Document:

Exhibit
      10.13

    EMPLOYMENT
      AGREEMENT

    

    

    KNOW
      ALL MEN BY THESE PRESENTS, this contract for services is made this
      14th
      day of September 2005 by and between the following
      parties:

    

    ThermoEnergy
      Corporation

    1300
      Tower Building

    323
      Center Street

    Little
      Rock, Arkansas 72201

    

    Herein
      after referenced as the “Employer” and,

    

    Dennis
      C. Cossey

    48
      Robinwood Drive

    Little
      Rock, Arkansas 72227

    

    Herein
      after referenced as the “Employee”

    

    WHEREAS,
      Employer is desirous of hiring Employee as one of its key employees;

    

    WHEREAS,
      Employee is willing to accept employment as an Employee of Employer,
      and

    

    WHEREAS,
      the parties hereto desire to delineate the responsibilities of Employee and
      the
      expectations of Employer;

    

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

    

    
      	
              1.

            	
              EMPLOYMENT.
                Employer hereby employs Employee, and Employee hereby accepts employment
                with Employer, upon the terms and conditions set forth in this
                Agreement.

            

    

    

    
      	
              2.

            	
              TERM
                OF EMPLOYMENT. The employment of Employee pursuant to the terms of
                this
                Agreement shall commence as of July 1, 2001 and shall continue for
                a
                period of five (5) years, unless sooner terminated pursuant to the
                provisions hereof; PROVIDED, HOWEVER, that this Agreement shall,
                unless
                earlier terminated, as of the fifteenth of each month of the term
                of this
                Agreement, by automatically extended for an additional
                month.

            

    

    

    
      	
              3.

            	
              DUTIES.

            

    

    

    
      	 	
              3.1.

            	
              BASIC
                DUTIES. Subject to the direction and control of the Board of Directors
                of
                Employer, Employee shall serve as Chairman and Chief Executive Officer
                of
                Employer and shall fulfill all duties and obligations of such office
                including but not limited to the
                following:

            

    

    
      	 	
              (i)

            	
              Administer
                the corporate affairs,

            

    

    
      	 	
              (ii)

            	
              Formulate
                and execute corporate
                policy,

            

    

    
      	 	
              (iii)

            	
              Report
                to the Board of Directors at least
                quarterly,

            

    

    
      	 	
              (iv)

            	
              Oversee
                corporate management
                staff,

            

    

    
      	 	
              (v)

            	
              Oversee
                strategic planning,

            

    

    
      	 	
              (vi)

            	
              Develop
                new markets and technologies,
                and

            

    

    
      	 	
              (vii)

            	
              Assist
                with investor relations.

            

    

     

     

    
      
        
        

      

      
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              3.2.

            	
              OTHER
                DUTIES OF EMPLOYEE. In addition to the foregoing, Employee shall
                perform
                such other or different duties related to those set forth in Paragraph
                3.1
                as may be assigned to him from time to time by Employer, PROVIDED,
                HOWEVER, that any such additional assignment shall be at a level
                of
                responsibility commensurate with that set forth in Paragraph 3.1
                and
                PROVIDED, FURTHER, that Employee may serve, or continue to serve,
                on the
                boards of directors of and hold any other offices or positions in,
                companies or entities that in the judgment of Employer will not present
                any conflict of interest with Employer or any of its operations or
                adversely affect the performance of Employee’s duties pursuant to this
                Agreement.

            

    

    

    
      	 	
              3.3.

            	
              TIME
                DEVOTED TO EMPLOYMENT. Employee shall devote his full time to the
                business
                of Employer during the term of this Agreement to fulfill his obligations
                hereunder. 

            

    

    

    
      	 	
              3.4.

            	
              PLACE
                OF PERFORMANCE OF DUTIES. The services of Employee shall be performed
                at
                Employer’s place of business, Little Rock, Arkansas, and at such other
                locations as shall be designated from time to time by
                Employer.

            

    

    

    
      	 	
              3.5.

            	
              SERVICES
                AS OFFICER OR DIRECTOR. During the employment period, the Employee
                shall,
                if elected or appointed, serve as a director of Employer and as an
                officer
                and/or director of all current and future subsidiaries or affiliates
                of
                Employer without any additional compensation for such
                services.

            

    

    

    
      	
              4.

            	
              COMPENSATION
                AND METHOD OF PAYMENT.

            

    

    

    
      	 	
              4.1.

            	
              TOTAL
                COMPENSATION. As compensation under this Agreement, Employer shall
                pay and
                Employee shall accept the
                following:

            

    

    

    
      	 	
              (1)

            	
              BASE
                COMPENSATION. For each year of this Agreement, measured from the
                effective
                date hereof, base compensation of $200,000.00 (Two Hundred Thousand
                United
                States Dollars), and further increased as may be approved from time
                to
                time by the Compensation Committee of the Employer, but by a minimum
                of
                15% annually. Upon the base compensation becoming $500,000.00, the
                minimum
                annual increase will change to the Consumer Price Index for All Urban
                Consumers (“the CPI-U”) for the most recent quarter available at the time
                of the increase. All such increases shall be effective as of the
                beginning
                of such calendar year in which the increase becomes effective pursuant
                to
                the terms hereof or as approved by the Employer, as the case may
                be. Such
                adjustments may be based on the performance of Employer, the value
                of
                Employee to Employer or any other factors considered relevant by
                Employer.

            

    

    

    
      	 	
              (2)

            	
              INCENTIVE
                COMPENSATION. For each year the Employer shall pay to Employee as
                incentive compensation (“Incentive Compensation”), in respect of each
                fiscal year or portion thereof included within the Employment Period,
                an
                amount (up to one hundred percent (100%) of his Base Compensation)
                determined in accordance with a formula to be established annually
                in good
                faith by the Compensation Committee of the Board of Directors of
                Employer
                thereof authorized to act on compensation matters and, in the case
                of each
                fiscal year commencing after December 31, 2001, communicated to Executive
                prior to the beginning of such fiscal year, such formula to give
                a fifty
                percent (50%) weight to Employee’s performance (measured by such method or
                combination of methods as the Compensation Committee shall deem fair
                and
                equitable) during each fiscal year, and a fifty percent (50%) weight
                to
                Employee’s performance (determined by the Board of Directors or the
                Compensation Committee on the basis of personal goals established
                for
                Employee) during each fiscal year. The formula shall be established
                so
                that Employee will have a reasonable opportunity, through diligent
                performance of his duties, to earn the maximum Incentive Compensation,
                with partial Incentive Compensation being earned for partial achievement
                of the performance
                standards.

            

    

     

     

    
      
        
        

      

      
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              (3)

            	
              PERIODIC
                PERFORMANCE COMPENSATION. In addition to Incentive Compensation,
                special
                compensation can be determined periodically by the Compensation Committee
                to be paid for unusual activities such as, but not inclusive of the
                following: 1) development or acquisition of a new technology, 2)
                execution
                of new contracts in excess of twenty percent (20%) of existing revenues
                of
                Employer, 3) completion of tests of existing technology that verifies
                the
                feasibility of that technology, 4) completion of any financing arrangement
                necessary to accomplish Employer’s goals, 5) other unusual events that are
                determined to be significant by the Compensation Committee, and 6)
                a
                substantial increase in stock price.

            

    

    

    
      	 	
              (4)

            	
              EXPENSE
                REIMBURSEMENT. Reimbursement of such discretionary expenses, including
                travel expenses, as are reasonable and necessary, in the judgment
                of the
                Employer, for Employee’s performance of his responsibilities under this
                Agreement.

            

    

    

    
      	 	
              (5)

            	
              STOCK
                OPTIONS. Nonqualified options issued at the discretion of the
                Employer.

            

    

    

    
      	 	
              (6)

            	
              RESTRICTED
                STOCK GRANTS. Restricted stock issued at the discretion of the
                Employer.

            

    

    

    
      	 	
              (7)

            	
              EMPLOYEE
                FRINGE BENEFITS. Participation in Employer’s employee fringe benefit
                programs in effect from time to time for employees at comparable
                levels of
                responsibility. Participation will be in accordance with any applicable
                policies adopted by Employer. Employee shall be entitled to vacations,
                absences for illness, and to similar benefits of employment, and
                shall be
                subject to such policies and procedures as may be adopted by Employer.
                Without limiting the generality of the foregoing, it is initially
                anticipated that such benefits of employment shall include four (4)
                weeks
                vacation during each 12-month period of employment with Employer
                (which
                shall accrue monthly on a PRO RATA basis and which shall be carried
                forward for a period not to exceed three (3) years and otherwise
                in
                accordance with Employer’s policies); major medical and health insurance;
                life and disability insurance; and stock option plans for employees
                and
                members of the Board of Directors. Employer further agrees that in
                the
                event it offers disability insurance to its employees, Employer shall
                arrange for Employee to be covered by similar
                insurance.

            

    

     

     

    
      
        
        

      

      
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              (8)

            	
              In
                addition, Employee shall be entitled to: (a) a car allowance of $1,000.00
                per month, and (b) if for any reason Employee shall not be covered
                by a
                health insurance policy of Employer, a medical insurance coverage
                expense
                allowance of $1,000.00 per
                month.

            

    

    

    
      	 	
              (9)

            	
              LIFE
                INSURANCE. The Employer shall pay all premiums for one or more life
                insurance policies upon the life of the Employee in an aggregate
                face
                amount equal to two and one-half times (2&1/2) the Base Compensation
                of Employee. The death benefit or benefits shall be payable to such
                beneficiary or beneficiaries as Employee shall designate in writing
                to
                Employer. Employee shall aid Company in procuring such insurance,
                as well
                as in obtaining any other life, health, accident, disability, or
                other
                insurance which Employer should at any time apply for, it its own
                name ant
                its own expense, to ensure Employer’s obligations hereunder, by submitting
                to the usual and customary medical examinations and by completing,
                executing, and delivering such applications and other instruments
                in
                writing as may be reasonably required by any insurance company or
                companies.

            

    

    

    
      	 	
              (10)

            	
              OTHER
                BENEFITS. Employer shall pay or shall reimburse Employee for his
                reasonable expenses in connection with (i) obtaining from time-to-time
                of
                financial planning advice; (ii) preparation of personal Federal and
                State
                income tax returns; and (iii) cost of annual medical physical
                examinations. While employed, the Employer shall also pay the initiation
                fee and the annual and/or monthly dues and/or assessments for the
                Employee’s membership in social and/or business clubs, business
                organizations, and social and/or civic groups of Employee’s choosing. The
                employer will also provide parking for the Employee at the place
                of
                business at no cost to the
                Employee.

            

    

    

    
      	 	
              (11)

            	
              In
                the event of a Change of Control of Employer (as such term is defined
                in
                Section 4.3 hereof). Employee shall be entitled to receive the balance
                of
                the unpaid base compensation (“Unpaid Base Compensation”) which would
                otherwise be payable to Employee during the remainder of the term
                of this
                Agreement pursuant to Section 4.1(1) hereof within thirty (30) days
                of the
                date of such Change of Control and any and all stock options and/or
                restricted stock grants granted to Employee pursuant to Section 4.1(5)
                and
                4.1(6) hereof and otherwise shall vest immediately upon the date
                of such
                Change of Control; PROVIDED, HOWEVER, in the event of such Change
                of
                Control of Employer, the term of this Agreement shall automatically
                be
                extended to a period of five (5) years from the date of such Change
                of
                Control of Employer for purposes of this Section
                4.1(11).

            

    

     

     

    
      
        
        

      

      
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              (12)

            	
              MOVING
                EXPENSES. In the event that during the term of this agreement, Employee
                is
                transferred by Employer to a new principal place of work at least
                100
                miles further from his residence at the time of transfer (“current
                residence’) than his principal place of work at the time of the transfer,
                Employer shall reimburse Employee for all reasonable expenses incurred
                for:

            

    

    
      	 	
              (i)

            	
              The
                expenses of one round-trip, including meals and lodging, by Employee
                and
                Employee’s spouse and minor children, from the current residence to the
                general location of the new principal place of work for the principal
                purpose of searching for a new
                residence.

            

    

    
      	 	
              (ii)

            	
              The
                expenses of a one-way trip, including meals and lodging, by Employee
                and
                Employee’s spouse and minor children, from the current residence to the
                new place of residence.

            

    

    
      	 	
              (iii)

            	
              Moving
                the household goods and personal effects of Employee and Employee’s spouse
                and minor children from the current residence to the new place of
                residence.

            

    

    
      	 	
              (iv)

            	
              Meals
                and lodging for Employee and Employee’s spouse and minor children for a
                period of consecutive days not in excess of 60 days while occupying
                temporary quarters in the general location of the new principal place
                of
                work.

            

    

    
      	 	
              (v)

            	
              “Qualified
                residence sale, purchase, or lease expenses” as defined in Internal
                Revenue Code Section 217(b)(2). This includes, subject to any future
                amendment of Internal Revenue Code Section 217(b)(2), reasonable
                expenses
                incident to: the sale or exchange of Employee’s former residence (but not
                expenses for work performed on it to assist in its sale); the purchase
                of
                a new residence, including the cost of a loan but not including any
                prepayment of interest; the settlement of an unexpired lease held
                by
                Employee on his former residence; and the acquisition of a lease
                on the
                new residence of Employee, but not including any prepayment of rent.
                

            

    

    

    
      	 	
              4.2.

            	
              PAYMENT
                OF COMPENSATION. Employer shall pay the compensation provided for
                in
                Section 4.1 hereof as
                follows:

            

    

    

    
      	 	
              (1)

            	
              Employer
                shall pay the base compensation in cash in accordance with Employer’s
                payroll practices for all its employees, but in no event less frequently
                than monthly.

            

    

    

    
      	 	
              (2)

            	
              Incentive
                Compensation earned hereunder shall be determined by the Compensation
                Committee as soon as reasonably practicable after the end of each
                fiscal
                year of Employer and shall be paid promptly thereafter to the
                Employee.

            

    

    

    
      	 	
              (3)

            	
              Employer
                shall pay in cash the reimbursement of such discretionary expenses
                provided in Section 4.1(4), 4.1(8) and 4.1(10)
                hereof.

            

    

    

    
      	 	
              (4)

            	
              If
                the Employer in its judgment concludes that Employer’s financial position
                is such that it cannot pay compensation due Employee currently, it
                may
                give a written notice (a “Deferral Notice”) to Employee to the effect that
                all or a designated percentage of his compensation for such fiscal
                year
                shall be deferred. Deferred Base Compensation and deferred Incentive
                Compensation shall bear interest on the unpaid balance thereof from
                the
                last day of the fiscal year in respect of which it was earned at
                the Prime
                Rate as published in The
                Wall Street Journal
                on the date of the deferral. Such interest shall be computed annually
                in
                arrears, and shall be added as of the last day of each fiscal year
                of
                Employer. 

            

    

     

     

    
      
        
        

      

      
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              4.3.

            	
              A
                CHANGE OF CONTROL OF EMPLOYER. For all purposes of this Agreement,
                a
                “Change of Control” shall mean: (i) the acquisition by any person, entity
                or groups of persons, within the meaning of Section 13(d) or 14(d),
                or any
                comparable successor provisions of the Securities Exchange Act of
                1934
                (the “Act”) of beneficial ownership (within the meaning of Rule 13d-3
                promulgated under the Act) of at least twenty-five percent (25%)
                of either
                the outstanding shares of common stock or the combined voting power
                of
                Employer’s then outstanding voting securities entitled to vote generally,
                or (ii) the approval by stockholders of Employer of a reorganization,
                merger or consolidation, in which persons who were stockholders of
                Employer immediately prior to such reorganization, merger or consolidation
                do not, immediately thereafter, own or control more than fifty percent
                (50%) of the combined voting power entitled to vote generally in
                the
                election of directors of the surviving corporation of such reorganization
                merger or consolidation, or a liquidation or dissolution of Employer
                or of
                the sale of all or substantially all of Employer’s assets, or (iii) in the
                event Employer terminates Employee pursuant to this Agreement for
                any
                reason other than the occurrence of any of the events set forth in
                Sections 5.2(2), (3), (4), (6), (7) or (9) hereof, or (iv) in the
                event
                any person shall be elected by the stockholders of Employer to the
                Board
                of Directors of Employer who shall not have been nominated for election
                by
                a majority of the Board of Directors of Employer or any duly appointed
                committee thereof.

            

    

    

    
      	
              5.

            	
              TERMINATION
                OF AGREEMENT.

            

    

    

    
      	 	
              5.1.

            	
              BY
                NOTICE. This agreement, and the employment of Employee hereunder,
                may be
                terminated by Employee or Employer upon ninety (90) days written
                notice of
                termination; PROVIDED, HOWEVER, in the event Employer terminates
                this
                Agreement for any reason other than the occurrence of any of the
                events
                set forth in Sections 5.2(2), (3), (4), (6), (7) or (9), and subject
                to
                Section 4.1(11) hereof, Employee shall be entitled to receive the
                balance
                of the unpaid base salary which would otherwise be payable to Employee
                during the remainder of the term of this Agreement pursuant to Sections
                4.1(1), 4.1(8) and 4.1(10) hereof within thirty (30) days after such
                ninety (90) day notice
                period.

            

    

    

    
      	 	
              5.2.

            	
              OTHER
                TERMINATION. This Agreement, and the employment of Employee hereunder,
                shall terminate immediately upon the occurrence of any one of the
                following events:

            

    

    

    
      	 	
              (1)

            	
              The
                death or mental or physical incapacity of
                Employee.

            

    

    

    
      	 	
              (2)

            	
              The
                loss by Employee of legal capacity (other than as described in Section
                5.2(1) hereof).

            

    

     

     

    
      
        
        

      

      
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              (3)

            	
              The
                failure by Employee to devote substantially all of his available
                professional time to the business of Employer or the willful and
                habitual
                neglect of duties.

            

    

    

    
      	 	
              (4)

            	
              The
                willful engaging by Employee in an act of dishonesty constituting
                a felony
                under the laws of the state in which Employer’s principal place of
                business is located, resulting or intending to result in gain or
                personal
                enrichment at the expense of Employer or to the detriment of Employer’s
                business and to which Employee is not legally
                entitled.

            

    

    

    
      	 	
              (5)

            	
              The
                continued incapacity in excess of one hundred eighty (180) days on
                the
                part of Employee to perform his duties, unless waived by
                Employer.

            

    

    

    
      	 	
              (6)

            	
              The
                mutual written agreement of Employee and
                Employer.

            

    

    

    
      	 	
              (7)

            	
              The
                expiration of the term of this
                Agreement.

            

    

    

    
      	 	
              (8)

            	
              The
                involuntary termination of Employee as a director
                Employer.

            

    

    

    
      	 	
              (9)

            	
              Employee’s
                breach of this Agreement.

            

    

    

    
      	 	
              5.3.

            	
              EFFECT
                OF TERMINATION BY REASON OF DEATH OR INCAPACITY. In the event of
                the
                termination of Employee’s employment pursuant to Sections 5.2(1) or (5) of
                this Agreement prior to the completion of the term of employment
                specified
                herein, and subject to Section 4.1 (11) hereof,Employee shall be
                entitled
                to receive the balance of the unpaid compensation (including any
                Incentive
                Compensation pursuant to Section 4.1(2) hereof) which is not covered
                by
                disability or other insurance and which would otherwise be payable
                to
                Employee during the term of this Agreement pursuant to Section 4.1(1)
                hereof within 60 days after such termination.
                

            

    

    

    
      	 	
              5.4.

            	
              REMEDIES.
                No termination of the employment of Employee pursuant to the terms
                of this
                Agreement shall prejudice any other remedy to which any party to
                this
                Agreement may be entitled either at law, in equity, or under this
                Agreement.

            

    

    

    
      	
              6.

            	
              PROPERTY
                RIGHTS AND OBLIGATIONS OF
                EMPLOYEE.

            

    

    

    
      	 	
              6.1.

            	
              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 Employer and has not previously been publicly
                released by duly authorized representatives of Employer or Parent
                or
                otherwise lawfully entered the public
                domain.

            

    

    

    
      	 	
              6.2.

            	
              PRESERVATION
                OF TRADE SECRETS. Employee will preserve as confidential all trade
                secrets
                pertaining to Employer’s business that have been or may be obtained or
                learned by him by reason of his employment or otherwise. Employee
                will
                not, without the written consent of Employer, 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
                Employer.

            

    

     

     

    
      
        
        

      

      
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              6.3.

            	
              TRADE
                SECRETS OF OTHERS. Employee agrees that he will not disclose to Employer
                or induce Employer to use any trade secret belonging to any third
                party.

            

    

    

    
      	 	
              6.4.

            	
              PROPERTY
                OF EMPLOYER. Employee agrees 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
                with
                Employer are the property of Employer and shall not be used by him
                in any
                way adverse to Employer’s interests. Employee 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
                Employer. Employee agrees to deliver to the Board of Directors of
                Employer
                or its designee, upon demand, and in any event upon the termination
                of
                Employee’s employment, all of such documents and things which are in
                Employee’s possession or under his control.
                

            

    

    

    
      	 	
              6.5.

            	
              NONCOMPETITION
                BY EMPLOYEE. During the term of this Agreement, and for a period
                of one
                (1) year following the termination of this Agreement, Employer 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 Employer; (ii) divert, take away or attempt
                to divert
                or take away (and during the one year period, call on or solicit)
                any of
                Employer’s clients within the United States. For purposes of this
                Agreement, the term “Employer’s clients” shall mean clients who had a
                business relationship with Employer prior to Employee’s employment with
                Employer and those who develop a business relationship with Employer,
                during Employee’s employment with Employer; (iii) undertake planning for
                or organization of any business within the United States or in any
                other
                country in which Employer is engaged in business activity competitive
                with
                Employer’s business within the United States or in any other country in
                which Employer is engaged in business or combined or conspire with
                Employees or other representative of Employer’s business within the United
                States or in any other country in which Employer is engaged in business
                for the purpose of organizing any such competitive activity within
                the
                United States or in any other country in which Employer is engaged
                in
                business; or (iv) induce or influence (or seek to induce or influence)
                any
                person who is engaged, as an employee, agent, independent contractor
                or
                otherwise by Employer within the United States or in any other country
                in
                which Employer is engaged in business to terminate his or her employment
                or engagement.

            

    

    

    
      	 	
              6.6.

            	
              SURVIVAL
                PROVISIONS AND CERTAIN REMEDIES. Unless otherwise agreed to in writing
                between the parties hereto, the provisions of this Section 6 shall
                survive
                the termination of this Agreement. The covenants in this Section
                6 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 Employee breaches any of the provisions of
                this
                Section 6, Employee agrees that Employer may be entitled to injunctive
                relief in addition to any other remedy to which Employer may be
                entitled.

            

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    
      	
              7.

            	
              GENERAL
                PROVISIONS:

            

    

    

    
      	 	
              7.1.

            	
              NOTICES.
                Any notices or other communications required or permitted to be given
                hereunder shall be given sufficiently only if in writing and served
                personally or sent by certified mail, postage prepaid and return
                receipt
                requested, addressed as
                follows:

            

    

     

    
      
        	 If to
                Employer:	
                ThermoEnergy
                  Corporation

                1300
                  Tower Building

                323
                  Center Street

                Little
                  Rock, Arkansas 72201

                Attn:Chairman,
                  Compensation Committee

                Tel:
                  501.376.6477

                Fax:
                  501.375.5249

              
	 	 
	 If to Employee:
                	
                Dennis
                  C. Cossey

                48
                  Robinwood Drive

                Little
                  Rock, Arkansas 72227

                Tel:
                  501.219.2220

              

      

    

    
      

      
        	 	
                 

              	
                However,
                  either party may change his/its address for purposes of this Agreement
                  by
                  giving written notice of such change to the other party in accordance
                  with
                  this Paragraph 7.1. Notices delivered personally shall be deemed
                  effective
                  as of the day delivered and notices delivered by mail shall be
                  deemed
                  effective as of three days after mailing (excluding weekends and
                  federal
                  holidays).

              

      

       

    

    
      	 	
              7.2.

            	
              CHOICE
                OF LAW AND FORUM. Except as expressly provided otherwise in this
                Agreement, this Agreement shall be governed by and construed in accordance
                with the laws of the State of Arkansas. The parties agree that any
                dispute
                arising under this Agreement, whether during the term of this Agreement
                or
                at any subsequent time, shall be resolved exclusively in the courts
                of the
                State of Arkansas and the parties hereby submit to the jurisdiction
                of
                such courts for all purposes provided herein and appoint the Secretary
                of
                State of the State of Arkansas as agent for service of process for
                all
                purposes provided herein.

            

    

    

    
      	 	
              7.3.

            	
              ENTIRE
                AGREEMENT; MODIFICATION AND WAIVER. This Agreement supersedes any
                and all
                other agreements, whether oral or in writing, between the parties
                hereto
                with respect to the employment of Employee by Employer and contains
                all
                covenants and agreements between the parties relating to such employment
                in any manner whatsoever. Each party to this Agreement acknowledges
                that
                no representations, inducements, promises, or agreements, oral or
                written,
                have been made by any party, or anyone acting on behalf of any party,
                which are not embodied herein, and that no other agreement, statement,
                or
                promise not contained in this Agreement shall be valid or binding.
                Any
                modification of this Agreement shall be effective only if it is in
                writing
                signed by the party to be charged. No waiver of any of the provisions
                of
                this Agreement shall be deemed, or shall constitute, a waiver of
                any other
                provision, whether or not similar, nor shall any waiver constitute
                a
                continuing waiver. No waiver shall be binding unless executed in
                writing
                by the party making the
                waiver.

            

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              7.4.

            	
              ASSIGNMENT.
                Because of the personal nature of the services to be rendered hereunder,
                this Agreement may not be assigned in whole or in part by Employee
                without
                the prior written consent of Employer. However, subject to the foregoing
                limitation, this Agreement shall be binding on, and shall inure to
                the
                benefit of, the parties hereto and their respective heirs, legatees,
                executors, administrators, legal representative, successors and
                assigns.

            

    

    

    
      	 	
              7.5.

            	
              SEVERABILITY.
                If for any reason whatsoever, any one or more of the provisions of
                this
                Agreement shall be held or deemed to be inoperative, unenforceable,
                or
                invalid as applied to any particular case or in all cases, such
                circumstances shall not have the effect of rendering any such provision
                inoperative, unenforceable, or invalid in any other case or of rendering
                any of the other provisions of this Agreement inoperative, unenforceable
                or invalid.

            

    

    

    
      	 	
              7.6.

            	
              CORPORATE
                AUTHORITY. Employer represents and warrants as of the date hereof
                that
                Employer’s execution and delivery of this Agreement to Employee and the
                carrying out of the provisions hereof have been duly authorized by
                Employer’s Board of Directors and authorized by Employer’s shareholders
                and further represents and warrants that neither the execution and
                delivery of this Agreement, nor the compliance with the terms and
                provisions thereof by Employer will result in the breach of any state
                regulation, administrative or court order, nor will such compliance
                conflict with, or result in the breach of, any of the terms or conditions
                of Employer’s Articles of Incorporation or Bylaws, as amended, or any
                agreement or other instrument to which Employer is a party, or by
                which
                Employer is or may be bound, or constitute an event of default thereunder,
                or with the lapse of time or the giving of notice or both constitute
                an
                event of default
                thereunder.

            

    

    

    
      	 	
              7.7.

            	
              ATTORNEY’S
                FEES. In any action at law or in equity to enforce or construe any
                provisions or rights under this Agreement, the unsuccessful party
                or
                parties to such litigation, as determined by the courts pursuant
                to a
                final judgment or decree, shall pay the successful party or parties
                all
                costs, expenses, and reasonable attorneys’ fees incurred by such
                successful party or parties (including, without limitation, such
                costs,
                expenses, and fees on any appeals), and if such successful party
                or
                parties shall recover judgment in any such action or proceedings,
                such
                costs, expenses, and attorneys’ fees shall be included as part of such
                judgment.

            

    

    

    
      	 	
              7.8.

            	
              COUNTERPARTS.
                This Agreement may be executed simultaneously in one or more counterparts,
                each of which shall be deemed an original, but all of which together
                shall
                constitute one and the same
                instrument.

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              7.9.

            	
              HEADING
                AND CAPTIONS. Heading and captions are included for purposes of
                convenience only and are not a part
                hereof.

            

    

    

    
      	 	
              7.10.

            	
              CONSULTATION
                WITH COUNSEL. Employee acknowledges that he has had the opportunity
                to
                consult with counsel independent of Employer or Employer’s counsel,
                regarding the entering into of this Agreement and has done so to
                the
                extent he sees fit.

            

    

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement effective
      as of
      the day and year first written above at Little Rock,
      Arkansas.

    

    
      “Employer”

      ThermoEnergy
        Corporation

      
        
           

          
            	
                    By: /s/ Andrew
                      T. Melton 

                  	9/14/2005	 
	
                     Andrew
                      T. Melton

                  	   Date	 

          

        

         

      

       

      “Employee”

      
         

        
          	
                  By: /s/
                    Dennis C. Cossey

                	9/14/2005	 
	
                   Dennis
                    C. Cossey,
                    Chairman    

                	   Date	 

        

        
 

      

    

    
      
        
        

      

      
        11Exhibit
      10.14

    EMPLOYMENT
      AGREEMENT

    

    

    KNOW
      ALL MEN BY THESE PRESENTS, this contract for services is made this 1st Day
      of
      May, 2005 by and between the following parties:

    

    ThermoEnergy
      Corporation

    1300
      Tower Building

    323
      Center Street

    Little
      Rock, Arkansas 72201

    

    Herein
      after referenced as the “Employer” and,

    

    Andrew
      T. Melton

    7750
      N. MacArthur Blvd., Suite 120-255

    Irving,
      Texas 75063

    

    Herein
      after referenced as the “Employee”

    

    WHEREAS,
      Employer is desirous of hiring Employee as one of its key employees;

    

    WHEREAS,
      Employee is willing to accept employment as an Employee of Employer,
      and

    

    WHEREAS,
      the parties hereto desire to delineate the responsibilities of Employee and
      the
      expectations of Employer;

    

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

    

    
      	
              1.

            	
              EMPLOYMENT.
                Employer hereby employs Employee, and Employee hereby accepts employment
                with Employer, upon the terms and conditions set forth in this
                Agreement.

            

    

    

    
      	
              2.

            	
              TERM
                OF EMPLOYMENT. The employment of Employee pursuant to the terms of
                this
                Agreement shall commence as of May 1, 2005 and shall continue for
                a period
                of five (5) years, unless sooner terminated pursuant to the provisions
                hereof; PROVIDED, HOWEVER, that this Agreement shall, unless earlier
                terminated, as of the fifteenth of each month of the term of this
                Agreement, be automatically extended for an additional
                month.

            

    

    

    
      	
              3.

            	
              DUTIES.

            

    

    

    
      	 	
              3.1.

            	
              BASIC
                DUTIES. Subject to the direction and control of the Chief Executive
                Officer and the Board of Directors of Employer, Employee shall serve
                as
                Executive Vice President and Chief Financial Officer of Employer
                and shall
                fulfill all duties and obligations of such office including but not
                limited to the following:

            

    

    

    
      	 	
              (i)

            	
              Assist
                the CEO in administering the corporate
                affairs,

            

    

    
      	 	
              (ii)

            	
              Execute
                corporate policy,

            

    

    
      	 	
              (iii)

            	
              Act
                as Chief Accounting Officer of the
                Company,

            

    

    
      	 	
              (iv)

            	
              Manage
                and invest excess funds,

            

    

    
      	 	
              (v)

            	
              Coordinate
                external Accounting Activities,

            

    

    
      	 	
              (vi)

            	
              Oversee
                all financial operations, including budgets,
                

            

    

    
      	 	
              (vii)

            	
              Coordinate
                and cultivate market makers, and

            

    

    
      	 	
              (viii)

            	
              Assist
                with investor relations.

            

    

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              3.2.

            	
              OTHER
                DUTIES OF EMPLOYEE. In addition to the foregoing, Employee shall
                perform
                such other or different duties related to those set forth in Paragraph
                3.1
                as may be assigned to him from time to time by Employer, PROVIDED,
                HOWEVER, that any such additional assignment shall be at a level
                of
                responsibility commensurate with that set forth in Paragraph 3.1
                and
                PROVIDED, FURTHER, that Employee may serve, or continue to serve,
                on the
                boards of directors of and hold any other offices or positions in,
                companies or entities that in the judgment of Employer will not present
                any conflict of interest with Employer or any of its operations or
                adversely affect the performance of Employee’s duties pursuant to this
                Agreement.

            

    

    

    
      	 	
              3.3.

            	
              TIME
                DEVOTED TO EMPLOYMENT. Employee shall devote his full time to the
                business
                of Employer during the term of this Agreement to fulfill his obligations
                hereunder. 

            

    

    

    
      	 	
              3.4.

            	
              PLACE
                OF PERFORMANCE OF DUTIES. The services of Employee shall be performed
                at
                Employer’s place of business, Little Rock, Arkansas, and at such other
                locations as shall be designated from time to time by
                Employer.

            

    

    

    
      	 	
              3.5.

            	
              SERVICES
                AS OFFICER OR DIRECTOR. During the employment period, Employee shall,
                if
                elected or appointed, serve as a director of Employer and as an officer
                and/or director of all current and future subsidiaries or affiliates
                of
                Employer without any additional compensation for such
                services.

            

    

    

    
      	
              4.

            	
              COMPENSATION
                AND METHOD OF PAYMENT.

            

    

    

    
      	 	
              4.1.

            	
              TOTAL
                COMPENSATION. As compensation under this Agreement, Employer shall
                pay and
                Employee shall accept the
                following:

            

    

    

    
      	 	
              (1)

            	
              BASE
                COMPENSATION. For each year of this Agreement, measured from the
                effective
                date hereof, base compensation of $200,000.00 (Two Hundred Thousand
                United
                States Dollars), and further increased as may be approved from time
                to
                time by the Compensation Committee of the Employer, but by a minimum
                of
                15% annually. Upon the base compensation becoming $500,000.00, the
                minimum
                annual increase will change to the Consumer Price Index for All Urban
                Consumers (“the CPI-U”) for the most recent quarter available at the time
                of the increase. All such increases shall be effective as of the
                beginning
                of such calendar year in which the increase becomes effective pursuant
                to
                the terms hereof or as approved by the Employer, as the case may
                be. Such
                adjustments may be based on the performance of Employer, the value
                of
                Employee to Employer or any other factors considered relevant by
                Employer.

            

    

    

    
      	 	
              (2)

            	
              INCENTIVE
                COMPENSATION. For each year the Employer shall pay to Employee as
                incentive compensation (“Incentive Compensation”), in respect of each
                fiscal year or portion thereof included within the Employment Period,
                an
                amount (up to one hundred percent (100%) of his Base Compensation)
                determined in accordance with a formula to be established annually
                in good
                faith by the Compensation Committee of the Board of Directors of
                Employer
                thereof authorized to act on compensation matters and, in the case
                of each
                fiscal year commencing after December 31, 2005, communicated to Executive
                prior to the beginning of such fiscal year, such formula to give
                a fifty
                percent (50%) weight to Employee’s performance (measured by such method or
                combination of methods as the Compensation Committee shall deem fair
                and
                equitable) during each fiscal year, and a fifty percent (50%) weight
                to
                Employee’s performance (determined by the Board of Directors or the
                Compensation Committee on the basis of personal goals established
                for
                Employee) during each fiscal year. The formula shall be established
                so
                that Employee will have a reasonable opportunity, through diligent
                performance of his duties, to earn the maximum Incentive Compensation,
                with partial Incentive Compensation being earned for partial achievement
                of the performance
                standards.

            

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (3)

            	
              PERIODIC
                PERFORMANCE COMPENSATION. In addition to Incentive Compensation,
                special
                compensation can be determined periodically by the Compensation Committee
                to be paid for unusual activities such as, but not inclusive of the
                following: 1) complete merger or acquisition of a new business or
                technology, 2) execution of new contracts in excess of twenty percent
                (20%) of existing revenues of Employer, 3) a substantial increase
                in stock
                price, 4) completion of any financing arrangement necessary to accomplish
                Employer’s goals, and 5) other unusual events that are determined to be
                significant by the Compensation Committee.
                

            

    

    

    
      	 	
              (4)

            	
              EXPENSE
                REIMBURSEMENT. Reimbursement of such discretionary expenses, including
                travel expenses, as are reasonable and necessary, in the judgment
                of the
                Employer, for Employee’s performance of his responsibilities under this
                Agreement.

            

    

    

    
      	 	
              (5)

            	
              STOCK
                OPTIONS. Nonqualified options issued at the discretion of the
                Employer.

            

    

    

    
      	 	
              (6)

            	
              RESTRICTED
                STOCK GRANTS. Restricted stock issued at the discretion of the
                Employer.

            

    

    

    
      	 	
              (7)

            	
              EMPLOYEE
                FRINGE BENEFITS. Participation in Employer’s employee fringe benefit
                programs in effect from time to time for employees at comparable
                levels of
                responsibility. Participation will be in accordance with any applicable
                policies adopted by Employer. Employee shall be entitled to vacations,
                absences for illness, and to similar benefits of employment, and
                shall be
                subject to such policies and procedures as may be adopted by Employer.
                Without limiting the generality of the foregoing, it is initially
                anticipated that such benefits of employment shall include four (4)
                weeks
                vacation during each 12-month period of employment with Employer
                (which
                shall accrue monthly on a PRO RATA basis and which shall be carried
                forward for a period not to exceed three (3) years and otherwise
                in
                accordance with Employer’s policies); major medical and health insurance;
                life and disability insurance; and stock option plans for employees
                and
                members of the Board of Directors. Employer further agrees that in
                the
                event it offers disability insurance to its employees, Employer shall
                arrange for Employee to be covered by similar
                insurance.

            

    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (8)

            	
              In
                addition, Employee shall be entitled to: (a) a car allowance of $1,000.00
                per month, and (b) if for any reason Employee shall not be covered
                by a
                health insurance policy of Employer, a medical insurance coverage
                expense
                allowance of $1,000.00 per
                month.

            

    

    

    
      	 	
              (9)

            	
              LIFE
                INSURANCE. The Employer shall pay all premiums for one or more life
                insurance policies upon the life of the Employee in an aggregate
                face
                amount equal to two and one-half times (2&1/2) the Base Compensation
                of Employee. The death benefit or benefits shall be payable to such
                beneficiary or beneficiaries as Employee shall designate in writing
                to
                Employer. Employee shall aid Company in procuring such insurance,
                as well
                as in obtaining any other life, health, accident, disability, or
                other
                insurance which Employer should at any time apply for, it its own
                name ant
                its own expense, to ensure Employer’s obligations hereunder, by submitting
                to the usual and customary medical examinations and by completing,
                executing, and delivering such applications and other instruments
                in
                writing as may be reasonably required by any insurance company or
                companies.

            

    

    

    
      	 	
              (10)

            	
              OTHER
                BENEFITS. Employer shall pay or shall reimburse Employee for his
                reasonable expenses in connection with (i) obtaining from time-to-time
                of
                financial planning advice; (ii) preparation of personal Federal and
                State
                income tax returns; and (iii) cost of annual medical physical
                examinations. While employed, the Employer shall also pay the initiation
                fee and the annual and/or monthly dues and/or assessments for the
                Employee’s membership in social and/or business clubs, business
                organizations, and social and/or civic groups of Employee’s choosing. The
                employer will also provide parking for the Employee at the place
                of
                business at no cost to the
                Employee.

            

    

    

    
      	 	
              (11)

            	
              In
                the event of a Change of Control of Employer (as such term is defined
                in
                Section 4.3 hereof). Employee shall be entitled to receive the balance
                of
                the unpaid base compensation (“Unpaid Base Compensation”) which would
                otherwise be payable to Employee during the remainder of the term
                of this
                Agreement pursuant to Section 4.1(1) hereof within thirty (30) days
                of the
                date of such Change of Control and any and all stock options and/or
                restricted stock grants granted to Employee pursuant to Section 4.1(5)
                and
                4.1(6) hereof and otherwise shall vest immediately upon the date
                of such
                Change of Control; PROVIDED, HOWEVER, in the event of such Change
                of
                Control of Employer, the term of this Agreement shall automatically
                be
                extended to a period of five (5) years from the date of such Change
                of
                Control of Employer for purposes of this Section
                4.1(11).

            

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (12)

            	
              MOVING
                EXPENSES. In the event that during the term of this agreement, Employee
                is
                transferred by Employer to a new principal place of work at least
                100
                miles further from his residence at the time of transfer (“current
                residence’) than his principal place of work at the time of the transfer,
                Employer shall reimburse Employee for all reasonable expenses incurred
                for:

            

    

    
      	 	
              (i)

            	
              The
                expenses of two round-trips, including meals and lodging, by Employee
                and
                Employee’s spouse, from the current residence to the general location of
                the new principal place of work for the principal purpose of searching
                for
                a new residence.

            

    

    
      	 	
              (ii)

            	
              The
                expenses of a one-way trip, including meals and lodging, by Employee
                and
                Employee’s spouse, from the current residence to the new place
                ofresidence.

            

    

    
      	 	
              (iii)

            	
              Moving
                the household goods and personal effects of Employee and Employee’s spouse
                from the current residence to the new place of
                residence.

            

    

    
      	 	
              (iv)

            	
              Meals
                and lodging for Employee and Employee’s spouse for a period of consecutive
                days not in excess of 60 days while occupying temporary quarters
                in the
                general location of the new principal place of
                work.

            

    

    
      	 	
              (v)

            	
              “Qualified
                residence sale, purchase, or lease expenses” as defined in Internal
                Revenue Code, subject to any future amendments. Reasonable expenses
                incident to: the sale or exchange of Employee’s former residence (but not
                expenses for work performed on it to assist in its sale); the purchase
                of
                a new residence, including the cost of a loan but not including any
                prepayment of interest; the settlement of an unexpired lease held
                by
                Employee on his former residence; and the acquisition of a lease
                on the
                new residence of Employee, but not including any prepayment of rent.
                

            

    

    

    
      	 	
              4.2.

            	
              PAYMENT
                OF COMPENSATION. Employer shall pay the compensation provided for
                in
                Section 4.1 hereof as
                follows:

            

    

    

    
      	 	
              (1)

            	
              Employer
                shall pay the base compensation in cash in accordance with Employer’s
                payroll practices for all its employees, but in no event less frequently
                than monthly.

            

    

    

    
      	 	
              (2)

            	
              Incentive
                Compensation earned hereunder shall be determined by the Compensation
                Committee as soon as reasonably practicable after the end of each
                fiscal
                year of Employer and shall be paid promptly thereafter to the
                Employee.

            

    

    

    
      	 	
              (3)

            	
              Employer
                shall pay in cash the reimbursement of such discretionary expenses
                provided in Section 4.1(4), 4.1(8) and 4.1(10)
                hereof.

            

    

    

    
      	 	
              (4)

            	
              If
                the Employer in its judgment concludes that Employer’s financial position
                is such that it cannot pay compensation due Employee currently, it
                may
                give a written notice (a “Deferral Notice”) to Employee to the effect that
                all or a designated percentage of his compensation for such fiscal
                year
                shall be deferred. Deferred Base Compensation and deferred Incentive
                Compensation shall bear interest on the unpaid balance thereof from
                the
                last day of the fiscal year in respect of which it was earned at
                the Prime
                Rate as published in The
                Wall Street Journal
                on the date of the deferral. Such interest shall be computed annually
                in
                arrears, and shall be added as of the last day of each fiscal year
                of
                Employer. 

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              4.3.

            	
              A
                CHANGE OF CONTROL OF EMPLOYER. For all purposes of this Agreement,
                a
                “Change of Control” shall mean: (i) the acquisition by any person, entity
                or groups of persons, within the meaning of Section 13(d) or 14(d),
                or any
                comparable successor provisions of the Securities Exchange Act of
                1934
                (the “Act”) of beneficial ownership (within the meaning of Rule 13d-3
                promulgated under the Act) of at least twenty-five percent (25%)
                of either
                the outstanding shares of common stock or the combined voting power
                of
                Employer’s then outstanding voting securities entitled to vote generally,
                or (ii) the approval by stockholders of Employer of a reorganization,
                merger or consolidation, in which persons who were stockholders of
                Employer immediately prior to such reorganization, merger or consolidation
                do not, immediately thereafter, own or control more than fifty percent
                (50%) of the combined voting power entitled to vote generally in
                the
                election of directors of the surviving corporation of such reorganization
                merger or consolidation, or a liquidation or dissolution of Employer
                or of
                the sale of all or substantially all of Employer’s assets, or (iii) in the
                event Employer terminates Employee pursuant to this Agreement for
                any
                reason other than the occurrence of any of the events set forth in
                Sections 5.2(2), (3), (4), (6), (7) or (9) hereof, or (iv) in the
                event
                any person shall be elected by the stockholders of Employer to the
                Board
                of Directors of Employer who shall not have been nominated for election
                by
                a majority of the Board of Directors of Employer or any duly appointed
                committee thereof.

            

    

    

    
      	
              5.

            	
              TERMINATION
                OF AGREEMENT.

            

    

    

    
      	 	
              5.1.

            	
              BY
                NOTICE. This agreement, and the employment of Employee hereunder,
                may be
                terminated by Employee or Employer upon ninety (90) days written
                notice of
                termination; PROVIDED, HOWEVER, in the event Employer terminates
                this
                Agreement for any reason other than the occurrence of any of the
                events
                set forth in Sections 5.2(2), (3), (4), (6), (7) or (9), and subject
                to
                Section 4.1(11) hereof, Employee shall be entitled to receive the
                balance
                of the unpaid base salary which would otherwise be payable to Employee
                during the remainder of the term of this Agreement pursuant to Sections
                4.1(1), 4.1(8) and 4.1(10) hereof within thirty (30) days after such
                ninety (90) day notice
                period.

            

    

    

    
      	 	
              5.2.

            	
              OTHER
                TERMINATION. This Agreement and the employment of Employee hereunder,
                shall terminate immediately upon the occurrence of any one of the
                following events:

            

    

    

    
      	 	
              (1)

            	
              The
                death or mental or physical incapacity of
                Employee.

            

    

    

    
      	 	
              (2)

            	
              The
                loss by Employee of legal capacity (other than as described in Section
                5.2(1) hereof).

            

    

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (3)

            	
              The
                failure by Employee to devote substantially all of his available
                professional time to the business of Employer or the willful and
                habitual
                neglect of duties.

            

    

    

    
      	 	
              (4)

            	
              The
                willful engaging by Employee in an act of dishonesty constituting
                a felony
                under the laws of the state in which Employer’s principal place of
                business is located, resulting or intending to result in gain or
                personal
                enrichment at the expense of Employer or to the detriment of Employer’s
                business and to which Employee is not legally
                entitled.

            

    

    

    
      	 	
              (5)

            	
              The
                continued incapacity in excess of one hundred eighty (180) days on
                the
                part of Employee to perform his duties, unless waived by
                Employer.

            

    

    

    
      	 	
              (6)

            	
              The
                mutual written agreement of Employee and
                Employer.

            

    

    

    
      	 	
              (7)

            	
              The
                expiration of the term of this
                Agreement.

            

    

    

    
      	 	
              (8)

            	
              The
                involuntary termination of Employee as a director of
                Employer.

            

    

    

    
      	 	
              (9)

            	
              Employee’s
                breach of this Agreement.

            

    

    

    
      	 	
              5.3.

            	
              EFFECT
                OF TERMINATION BY REASON OF DEATH OR INCAPACITY. In the event of
                the
                termination of Employee’s employment pursuant to Sections 5.2(1) or (5) of
                this Agreement prior to the completion of the term of employment
                specified
                herein, and subject to Section 4.1 (11) hereof,Employee shall be
                entitled
                to receive the balance of the unpaid compensation (including any
                Incentive
                Compensation pursuant to Section 4.1(2) hereof) which is not covered
                by
                disability or other insurance and which would otherwise be payable
                to
                Employee during the term of this Agreement pursuant to Section 4.1(1)
                hereof within 60 days after such termination.
                

            

    

    

    
      	 	
              5.4.

            	
              REMEDIES.
                No termination of the employment of Employee pursuant to the terms
                of this
                Agreement shall prejudice any other remedy to which any party to
                this
                Agreement may be entitled either at law, in equity, or under this
                Agreement.

            

    

    

    
      	
              6.

            	
              PROPERTY
                RIGHTS AND OBLIGATIONS OF
                EMPLOYEE.

            

    

    

    
      	 	
              6.1.

            	
              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 Employer and has not previously been publicly
                released by duly authorized representatives of Employer or Parent
                or
                otherwise lawfully entered the public
                domain.

            

    

    

    
      	 	
              6.2.

            	
              PRESERVATION
                OF TRADE SECRETS. Employee will preserve as confidential all trade
                secrets
                pertaining to Employer’s business that have been or may be obtained or
                learned by him by reason of his employment or otherwise. Employee
                will
                not, without the written consent of Employer, 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
                Employer.

            

    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              6.3.

            	
              TRADE
                SECRETS OF OTHERS. Employee agrees that he will not disclose to Employer
                or induce Employer to use any trade secret belonging to any third
                party.

            

    

    

    
      	 	
              6.4.

            	
              PROPERTY
                OF EMPLOYER. Employee agrees 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
                with
                Employer are the property of Employer and shall not be used by him
                in any
                way adverse to Employer’s interests. Employee 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
                Employer. Employee agrees to deliver to the Board of Directors of
                Employer
                or its designee, upon demand, and in any event upon the termination
                of
                Employee’s employment, all of such documents and things which are in
                Employee’s possession or under his control.
                

            

    

    

    
      	 	
              6.5.

            	
              NONCOMPETITION
                BY EMPLOYEE. During the term of this Agreement, and for a period
                of one
                (1) year following the termination of this Agreement, Employer 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 Employer; (ii) divert, take away or attempt
                to divert
                or take away (and during the one year period, call on or solicit)
                any of
                Employer’s clients within the United States. For purposes of this
                Agreement, the term “Employer’s clients” shall mean clients who had a
                business relationship with Employer prior to Employee’s employment with
                Employer and those who develop a business relationship with Employer,
                during Employee’s employment with Employer; (iii) undertake planning for
                or organization of any business within the United States or in any
                other
                country in which Employer is engaged in business activity competitive
                with
                Employer’s business within the United States or in any other country in
                which Employer is engaged in business or combined or conspire with
                Employees or other representative of Employer’s business within the United
                States or in any other country in which Employer is engaged in business
                for the purpose of organizing any such competitive activity within
                the
                United States or in any other country in which Employer is engaged
                in
                business; or (iv) induce or influence (or seek to induce or influence)
                any
                person who is engaged, as an employee, agent, independent contractor
                or
                otherwise by Employer within the United States or in any other country
                in
                which Employer is engaged in business to terminate his or her employment
                or engagement.

            

    

    

    
      	 	
              6.6.

            	
              SURVIVAL
                PROVISIONS AND CERTAIN REMEDIES. Unless otherwise agreed to in writing
                between the parties hereto, the provisions of this Section 6 shall
                survive
                the termination of this Agreement. The covenants in this Section
                6 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 Employee breaches any of the provisions of
                this
                Section 6, Employee agrees that Employer may be entitled to injunctive
                relief in addition to any other remedy to which Employer may be
                entitled.

            

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    
      	
              7.

            	
              GENERAL
                PROVISIONS:

            

    

    

    
      	 	
              7.1.

            	
              NOTICES.
                Any notices or other communications required or permitted to be given
                hereunder shall be given sufficiently only if in writing and served
                personally or sent by certified mail, postage prepaid and return
                receipt
                requested, addressed as
                follows:

            

    

     

    
      	If to
              Employer:	ThermoEnergy
              Corporation
              1300
                Tower Building

              323
                Center Street

              Little
                Rock, Arkansas 72201

              Attn:Chairman,
                Compensation Committee

              Tel:
                501.376.6477

              Fax:
                501.375.5249

            
	 	 
	 If to Employee:
              	
              Andrew
                T. Melton

              7750
                N. MacArthur Blvd., Suite 120-255

              Irving,
                Texas 75063

              Tel:
                972.754.0535

              Fax:
                208.485.4721

              

            

    

    
      

      
        	 	
                 

              	
                However,
                  either party may change his/its address for purposes of this Agreement
                  by
                  giving written notice of such change to the other party in accordance
                  with
                  this Paragraph 7.1. Notices delivered personally shall be deemed
                  effective
                  as of the day delivered and notices delivered by mail shall be
                  deemed
                  effective as of three days after mailing (excluding weekends and
                  federal
                  holidays).

              

      

       

    

    
      	 	
              7.2.

            	
              CHOICE
                OF LAW AND FORUM. Except as expressly provided otherwise in this
                Agreement, this Agreement shall be governed by and construed in accordance
                with the laws of the State of Arkansas. The parties agree that any
                dispute
                arising under this Agreement, whether during the term of this Agreement
                or
                at any subsequent time, shall be resolved exclusively in the courts
                of the
                State of Arkansas and the parties hereby submit to the jurisdiction
                of
                such courts for all purposes provided herein and appoint the Secretary
                of
                State of the State of Arkansas as agent for service of process for
                all
                purposes provided herein.

            

    

    

    
      	 	
              7.3.

            	
              ENTIRE
                AGREEMENT; MODIFICATION AND WAIVER. This Agreement supersedes any
                and all
                other agreements, whether oral or in writing, between the parties
                hereto
                with respect to the employment of Employee by Employer and contains
                all
                covenants and agreements between the parties relating to such employment
                in any manner whatsoever. Each party to this Agreement acknowledges
                that
                no representations, inducements, promises, or agreements, oral or
                written,
                have been made by any party, or anyone acting on behalf of any party,
                which are not embodied herein, and that no other agreement, statement,
                or
                promise not contained in this Agreement shall be valid or binding.
                Any
                modification of this Agreement shall be effective only if it is in
                writing
                signed by the party to be charged. No waiver of any of the provisions
                of
                this Agreement shall be deemed, or shall constitute, a waiver of
                any other
                provision, whether or not similar, nor shall any waiver constitute
                a
                continuing waiver. No waiver shall be binding unless executed in
                writing
                by the party making the
                waiver.

            

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              7.4.

            	
              ASSIGNMENT.
                Because of the personal nature of the services to be rendered hereunder,
                this Agreement may not be assigned in whole or in part by Employee
                without
                the prior written consent of Employer. However, subject to the foregoing
                limitation, this Agreement shall be binding on, and shall inure to
                the
                benefit of, the parties hereto and their respective heirs, legatees,
                executors, administrators, legal representative, successors and
                assigns.

            

    

    

    
      	 	
              7.5.

            	
              SEVERABILITY.
                If for any reason whatsoever, any one or more of the provisions of
                this
                Agreement shall be held or deemed to be inoperative, unenforceable,
                or
                invalid as applied to any particular case or in all cases, such
                circumstances shall not have the effect of rendering any such provision
                inoperative, unenforceable, or invalid in any other case or of rendering
                any of the other provisions of this Agreement inoperative, unenforceable
                or invalid.

            

    

    

    
      	 	
              7.6.

            	
              CORPORATE
                AUTHORITY. Employer represents and warrants as of the date hereof
                that
                Employer’s execution and delivery of this Agreement to Employee and the
                carrying out of the provisions hereof have been duly authorized by
                Employer’s Board of Directors and authorized by Employer’s shareholders
                and further represents and warrants that neither the execution and
                delivery of this Agreement, nor the compliance with the terms and
                provisions thereof by Employer will result in the breach of any state
                regulation, administrative or court order, nor will such compliance
                conflict with, or result in the breach of, any of the terms or conditions
                of Employer’s Articles of Incorporation or Bylaws, as amended, or any
                agreement or other instrument to which Employer is a party, or by
                which
                Employer is or may be bound, or constitute an event of default thereunder,
                or with the lapse of time or the giving of notice or both constitute
                an
                event of default
                thereunder.

            

    

    

    
      	 	
              7.7.

            	
              ATTORNEY’S
                FEES. In any action at law or in equity to enforce or construe any
                provisions or rights under this Agreement, the unsuccessful party
                or
                parties to such litigation, as determined by the courts pursuant
                to a
                final judgment or decree, shall pay the successful party or parties
                all
                costs, expenses, and reasonable attorneys’ fees incurred by such
                successful party or parties (including, without limitation, such
                costs,
                expenses, and fees on any appeals), and if such successful party
                or
                parties shall recover judgment in any such action or proceedings,
                such
                costs, expenses, and attorneys’ fees shall be included as part of such
                judgment.

            

    

    

    
      	 	
              7.8.

            	
              COUNTERPARTS.
                This Agreement may be executed simultaneously in one or more counterparts,
                each of which shall be deemed an original, but all of which together
                shall
                constitute one and the same
                instrument.

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              7.9.

            	
              HEADING
                AND CAPTIONS. Heading and captions are included for purposes of
                convenience only and are not a part
                hereof.

            

    

    

    
      	 	
              7.10.

            	
              CONSULTATION
                WITH COUNSEL. Employee acknowledges that he has had the opportunity
                to
                consult with counsel independent of Employer or Employer’s counsel,
                regarding the entering into of this Agreement and has done so to
                the
                extent he sees fit.

            

    

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement effective
      as of
      the day and year first written above at Little Rock,
      Arkansas.

     

    “Employer”

    ThermoEnergy
      Corporation

     

    
      	
              By: /s/
                Dennis C. Cossey

            	5/1/2005	 
	
               Dennis
                C. Cossey,
                Chairman    

            	   Date	 

    

     

    “Employee”

     

    
       

      
        	
                By: /s/ Andrew
                  T. Melton 

              	5/1/2005	 
	
                 Andrew
                  T. Melton

              	   Date	 

      

    

    

    

    
      
        
        

      

      
        11

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