Exhibit
10.3

    


    ThermoEnergy
Corporation

    124 West
Capitol Avenue

    Little
Rock, Arkansas 72201

    


    February
25, 2009

    


    Babcock-Thermo
Carbon Capture LLC

    c/o
Babcock Power Inc.

    Attention:
William J. Ferguson, Jr., Vice President Administration & General
Counsel

    One
Corporate Place

    55
Ferncroft Road

    Danvers,
MA 01923

    


    Babcock
Power Development, LLC

    c/o
Babcock Power Inc.

    Attention:
William J. Ferguson, Jr., Vice President Administration & General
Counsel

    One
Corporate Place

    55
Ferncroft Road

    Danvers,
MA 01923

    


    
      Re:  Agreement to Indemnify
Certain Members of Babcock - Thermo Carbon 

    

    Capture LLC (the
“Company”)

    


    To Whom
It May Concern:

    


    Reference is hereby made to the Limited
Liability Company Agreement of the Company (the “Agreement”), dated as of
February 25, 2009, by and among Babcock Power Development, LLC, a Delaware
limited liability company (“Babcock”), and ThermoEnergy
Power Systems, LLC, a Delaware limited liability company (“TEPS”).  Capitalized
terms which are used herein without definition and which are defined in the
Agreement shall have the same meanings herein as in the Agreement.

    


    The undersigned hereby acknowledges and
agrees that it is the Member Parent of TEPS.

    


    In accordance with Section 7.07(C) of
the Agreement, in exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Member Parent agrees it will
indemnify and hold harmless the Company, the Members (other than TEPS) and their
respective Affiliates against any damage or loss incurred by the Company and/or
such Members and/or their respective Affiliates by reason of TEPS’ fraud, gross
negligence or intentional misconduct with respect to the Company and/or any
Company Property.

    


    The undersigned hereby confirms that it
has delivered to Babcock and the Company a true and correct copy of the
Employment Agreement, by and between the undersigned and Alexander G.
Fassbender, dated as of November 18, 1998, as amended by the Amendment to
Employment Agreement, dated as of November 20, 1998, and as further amended by
the Amendment to Employment Agreement, dated as of February 20, 2009 (such
Employment Agreement and Amendments, collectively, the “Employment Agreement”), and
the Employment Agreement remains in full force and effect on the date
hereof.  In addition, the undersigned hereby agrees that the Company
and Babcock are intended third party beneficiaries of Section 5.05 of the
Employment Agreement, and shall be entitled to enforce directly the provisions
of Section 5.05 of the Employment Agreement as it relates to the
Company.  The undersigned hereby agrees that it will not amend or
terminate, or waive compliance with, Section 5.05 of the Employment Agreement
with respect to the business of the Company, without the Company’s prior written
consent.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This letter is a Related Agreement for
purposes of the Agreement and the Dispute Resolution Agreement.

    


    
      
        
          
            
              
                	
                        Very truly yours,

                      
	
                        THERMOENERGY
      CORPORATION

                      
	 
      
	
                        By:

                      	
                           /s/
      Dennis C. Cossey

                      
	
                        Name:  Dennis
      C. Cossey

                      
	
                        Title:  Chairman and
  CEO

                      


              

            

          

        

      

    

    


    
      
        
          	
                  Accepted:

                	
                  Accepted:

                
	
                  BABCOCK-THERMO
      CARBON CAPTURE LLC

                	
                  BABCOCK
      POWER DEVELOPMENT, LLC

                
	 	 
	
                  By:
        /s/ E N Balles

                	
                  By:
        /s/ E N Balles

                
	
                  Name:

                	
                  Name:

                
	
                  Title:

                	
                  Title: