Document:

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:Exhibit
10.4

     

    AMENDMENT
TO EMPLOYMENT AGREEMENT

     

    This Agreement of Amendment is entered
into as of the 25th day of
February 2009 by and between Alexander G. Fassbender  (the
“Executive”) and ThermoEnergy Corporation, a Delaware corporation (the
“Company”).

     

    Whereas, the Executive and the Company
are parties to an Employment Agreement dated as of November 18, 1999 (the
“Original Agreement”); and

     

    Whereas, the Executive and the Company
desire to amend the Original Agreement as hereinafter set forth;

     

    Now, therefore, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Executive and the Company hereby agree as follows:

     

    1.           Article
V of the Original Agreement is hereby deleted in its entirety and the following
new Article V is hereby substituted therefore:

     

    “ARTICLE
V

     

    Property Rights and
Obligations of Executive

     

    Section 5.01  Trade
Secrets.    For
purposes of this Agreement, “trade secrets” 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, where such
information is reasonably related to the business of the Companies and has not
previously been publicly released by duly authorized representatives of the
Companies or otherwise lawfully entered the public domain.

     

    Section 5.02  Preservation
of Trade Secrets.  Executive will
preserve as confidential all trade secrets pertaining to the Companies’ business
that have been or may be obtained or learned by him by reason of his employment
or otherwise.  Executive will not, without the written consent of the
Company, either use for his own benefit or purposes or disclose or permit
disclosure to any third parties, either during the term of his employment
hereunder or thereafter (except as required in fulfilling the duties of his
employment), any trade secret connected with the business of the
Companies.

     

    Section 5.03  Trade
Secrets of Others.  Executive agrees
that he will not disclose to the Companies or induce the Companies to use any
trade secret belonging to any third party except pursuant to valid licenses or
similar rights.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section 5.04  Property
of the Companies.  Executive agrees
that no 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 that come into his
possession by reason of his employment with the Companies shall be used by him
in any way adverse to the Companies’ interests.  Executive will not
allow any such documents or 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.  Executive agrees to deliver to the Board of
Directors of the Company or its designee, upon demand, and in any event upon the
termination of Executive’s employment, all of such documents and things which
are in Executive’s possession or under his control.

     

    Section 5.05  Non-competition
by Executive.  During the term
of this Agreement, and for the applicable Non-competition Period (as such term
is hereinafter defined) following the termination of this Agreement, Executive shall not, directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
principal stockholder, corporate officer, director, or in any other individual
or representative capacity:  (i) engage or participate in any business
that is in competition in any manner with the business of the Companies (with
Babcock-Thermo Carbon Capture LLC (the “Joint
Venture”) constituting one of the “Companies” for purposes of this Section 5.05
notwithstanding the direct or indirect  level of ownership in the
Joint Venture at any time by ThermoEnergy Corporation); (ii) divert, take
away or attempt to divert or take away (and during the Non-competition Period, call on or solicit) any
of the Companies’ clients within the United
States.  For purposes of this Agreement, the term “Non-Competition
Period” shall mean (i) with respect only to the Joint Venture, two (2) years and
(ii) with respect to all of the other Companies, one (1) year.  For
purposes of this Agreement, the term “Companies’ clients” shall mean clients who had
a business relationship with any of the
Companies prior to Executive’s employment with the Company and those who develop
a business relationship with any of the
Companies during Executive’s employment with the Company; (iii) undertake
planning for or organization of any business, within the United States or in any other
country in which any of the Companies is
engaged in business activity competitive with any of the Companies’ business within the United States or
in any other country in which any of the
Companies is engaged in business, or
combine or conspire with employees or other
representatives of any of the Companies’
business within the United States or in any other country in which any of the Companies is engaged in business, for the purpose of organizing any such
competitive activity within the United States or in any other country in which
any of the Companies is engaged in
business; or (iv) induce or influence (or seek to induce or influence) any
person who is engaged, as an Executive, agent, independent contractor or
otherwise by any of the Companies, within the United States or in any other
country in which any of the Companies is engaged in business, to terminate his or her employment or
engagement.  The provisions of this Section 5.05 may be waived,
generally or in specific instances, by the Company; provided, however,
that the provisions of this Section 5.05 may be waived with respect to the
business of the Joint Venture only by the Joint Venture.

    

    Section 5.06  Survival
Provisions and Certain Remedies  Unless otherwise agreed to in
writing between the parties hereto, the provisions of this Article V shall
survive the termination of this Agreement.  The covenants in this
Article V shall be construed as separate covenants and to the extent any
covenant shall be judicially unenforceable, it shall not affect the enforcement
of any other covenant.  In the event Executive breaches any of the
provisions of this Article V, Executive agrees that the Company may be entitled
to injunctive relief in addition to any other remedy to which the Company may be
entitled.”

     

    
      
        
        

      

      
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    2.           Except
as expressly amended hereby, the Original Agreement shall remain in full force
and effect without amendment or alteration.

     

    3.           The
Executive hereby 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 made by him
and  related to the Companies’ clean energy technology known as
ThermoEnergy Integrated Power System (“TIPS”), which is a pressurized
oxy-fuel combustion technology for multi-pollutant capture that gasifies or
combusts fossil fuels (particularly coal and biomass) and facilitates conversion
into electricity without producing air emissions, and is aimed at competing with
conventional energy conversion technologies, are the property of the
Companies.

     

    4.           This
Agreement may be executed in counterparts, each of which shall be considered an
original but all of which, taken together, shall constitute a single
Agreement.  Delivery of an executed copy of this Agreement by
facsimile or other electronic transmission shall be deemed delivery of the
original, notwithstanding any subsequent failure or refusal to deliver a copy
signed in ink.

     

    In
witness whereof, the parties have executed this Agreement as of the 25th day of
February 2009.

     

    ThermoEnergy
Corporation

     

    
      
        	 
      	 
      	 
      	
                   /s/ Alexander G.
      Fassbender

              
	 
      	 
      	 
      	
                Alexander
      G. Fassbender

              
	
                By:

              	
                  /s/ Andrew T. Melton

              	 
      	 
      
	 
      	
                 
      Chief Financial Officer

              	 
      	 
      
	 
      	
                  
      Andrew T. Melton

              	 
      	 
      

      

    

    

    
      
        
        

      

      
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