Exhibit
10.3


ThermoEnergy
Corporation




Executive
Employment Agreement




AGREEMENT,
effective September 16, 2009 (the “Effective Date”), by and between ThermoEnergy
Corporation, a Delaware corporation (together with all of its subsidiaries, the
“Company”) and Shawn R. Hughes (the “Executive”).




WHEREAS,  the
Executive has served the Company as President and Chief Operating Officer;
and




WHEREAS,
the Company desires to continue, on an interim basis, to retain the services of
the Executive as President and Chief Operating 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 term;




NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:




ARTICLE
I


EMPLOYMENT
DUTIES AND BENEFITS




Section
1.1Employment.  The Company
hereby employs the Executive as President and Chief Operating
Officer.  The Executive accepts such employment and agrees to perform
the duties and responsibilities assigned to him pursuant to this
Agreement.




Section
1.2Duties
and Responsibilities.  The Executive
shall perform such lawful duties and have such responsibilities as are
reasonably assigned to him by the Board of Directors of the
Company.  The Executive shall devote such time and attention to the
business of the Company as shall be reasonably necessary for the performance of
his responsibilities.




Section
1.3Work-Related
Travel.  The Executive
shall not be obligated to maintain a permanent office at the Company’s corporate
headquarters or at any other of the Company’s facilities, but he will travel, to
the Company’s offices and to other locations, as reasonably necessary for the
performance of his responsibilities.  Although the Executive will not
be obligated to devote any specific amount of time to travel, the Company and
the Executive expect that the Executive will travel on Company business between
two and three weeks each month.




ARTICLE
II


COMPENSATION
AND BENEFITS




Section
2.1Base
Salary.  From and after
the Effective Date, the Company shall pay to the Executive a salary at the rate
of $150,000 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
2.2Performance
Bonus.  In addition to
the Base Salary, the Executive shall be entitled, upon completion of the current
contract (the “URS Contract”) between the Company’s subsidiary, CASTion
Corporation (“CASTion”), and URS Corporation (“URS”) to receive a performance
bonus in an amount equal to 10% of CASTion’s gross profits on such contract (the
“URS Bonus”).  The Company’s agreement to pay the URS Bonus to the
Executive shall not entitle the Executive to receive any bonus or other payment
with respect to any other transaction between the Company or CASTion and URS or
any other party.







Section
2.3Expense
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
2.4Benefit
Plans.From and after
the Effective Date, 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
2.5Equity
Incentive.  Effective as of
the Effective Date, the Executive shall surrender for cancellation that certain
stock option for the purchase of 600,000 shares of the Company’s common stock
that was granted to the Executive in December 2007s in exchange for the issuance
to the Executive of a Common Stock Purchase Warrant entitling the Executive to
purchase 600,000 shares of the Company’s Common Stock at any time on or before
the tenth anniversary of the Effective Date at an exercise price of $0.24 per
share.







ARTICLE
III


TERM
OF EMPLOYMENT AND TERMINATION




Section
3.1Term.  The term of the
Executive’s employment hereunder shall commence on the Effective Date and shall
terminate on the earlier of (i) the date on which the Company has appointed both
a new Chief Executive Officer as successor to Dennis C. Cossey and a new Chief
Financial Officer as successor to Arthur S. Reynolds or (ii) March 31, 2010 (in
either case, the “Termination Date”); provided, however, that the Termination
Date may be extended by the mutual agreement of the parties on terms to be
agreed, in good faith, by the Executive and the Company’s Board of
Directors.




Section
3.2Termination
of Employment.  Upon the
Termination Date or, in the event the Executive’s employment is terminated prior
to the Termination Date for any reason other than (i) by the Company for Cause
or (ii) 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 $20,834 per month for a
period of twelve 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, plus(ii) upon completion of
the URS Contract, any unpaid portion of the URS Bonus.  For a period
of one year 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 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.  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.







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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 drawing, designs, plan,
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, (c) is generally
disclosed to third parties by the Company without similar restrictions on such
third parties or (d) was known to the Executive prior to June 15,
2007.   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 Board of
Directors of the Company, or its designee, upon demand, and in any event upon
the termination of the Executive’s employment, all of such documents and
otherthings 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 termination (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.




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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 has been employed by the Company
and the amount and duration of severance payments payable to him under this
Agreement.






ARTICLE
V


GENERAL
MATTERS




Section
5.1Governing
Law.  This Agreement
shall be governed by the laws of the Commonwealth of Massachusetts and shall be
construed in accordance therewith.




Section
5.2No
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
5.3Amendment.  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
5.4Benefit.  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.




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Section
5.5Text 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
5.6Severability.  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
5.6Entire
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 including, without limitation, the
Employment Agreement dated as of June 15, 2007 between the Company and the
Executive.




In
Witness Whereof, the Company and the Executive have executed this Agreement as
of the date first above written.






ThermoEnergy
      Corporation/s/Shawn
      R. Hughes
                    
                    By:
                    /s/
      Dennis C. CosseyShawn
      R. Hughes
                    
                    
                    Dennis
      C. CosseyChairman
      and Chief Executive Officer






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