LICENSE AGREEMENT


     THIS  AGREEMENT  made and entered into at  Columbus,  Ohio,  and  effective
December 30, 1997 (the "Effective Date") by and between ThermoEnergy Corporation
having its principal place of business in Little Rock,  Arkansas,  herein called
"LICENSEE"  and  Battelle  Memorial  Institute,  having its  principal  place of
business in Columbus, Ohio, herein called "BMI",

WITNESSETH THAT:

     WHEREAS,  BMI has certain rights in patents relating to recovery of ammonia
from fluid waste streams; and

     WHEREAS,  LICENSEE  recognizes  that BMI owns  inventions and  intellectual
property useful in the conduct of LICENSEE's business; and

     WHEREAS,  LICENSEE  recognizes that its anticipated  business activity will
encompass the practice of technology that requires a license under patents owned
or controlled by BMI; and

     WHEREAS, LICENSEE wishes to acquire the right to practice the inventions of
such patents.

     NOW THEREFORE in consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties agree as follows:

<PAGE>

                                 1. DEFINITIONS

     As used  herein,  the  following  terms shall have the  meanings  set forth
below:

     A. INVENTION or INVENTIONS  means  patented and unpatented BMI  proprietary
technology  related to  apparatus  and process for the  recovery of ammonia from
fluid waste streams (hereinafter  referred to as the ammonia recovery process or
"ARP Technology") as disclosed and claimed in the PATENTS.

     B.  IMPROVEMENTS  shall  mean only  those  technology  advances  in the ARP
Technology made by BMI's Columbus  Laboratories that are within the scope of the
PATENT claims and the LICENSED  FIELD.  BMI shall be obligated to include herein
only those BMI IMPROVEMENTS  which BMI determines to be necessary for LICENSEE's
practice of the  INVENTIONS,  without  which such practice  would  constitute an
infringement of BMI's rights.

     PATENT or PATENTS means the following  patents  and/or patent  applications
covering  the  INVENTIONS,  patents  to be  issued  pursuant  thereto,  and  all
divisions, continuations, reissues, substitutes, and extensions thereof:


                               Patent Applications

           Title                 Country          Serial No.        Date Filed

Apparatus and Method for         United States    60/042,175       31 March 1997
Ammonia Recovery (21988-1)

Ammonia Recovery by Formation,   United States     60/060,079  25 September 1997
Recovery, and Decomposition of
Ammonium Zinc Sulfate Hexahydrate
Crystals (21988-2)

     PATENTS  will  also  include  patents  and  patent  applications   covering
improvements  (within  the  scope of the  claims of the  above  PATENTS  and the
LICENSED FIELD) made by BMI licensees in other fields where BMI has the right to
grant rights to such improvements to LICENSEE.

LICENSED TERRITORIES are defined as:

           TERRITORY 1:            the United States,
           TERRITORY 2:            the Americas outside of the United States,
           TERRITORY 3:            Europe, and
           TERRITORY 4:            Asia.

     LICENSED FIELD means,  and is limited to, the practice of the INVENTIONS as
applied to waste streams from municipal waste water treatment facilities and the
practice of the INVENTIONS  applied to waste streams in commercial  agricultural
livestock production facilities.


                                2. PATENT LICENSE

     A. BMI hereby grants to LICENSEE,  to the extent of the LICENSED  FIELD and
in each of the  LICENSED  TERRITORIES  1, 2, 3 and 4, an  exclusive  license  to
practice and have practiced the INVENTIONS under the PATENTS.

     B. BMI  reserves  for  itself  the right to  practice  the  INVENTIONS  for
research,  development, and demonstration purposes and to license the INVENTIONS
in fields and territories not exclusively licensed herein.

<PAGE>

                                 3. LICENSE FEE


     LICENSEE  shall pay to BMI the sum of  Twenty-Five  Thousand  United States
Dollars  ($25,000 US) at the time of execution of this Agreement and Twenty-Five
Thousand  United States  Dollars  ($25,000 US) on the first  anniversary  of the
Effective Date.


                                  4. ROYALTIES

     A. For fluid  treated by the  process of the  INVENTION  as  disclosed  and
claimed in the PATENTS,  LICENSEE  shall pay to BMI a continuing  royalty at the
rate of (1)  five  percent  (5%) of all  revenues  received  from  customers  of
LICENSEE or sublicensees for which LICENSEE or a sublicensee is processing fluid
or (2) One United States Dollar ($1 US) for each one thousand (1,000) gallons of
input to the process of the INVENTION,  whichever is greater,  except and unless
in cases where the  provisions  of Paragraph  4B apply.  It is the intent of the
parties that the preferred  mode of payment under this  Agreement is pursuant to
this Paragraph 4A.

     B.  However,  in the  event  LICENSEE  or its  sublicensee  enters  into an
agreement with a customer wherein the customer will design, and/or build, and/or
own, and/or operate a facility licensed  hereunder,  LICENSEE or its sublicensee
may grant a license for or  authorize  such  activity  in exchange  for a sum of
money  or  other  consideration  which  does  not  contemplate  the  payment  of
continuing  royalties.  In such case, LICENSEE agrees to pay to BMI five percent
(5%) of the  installed  cost of a facility  utilizing  the  INVENTIONS  or Forty
Thousand  United States Dollars  ($40,000 US),  whichever is greater,  in a lump
sum,  according  to the  payment  schedule  defined in Article 8. In the general
case,  it is  anticipated  that the installed  cost of a facility  utilizing the
INVENTIONS shall be known and supported by invoice  records.  If costs for land,
building,  yard improvements,  service facilities,  taxes,  contingency fees and
working capital are incorporated into the invoice supported installed cost, then
these costs may be deducted prior to determination of the royalty due to BMI. It
is understood that in some circumstances, the total installed cost of a facility
used to implement the INVENTIONS may not be separately and specifically invoiced
apart from some larger  facility in such cases,  for purposes of this Agreement,
the installed  cost of a facility shall be calculated as equal to 2.72 times the
total  delivered  cost of the major  purchased  equipment  components.  The 2.72
factor  includes  the  cost  of  the  major  equipment   components,   equipment
installation,   instrumentation,   piping,  electric  wiring,   engineering  and
supervision,  construction expenses and contractor's fee of five percent (5%) on
the  above.  It does not  include  land,  building  yard  improvements,  service
facilities, taxes, contingency fees or working capital.

     C. BMI shall also receive  five  percent (5%) of all damages,  royalties or
other  consideration  received by LICENSEE  as a result of  successful  lawsuits
enforcing the rights  licensed  hereunder in accordance  with the  provisions of
Article 12.

     D. If this Agreement is for any reason  terminated before all of the earned
royalties herein provided for have been paid,  LICENSEE shall immediately pay to
BMI any remaining  unpaid  balance of earned  royalties even though the due date
provided in Article 8 has not been reached.

 <PAGE>


                              5. MINIMUM ROYALTIES

     A.  LICENSEE  shall pay to BMI  royalties as stated in Article 4, but in no
event shall  royalties for a calendar  year be less than the  following  minimum
royalties  during  each  of the  calendar  years  indicated:  Minimum  Royalties
Calendar Year U. S. $ per Calendar Year*

               1998                                                $10,000
               1999                                                $20,000
               2000                                                $30,000
               2001    and each calendar                           $40,000
               year thereafter during
               the term of this Agreement
               -------------------------------------
               *Net to BMI after taxes, if any, withheld at the source.

     B. Separate  from  LICENSEE's  obligation  to pay minimum  royalties as set
forth above,  beginning in the calendar  year 2001,  and for each  calendar year
thereafter,  BMI may, in its sole discretion,  elect to terminate this Agreement
with regard to a particular  TERRITORY if LICENSEE has not made sales sufficient
to generate  earned  royalties  in the amount of Twenty-  Five  Thousand  United
States Dollars ($25,000 US) per calendar year in such TERRITORY.

     In the event that the  amounts due at the end of any  calendar  year exceed
the earned royalty  requirement of the preceding  paragraph but do not equal the
minimum royalties  specified above for any calendar year,  LICENSEE shall pay to
BMI on the last day of the following January, the amount required to satisfy the
minimum royalty obligation for the preceding calendar year.

     D. If this  Agreement is  terminated  for any reason,  except for breach of
contract by BMI,  during any year that minimum  royalties  are due to BMI,  upon
termination,  LICENSEE shall immediately pay to BMI the proportionate  amount of
minimum  royalties owed to BMI that  represents that portion of the year elapsed
prior to termination.  For example, if LICENSEE terminates without breach by BMI
after the expiration of three (3) months of the new year,  LICENSEE shall pay to
BMI one-fourth (3) of the yearly minimum royalty due for that year.


                                 6. SUBLICENSING

     LICENSEE  shall  have the right to  sublicense  in the  LICENSED  FIELD and
LICENSED TERRITORIES.  Sublicenses entered by LICENSEE shall be transferable and
assignable from LICENSEE only to BMI.

     B. BMI shall have the right to approve any sublicense granted hereunder, as
regards to reasonable  business  practices,  including the terms and  conditions
therein. LICENSEE shallprovide BMI with a copy of each sublicense, and

<PAGE>
shall  not  grant  to its  sublicensees  any BMI  rights  not  conveyed  by this
Agreement.  The royalty paid to BMI under  sublicenses from LICENSEE shall be no
less than that set forth for LICENSEE in Article 4, above.

     If this Agreement is terminated  for any reason,  except breach of contract
by BMI, LICENSEE shall immediately assign all of its right,  title, and interest
to all sublicenses to BMI, including the right to receive income.


                                    DILIGENCE

     In each of the  TERRITORIES  1, 2 and 3, if a  contract  is not in place to
build a  commercial  facility to practice  the ARP  Technology  within three (3)
years of the Effective Date, BMI may, in its sole discretion, elect to terminate
the LICENSEE's  rights  hereunder for that particular  TERRITORY and BMI will be
free to license  the ARP  Technology  to others in the  LICENSED  FIELD for that
particular TERRITORY.

     In TERRITORY 4 (Asia),  if a contract is not in place to build a commercial
facility to practice the ARP  Technology  within five (5) years of the Effective
Date,  BMI may, in its sole  discretion,  elect to terminate  LICENSEE's  rights
hereunder  for  TERRITORY  4 and will be free to license the ARP  Technology  to
others for TERRITORY 4 and in the LICENSED FIELD.

     In such cases,  improvement inventions made solely by LICENSEE shall be the
exclusive  property  of  LICENSEE,  but BMI  shall be  granted  a  nonexclusive,
royalty-free,  paid-up license therein, including the right to sublicense within
the LICENSED FIELD.


                                   8. REPORTS

     A. Not later than the last day of each  January  and July,  LICENSEE  shall
furnish to BMI a written  statement in a form provided by BMI  (Attachment 1) to
determine the amounts due and the appropriateness of the royalties paid pursuant
to  Articles  4 and 6 for the  semiannual  periods  ended  the last  days of the
preceding December and June, respectively,  and shall pay to BMI all amounts due
to BMI. Such amounts are due at the dates the  statements  are due. If no amount
is accrued  during any  semiannual  period,  a written  statement to that effect
shall be furnished.

     B. Payments  provided for in this  Agreement,  shall,  when  overdue,  bear
interest at a rate per annum equal to three percent (3%) in excess of the "Prime
Rate" published by The Wall Street Journal at the time such payment is due until
payment is received by BMI.

<PAGE>

                               9. CONFIDENTIALITY

     BMI  may  disclose  confidential  and  proprietary  information  (Technical
Information)  to LICENSEE,  consisting of published or  unpublished  research or
development  information,  know  how  and  technical  data  related  to the  ARP
Technology. As a result of LICENSEE's access to the confidential and proprietary
Technical  Information  disclosed  by  BMI  hereunder,   LICENSEE  may  generate
information which shall also be considered Technical Information. LICENSEE shall
not disclose any  Technical  Information  to any third party without the express
written consent of BMI, until such Technical  Information  shall become publicly
available  through no fault or action of  LICENSEE.  LICENSEE  shall not use the
Technical Information for any use other than that expressly authorized herein.


                               10. REPRESENTATIONS

        This Agreement is entered into by BMI in its private capacity.

     B.  Nothing in this  Agreement  shall be deemed to be a  representation  or
warranty by BMI of the validity of any of the PATENTS or the accuracy, safety or
usefulness  for  any  purpose,  of any  Technical  Information,  techniques,  or
practices  at any time made  available  by BMI.  Neither BMI nor any  affiliated
company of BMI shall have any  liability  whatsoever  to  LICENSEE  or any other
person for or on account of any injury,  loss, or damage,  of any kind or nature
sustained by, or any damage assessed or asserted against, or any other liability
incurred by or imposed upon LICENSEE or any other  person,  arising out of or in
connection  with  or  resulting  from  (i)  the  production,  use or sale of any
apparatus  or product,  or the practice of the  INVENTIONS;  (ii) the use of any
Technical Information,  techniques,  or practices disclosed by BMI; or (iii) any
advertising  or  other  promotional  activities  with  respect  to  any  of  the
foregoing,  and  LICENSEE  shall hold BMI,  and any  affiliated  company of BMI,
harmless in the event BMI, or any affiliated company of BMI, is held liable.

        C. LICENSEE understands and acknowledges that the subject matter of this
Agreement has not yet been commercially  demonstrated,  and agrees to accept the
risks incident to designing, manufacturing and operating a nascent technology.

        D. BMI  represents  that it has the  right to  grant  all of the  rights
herein,  except as to such  rights as the  Government  of The  United  States of
America may have or may assert.

        E. BMI is unaware of any claims that have been, are, or could reasonably
be asserted against BMI by third parties with respect to patent  infringement or
any other type of liability relevant to licensing of the INVENTIONS,  which have
not been disclosed to LICENSEE as of the date of this Agreement.


                                 11. TERMINATION

        A. The PATENT  License of Article 2 shall end upon the expiration of the
last to expire of the PATENTS  included  herein,  or upon the abandonment of the
last to be abandoned of any patent  applications if no PATENTS have issued, or a
final  adjudication of invalidity of all patents included  herein,  whichever is
later, unless this Agreement is sooner terminated.


<PAGE>

        B.  LICENSEE may  terminate  this  Agreement at any time upon sixty (60)
days' written  notice in advance to BMI, or at any time after the  expiration of
all patents  included  herein,  or a final  adjudication  of  invalidity  of all
patents included herein.

        C. Except as provided  below in Paragraph  11D, if either party shall be
in default of any  obligation  hereunder,  the other  party may  terminate  this
Agreement by giving Notice of Termination by Certified or Registered Mail to the
party at fault, specifying the basis for termination.  If within sixty (60) days
after the  receipt of such  Notice of  Termination,  the party in default  shall
remedy  the  condition  forming  the  basis  for  termination,  such  Notice  of
Termination  shall cease to be operative,  and this Agreement  shall continue in
full force;  provided that if Notice of  Termination is given by BMI to LICENSEE
for the  third  time then  this  grace  period  shall  not be  available  unless
permitted  in such third  Notice of  Termination,  and this  Agreement  shall be
finally terminated.

        D.  LICENSEE  shall  inform  BMI of its  intention  to file a  voluntary
petition in bankruptcy or of another's intention to file an involuntary petition
in  bankruptcy  to be received at least  seventy-five  (75) days prior to filing
such a petition.  LICENSEE's filing without conforming to this requirement shall
be deemed a material,  pre-petition  incurable  breach not subject to the notice
requirement of Paragraph 11C.


                                 12. LITIGATION

        A.  LICENSEE  shall  notify  BMI of any  suspected  infringement  of the
PATENTS in the LICENSED FIELD and the LICENSED TERRITORIES, and each party shall
inform the other of any evidence of such infringement(s).

        B.  LICENSEE   shall  have  the  first  right  to  institute   suit  for
infringement(s)  in the LICENSED  FIELD and the LICENSED  TERRITORIES so long as
this  Agreement  remains  exclusive.  However,  if BMI notifies  LICENSEE of its
desire to institute suit for  infringement(s) and LICENSEE fails to do so within
ninety (90) days of such notice, then BMI may, at its own expense, bring suit or
take any other  appropriate  action.  Any  amounts  recovered  pursuant  to such
infringement suit shall be retained by and be the property of the party bringing
the suit. In the event LICENSEE receives any monies or other  consideration from
a third party as a result of LICENSEE's  rights under this Agreement,  BMI shall
receive  its  royalty  under  Article 4 as applied  to all such  monies or other
consideration  whether  such  monies  or  other  consideration  are  denoted  as
"royalties", "damages", "release" from prior acts, or any other designation.


                                   13. PATENTS

     A. BMI shall have the sole right to file,  prosecute,  and  maintain all of
the PATENTS covering the INVENTIONS that are the property of BMI, and shall have
the right to determine whether or not, and where, to file a patent  application,
to  abandon  the  prosecution  of  any  patent  or  patent  application,  or  to



<PAGE>



discontinue the maintenance of any patent or patent application.  All reasonable
expenses  incurred by BMI in the filing,  prosecution or maintenance of PATENTS,
or patent  applications and patents issued on IMPROVEMENTS,  licensed  hereunder
shall be  reimbursed  to BMI by LICENSEE  within  sixty (60) days of  LICENSEE's
receipt of notice setting forth such expenses,  if LICENSEE  chooses to make use
of such IMPROVEMENTS.

        B. All INVENTIONS conceived or reduced to practice for LICENSEE by BMI's
Columbus  Laboratories  and all Technical  Information  directly  related to the
INVENTIONS developed for LICENSEE by BMI's Columbus Laboratories during the term
of  this  Agreement,  shall  be  owned  by BMI and  shall  be  included  in this
Agreement.

        C. Improvement inventions made solely by LICENSEE shall be the exclusive
property of  LICENSEE,  but BMI shall be granted a  nonexclusive,  royalty-free,
paid-up license therein,  including the right to sublicense outside the LICENSED
FIELD.


                                   14. RECORDS

        LICENSEE  shall  keep  accurate  records  of  all  operations  affecting
payments hereunder, and shall permit BMI or its duly authorized agent to inspect
all such  records  and to make copies of or extracts  from such  records  during
regular  business  hours  throughout  the  term  of  this  Agreement  and  for a
reasonable period of not less than three (3) years thereafter.


                                15. ASSIGNABILITY

        LICENSEE   shall  not  assign  any  rights  under  this   Agreement  not
specifically  transferable  by its terms without the written consent of BMI. BMI
may assign its rights hereunder.


                                   16. REFORM

        A. The  parties  agree  that if any part,  term,  or  provision  of this
Agreement shall be found illegal or in conflict with any valid  controlling law,
the validity of the remaining provisions shall not be affected thereby.

        B. In the event the  legality  of any  provision  of this  Agreement  is
brought into question because of a decision by a court of competent jurisdiction
of any  country in which  this  Agreement  applies,  BMI,  by written  notice to
LICENSEE,  may revise the  provision in question or may delete it entirely so as
to comply with the decision of said court.


                                  17. PUBLICITY

     In publicizing anything made, used, or sold under this Agreement,  LICENSEE
shall not use the name BMI or  otherwise  refer to any  organization  related to
BMI, except with the written approval of BMI.



<PAGE>


                            18. WAIVER AND ALTERATION

        A. The waiver of a breach  hereunder  may be effected  only by a writing
signed by the  waiving  party and  shall  not  constitute  a waiver of any other
breach.

        B. A provision of this Agreement may be altered only by a writing signed
by both parties, except as provided in Article 16, above.


                               19. IMPLEMENTATION

        Each party shall  execute  any  instruments  reasonably  believed by the
other party to be necessary to implement the provisions of this Agreement.


                                20. CONSTRUCTION

        This  Agreement  shall be construed in  accordance  with the laws of the
State of Ohio of The United States of America and in the English  language,  and
any action  brought to enforce any  provision or obligation  hereunder  shall be
brought in a court of competent jurisdiction in the State of Ohio.


                    21. EXPORTATION OF TECHNICAL INFORMATION

        LICENSEE  agrees  not to  export  from The  United  States  of  America,
directly  or  indirectly,  any  technical  information  (or the  direct  product
thereof)  furnished to LICENSEE  either directly or indirectly by BMI, except to
the extent and to the  countries  permitted by the laws of The United  States of
America.  LICENSEE  agrees to  indemnify,  defend  and hold  harmless  BMI,  its
officers,  agents and employees  from all  liability  involving the violation of
such export regulations, either directly or indirectly, by LICENSEE.

                            22. ENTIRE UNDERSTANDING

        This Agreement represents the entire understanding  between the parties,
and supersedes  all other  agreements,  express or implied,  between the parties
concerning  the  INVENTIONS  in the  LICENSED  FIELD and  LICENSED  TERRITORIES.
Specifically,  no future representations made by BMI staff shall be effective to
alter  any  provision  herein  unless  such  representation  shall be made by an
authorized representative of BMI having the power to do so.




<PAGE>



                                  23. ADDRESSES

        For the purpose of all written communications between the parties, their
addresses shall be:
                                      ThermoEnergy Corporation
                                      1300 Tower Building
                                      Fourth and Center Streets
                                      Little Rock, AR  72201
                                      Telephone:    (501) 376-6477
                                      Telefax:      (501) 376-3643

                                      Battelle Memorial Institute
                                      Attention License Administrator
                                      505 King Avenue
                                      Columbus, OH 43201-2693
                                      Telephone: (614) 424-7449
                                      Telefax: (614) 424-3864

or any other  addresses  of which  either  party shall notify the other party in
writing.

        IN WITNESS WHEREOF the parties have caused this Agreement to be executed
by their duly authorized  officers on the respective dates and at the respective
places hereinafter set forth.

                                   THERMOENERGY CORPORATION
  
                                   ---------------------------------------------
                                   Signature
ATTEST:
                                   ---------------------------------------------
                                   Typed or Printed Name

--------------------------        ----------------------------------------------
Signature                         Title

--------------------------        ----------------------------------------------
Signed at                         Date



                                   BATTELLE MEMORIAL INSTITUTE

                   
                                   ---------------------------------------------
                                   Signature

ATTEST:                             Robert L. Zieg 
                                   ---------------------------------------------
                                   Typed or Printed Name

                                   Assistant General Counsel
-----------------------            ---------------------------------------------
Signature                          Title

                                     January 5, 1998
-----------------------              -------------------------------------------
Signed at                            Date

Attachment 1



<PAGE>


                                  ATTACHMENT 1

                              ROYALTY REPORT TO BMI

From:
     ---------------------------------------------------------------------
        (Company Name)

Reporting Period:

     From To -----------------  -------------------  (6 Month Period Ending June
30 and December 31, to be Reported by the Following July 31 and January 31).

    Article 4A. ROYALTIES (5% of all revenues received or $1 for each
               1,000 gallons of input, whichever is greater)

     (i)     (a)  Revenues Received:        

$------------                                                            X  0.05

                       (b)  Royalty Calculated:

$------------

     (ii)    (c)  No. of 1,000 gallons of input:          x $1.00= $
                                                ----------          ------------

             (d)  Twenty-five percent (25%) of Gross Profit       =$
                                                                    ------------
            (e) Royalty  Calculated = lesser of amount
                   on line (c) or (d):                             $
                                                                    ------------

               Royalty owed [greater of amount on line (b) or (e)]
$    
------------

2.      Article 4B. ROYALTIES (5% of installed cost of a facility or
               $40,000 whichever is greater, per facility)


<PAGE>



               $ Installed cost of a facility                       $
                                                                    ------------
                                                                     X  0.05

               $ Amount Royalties Owed:                             $
                                                                    ------------

               OR (whichever is greater)

               $40,000

               $ Amount Royalties Owed:                             $
                                                                    ------------

 3. Article 6C. Royalties from sublicenses

               $ Amount Royalties Owed:                             $
                                                                    ------------

               TOTAL ROYALTIES DUE:                                 $
                                                                    ------------
US

SIGNED BY 
          -------------------------------

PRINTED NAME
            -----------------------------

TELEPHONE NO.
             ----------------------------

DATE
    -------------------------------------                           

TELEFAX NO.
            ------------------------------





<PAGE>



                                LICENSE AGREEMENT

                                     BETWEEN

                           BATTELLE MEMORIAL INSTITUTE

                                       AND

                            THERMOENERGY CORPORATION



<PAGE>