Agreement; or (g) the commission of an
act of dishonesty or moral turpitude (including, without limitation,
embezzlement or misappropriation of Company property). As used herein, the term
“Good Reason” for the Executive’s voluntary termination of his employment shall
mean either of the following: (i)  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; or (b) the assignment to the Executive of any duty or to any
position inconsistent with the Executive’s training and experience.

     

    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 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 $14,583 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.  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 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 allow 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.

    


    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 for a period of one year following
the date on which his employment is terminated (whether voluntarily or
involuntarily, with or without Cause or Good Reason) (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.

     

    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/  Teodor Klowan,
      Jr.

                  	 
      	
                    By: 

                  	 
      	
                    /s/  Dennis C.
    Cossey

                  
	
                    Teodor
      Klowan, Jr.

                  	 
      	 
      	 
      	
                    Dennis
      C. Cossey

                  
	 
      	 
      	 
      	 
      	
                    Chairman
      and Chief Executive
Officer