Exhibit 10.1

 

[Letterhead of Environmental Power Corporation]

 

April 1, 2005

 

R. Jeffrey Macartney

29 Chimney Lane

Ladera Ranch, CA 92694

 

RE: Confirmation of Current Employment Terms

 

Dear Jeff,

 

The purpose of this letter is to set forth the current terms of your employment
with Environmental Power Corporation (“EPC”) in your capacity as Chief Financial
officer, effective retroactive to July 1, 2004.

 

Compensation: Your compensation will consist of salary paid at the rate of
$7,708 for each paid period (or $185,000 on an annualized basis), subject to
withholdings and the benefits package described below. Target Minimum annual
cash compensation of $200,000 — this will be a base salary of $185,000 and an
additional minimum bonus payment, paid each April 30 of $15,000. Salary is based
on a standard 40-hour workweek and is paid bi-weekly on the 15th and last
working day of the month. EPC retains the right to change the benefits package
it provides employees from time to time and to increase or reduce the amount it
pays for such benefits.

 

Stock Options: Effective June 23, 2004, EPC granted to you an option to acquire
21,428 shares of EPC’s common stock (after giving effect to the 1-for-7 reverse
split of EPC’s common stock on November 30, 2004) under the 2001 Stock Incentive
Plan (the “Option Plan”) at an exercise price equal to the fair market value of
a share of common stock on June 23, 2004. Any further equity incentives will be
at the discretion of the Compensation Committee of EPC’s Board of Directors.

 

Bonus: You will be eligible to participate in EPC’s 2005 Incentive Bonus Plan,
and we expect that you would also be eligible to participate in such other bonus
and incentive plans as EPC may adopt in the future.

 

Benefits: The following benefits are included in this offer, as summarized in
the enclosed “Summary of Benefits” (Please keep in mind that benefits may be
changed by the company at any point in time).

 

  •   Medical Insurance (100% paid by the Company including family)

 

  •   Dental Insurance (100% paid by the Company including family)

 

  •   Life Insurance ($10,000)

 

  •   Employee Pension Plan

 

  •   401(k) Plan (please note that there is no employer contribution at this
time)

 

Pension: Benefit accrues at 1.5% of average monthly compensation for each year
of service completed after December 31, 2002. Employee must have two years of
service and have attained the age of 21 to enter the plan. Vesting is 100% once
an employee enters the plan (Please keep in mind that this plan may be
terminated at any time). The Pension plan is attached

 

Vacation and Holidays: You will be entitled to three (3) weeks accrued vacation
per year. In addition, EPC currently provides employees eleven (11) paid
holidays per year, including the following: New Year’s Day, Martin Luther King
Day, President’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran Day, Thanksgiving Day, Day following Thanksgiving, Christmas Day and one
(1) floating holiday. The scheduling of vacation time and floating holidays
shall be arranged between you and your manager. You will be eligible to take
your vacation time as it accrues at a rate of (10) hours of vacation per month.
Unused accrued vacation time does not carry forward to later years, and no
payments will be made in lieu of vacation.

 

Performance and Salary Review: EPC seeks to provide a performance salary review
at least once a year.

 

Termination: You are and will continue to be an employee-at-will, and EPC may
terminate your employment at any time and for any reason or no reason.

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Severance: Notwithstanding your employee-at-will status, under certain
circumstances, you will be entitled to severance in accordance with and subject
to the conditions set forth in EPC’s 2004 Severance Pay Plan (the “Severance
Plan”), a copy of which is being provided to you in this letter. For purposes of
the Severance Plan, the severance period shall be 12 months from the date of
termination. The severance plan is attached.

 

Other Terms and Conditions: All EPC employees are required to comply with all
company policies and guidelines and to abide by certain other terms and
conditions that relate to non-disclosure and non-competition. The employment
terms set forth in this letter are contingent upon your execution (if you have
not already done so) of EPC’s standard non-disclosure and non-competition
agreement, a copy of which is also enclosed.

 

This is an exciting time for EPC, and the people who help us make the transition
will experience a wide range of rewards. We are pleased with your continued
efforts on behalf of the EPC team. Please contact me immediately if you have any
questions,

 

Sincerely,

 

/s/ Kamlesh Tejwani

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Kamlesh Tejwani

President & Chief Executive Officer