Business Development Agreement

Exhibit 10.1

BUSINESS DEVELOPMENT AGREEMENT

BUSINESS DEVELOPMENT AGREEMENT (this " Agreement" ) is made as of the 23 rd day of October, 2006, (the " Effective Date" ), between Cargill, Incorporated, a Delaware corporation, through its Emerging Business Accelerator business unit (" Cargill" ), on the one hand, and Environmental Power Corporation, a Delaware corporation (" EPC" ), and its wholly-owned subsidiary, Microgy Inc., a Colorado corporation (" Microgy" ), on the other hand. EPC and Microgy are collectively referred to herein as the " EPC Parties" , and individually as an " EPC Party." Cargill and the EPC Parties are collectively referred to herein as " Parties" , and individually as a " Party" . Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in Article X.

WHEREAS, the EPC Parties are in the business of developing renewable energy projects and are the licensees of anaerobic digester technology (the " Technology" ) which results in energy-production opportunities, emissions-reductions and the potential for issuance of Greenhouse Gas Reduction Certificates resulting from those emissions reductions; and

WHEREAS, Cargill and its Affiliates have contacts with a network of customers, farmers and strategic business partners (the " Cargill Network" ) who might utilize the Technology or otherwise add value to such projects;

WHEREAS, the Parties desire to work jointly to identify potential customers, and develop and pursue business opportunities, for the EPC Parties and their Affiliates with members of the Cargill Network that will enable them to undertake anaerobic digester projects (each an " AD Project" ); and

WHEREAS, the Parties now wish to enter into a definitive document in furtherance of that desire. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the Parties agree as follows:

Article I.

Business Development

Section 1.1. The territorial scope of the Parties' activities pursuant to this Agreement is North America, subject to enlargement by mutual agreement.

Section 1.2. Cargill shall use its reasonable efforts to identify AD Projects for the EPC Parties within the Cargill Network (each, a " Project Candidate" ). The EPC Parties and Cargill will work jointly to identify specific targeted markets for developing AD Projects within the Cargill Network in accordance with the process set forth in Schedule 1. Within those targeted markets Cargill will utilize the guidelines set forth in Schedule 2 (the " Project Guidelines" ), in order to identify specific producers that are deemed appropriate candidates for further discussion (" Project Candidates" ). The EPC Parties will make available their technical teams as reasonably necessary to facilitate the determination of Project Candidates. The parties acknowledge that the Project Guidelines are merely guidelines, and satisfaction of all the guidelines will not be a condition to the EPC Parties pursuing a possible AD Project. Section 1.3. The EPC Parties shall consider each of the Project Candidates and, acting reasonably and at their sole cost and expense, shall select those candidates that they want Cargill to further pursue on their behalf. Cargill will then present to the identified Project Candidates the EPC Parties' binding Option to implement an AD Project, the form of which is set forth in Schedule 3 (to be reasonably adapted as necessary to conform to specific environmental and physical variations presented by different Project Candidates). Cargill shall pursue negotiations with the Project Candidate with the goal of obtaining a completed and signed version of Schedule 3 as so presented, from the Project Candidate (a " Project Commitment" ). At the request of any party, the EPC Parties will make available their staff to facilitate the negotiation and/or completion of a Project Commitment. Once the Project Candidate has signed the Project Commitment, Cargill shall present it to the EPC Parties for their review and consideration. The EPC Parties shall, keeping Cargill informed, proceed to negotiation of a mutually acceptable Lease and Project Agreement with the Project Candidate. Any such negotiations shall be concluded within 120 days of the designated effective date of the Project Commitment as signed by the Project Candidate or said Commitment shall be deemed to be of no further force and effect.


- 2 -

Article II.

Consideration

Section 2.1 As consideration for Cargill' s services hereunder the EPC Parties shall provide Cargill with the following consideration:

(a) Warrants . EPC shall grant Cargill warrants to purchase shares of EPC' s common stock, $0.01 par value per share (" Common Stock" ) (the " Warrants" ). EPC shall issue to Cargill a Warrant to purchase a number of shares of Common Stock equal to one percent (1%) of the outstanding shares of Common Stock, on a fully diluted basis, on such date (the " Warrant Issuance Date" ) Cargill delivers to the EPC Parties executed Project Commitments with Project Candidates relating to AD Projects covering 10,000 Cow Equivalents in the aggregate (the " Warrant Issuance Conditions" ), and thereafter shall issue Warrants on each succeeding date on which the Warrant Issuance Conditions have again been satisfied (without regard to any prior satisfaction of the Warrant Issuance Conditions). Such Warrants shall be in the form attached to this Agreement as Schedule 5 . If, on any Warrant Issuance Date, the number of shares of Common Stock subject to the Warrant to be issued would, when added to the number of shares of Common Stock subject to Warrants previously issued, exceed four and 99/100 percent (4.99%) of the outstanding shares of Common Stock on such Warrant Issuance Date, then the Warrant to be issued shall cover only that number of shares of Common Stock which, when added to the number of shares of Common Stock subject to previously issued Warrants, equals 4.99% of the outstanding Common Stock on such Warrant Issuance Date, and EPC shall not be obligated to issue any further Warrants pursuant to the terms of this Agreement. Each Warrant shall have an exercise price per share equal to seventy-five percent (75%) of the closing price of the Common Stock on the last trading day immediately prior to the Warrant Issuance Date. All share calculations pursuant to this Section 2.1(a) shall be rounded to the nearest whole share.

(b) Greenhouse Gas Reduction Certificates .

(i) For a three year period beginning with the first date of issuance of an Eligible Certificate, the EPC Parties shall, after conveying any share due to a Project Candidate pursuant to a Lease and Project Agreement, convey or otherwise grant to Cargill or its designee unencumbered ownership of


- 3 -

25% of any remaining Eligible Certificates that are within the control of the EPC Parties. Said interest conveyance or other grant to Cargill shall be for the life of the Eligible Certificate.

(ii) During the same three-year period, Cargill shall have the right of first refusal on a proposed sale or other conveyance of the remainder of the Eligible Certificates issued, owned or controlled by the EPC Parties or any Affiliate or designee thereof. If an EPC Party or Affiliate or designee thereof wishes to sell or otherwise convey any such Eligible Certificate, it shall provide (and the EPC Parties shall cause any such Affiliate or designee to comply with this provision) Cargill (or a designee thereof) with notice of not less than 5 business days of the planned sale or conveyance, in which notice period Cargill shall have the opportunity to make bid (including all material terms and conditions, such as price). If the bid is acceptable, the EPC Party, Affiliate or designee, as applicable, shall sell and deliver the Eligible Certificate to Cargill (or its designee) in accordance with documentation entered into with respect to the transaction. If the bid is not acceptable, the EPC Party shall have the right to sell the Eligible Certificate to any other Person on terms no less favorable than those offered by Cargill. (iii) In the event the EPC Parties, their Affiliates and designees do not sell their portion of the Eligible Certificates to Cargill (or a designee thereof) or another Person in accordance with this Section, at the request of an EPC Party, Cargill (or a designee) shall exercise its reasonable efforts to aggregate and market the Eligible Certificates of the EPC Parties, their Affiliates and designees, provided, however, that Cargill shall have the right to prioritize the sale and or marketing of its own Eligible Certificates over those of the EPC Parties. There will be no additional compensation payable to Cargill for this service.

- 4 -

(c) Revenue Stream . An AD Project that results in a Project Commitment may generate revenue for an EPC Party from the sale of gas, electricity or other by-products generated by the AD Project (other than Greenhouse Gas Reduction Certificates) (all such revenue being referred to herein as " Source Revenue" ). With respect to each AD Project subject to a Project Commitment that generates Source Revenue to an EPC Party, the EPC Party shall pay to Cargill, within 30 days of receipt of revenue, two percent of all such Source Revenue received by the EPC Party from such project for a five year period following the date of the first receipt of any such Source Revenue.

(d) Right To Bid. During a three-year period following the date of the first generation of gas or electricity generated by an AD Project subject to a Project Commitment, Cargill shall have the right of first refusal on the proposed sale or other conveyance of all gas and electricity generated by that AD Project. If an EPC Party or Affiliate or designee thereof wishes to sell or otherwise convey any such gas or electricity, it shall provide (and the EPC Parties shall cause any such Affiliate or designee to comply with this provision) Cargill (or a designee thereof) with notice of not less than 5 business days of the planned sale or conveyance, in which notice period Cargill shall have the opportunity to make a bid (including all material terms and conditions, such as price). If the offer is acceptable, the EPC Party, Affiliate or designee, as applicable, shall sell and deliver the gas or electricity to Cargill (or its designee) in accordance with documentation entered into with respect to the transaction. If the offer is not acceptable, the EPC Party shall have the right to sell the gas or electricity to any other Person on terms no less favorable than those offered by Cargill.

Article III.

Representations and Warranties Section 3.1 Cargill and the EPC Parties each represent, warrant and agree to the other that, as of the Effective Date and at all times during the term ...