ENVIRONMENTAL POWER CORP
EQUITY INTEREST PURCHASE OPTION
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<TYPE>EX-10.11
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<DESCRIPTION>EQUITY INTEREST PURCHASE OPTION
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.11 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>EQUITY INTEREST OPTION AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">THIS AGREEMENT is made this 9th day of November, 2006, by and
between MICROGY, INC., a Colorado corporation whose mailing address is c/o Environmental Power Corporation, One Cate Street, 4</FONT><FONT FACE="Times New Roman" SIZE="1" COLOR="#000000"><SUP>th</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"
COLOR="#000000"> Floor, Portsmouth, New Hampshire 03801 (&#147;<U>Microgy</U>&#148;) and MICROGY HOLDINGS, LLC, a Delaware limited liability company (&#147;Microgy Holdings&#148;), on the one hand, and SOUTH-TEX MORROW, INC. (formerly known as
&#147;SOUTH-TEX TREATERS, INC.&#148;) a Texas corporation whose mailing address is P.O. Box 60480, Midland, Texas 79711 (&#147;<U>South-Tex&#148;</U>), on the other hand. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><U>RECITALS</U>: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">A. MST GP, LLC, a Texas limited liability company, Microgy and South-Tex entered into an
Amended and Restated Limited Partnership Agreement dated October&nbsp;13, 2005 (the &#147;<U>Limited Partnership Agreement</U>&#148;), creating MST PRODUCTION, LTD., a Texas limited partnership (&#147;<U>MST Production</U>&#148;). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">B. South-Tex owns the following equity interests in the following entites: </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1"><B>Name of Entity/</B></FONT></P> <P STYLE="margin-right:0px;margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT
FACE="Times New Roman" SIZE="1"><B>Jurisdiction of Organization</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Type of</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Interest</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Percentage&nbsp;of<BR>All Interests</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">MST Production Ltd., a Texas limited partnership</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Limited&nbsp;partnership</FONT><br><FONT FACE="Times New Roman" SIZE="2">interest</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">39.5</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">%*</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">MST GP, LLC, a Texas limited liability company</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Membership&nbsp;interest</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">50.0</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">MST Estates, LLC, a Texas limited liability company</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Membership&nbsp;interest</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD ALIGN="right" COLSPAN="1" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">40.0</FONT></TD>
<TD COLSPAN="1" NOWRAP VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
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<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">All of the limited partnership interests in MST Production Ltd. held by South-Tex represent 39.5% of all partnership interests in MST Production Ltd. MST GP, LLC owns a 1% general
partnership interest in MST Production, Ltd., and South-Tex owns a 50% membership interest in MST GP, LLC, as noted above. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">C. South-Tex has agreed to grant to Microgy Holdings an option to purchase, and to cause South-Tex to sell, the foregoing equity interests, under the terms, conditions and provisions set forth in this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1. <U>Certain Additional Defined Terms</U>. The following terms used in this Agreement shall have the following meanings: </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Additional Gas Facilities</U>&#148; shall mean up to three (3)&nbsp;additional gas treatment facilities meeting the specifications set forth in the Additional
Gas Facilities PO. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Additional Gas Facilities Agreement</U>&#148; shall mean an Equipment Purchase Agreement relating to the purchase by Microgy
or its assigns of the Additional Gas Facilities, substantially in the form attached to this Agreement as <U>Exhibit A</U>. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Assignment and Assumption Agreement</U>&#148; shall mean the assignment and assumption agreement relating to the
assignment by South-Tex to Microgy Holdings or its assigns of the Equity Interests upon exercise of the Option, substantially in the form attached to this Agreement as <U>Exhibit B</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Equity Interests</U>&#148; shall mean the Limited Partnership Interests and the Membership Interests. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Huckabay Gas Facility</U>&#148; shall mean the Gas Treatment Facility contemplated by the Limited Partnership Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">&#147;<U>Huckabay Gas Facility Agreement</U>&#148; shall mean a Construction and Equipment Purchase Agreement relating to the purchase by MST Production of the Huckabay Gas Facility, substantially in the form attached to this Agreement as
<U>Exhibit C</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Limited Partnership Interests</U>&#148; shall mean the limited partnership interest in MST Production held by South-Tex.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Membership Interests</U>&#148; shall mean the membership interests in MST GP and MST Estates held by South-Tex.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>MST Estates</U>&#148; means MST Estates, LLC, a Texas limited liability company of which South-Tex and Microgy are the sole members. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>MST GP</U>&#148; means MST GP, LLC, a Texas limited liability company of which South-Tex and Microgy are the sole members. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;<U>Option</U>&#148; shall have the meaning set forth in Section&nbsp;2 of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Organizational Documents</U>&#148; shall mean, with respect to any entity, its articles or certificate of organization or incorporation, its regulations, its limited partnership agreement, its limited
liability company or operating agreement, its bylaws, its indenture of trust or trust agreement or any other document relating to the organization and governance of such entity. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">&#147;<U>Project Participation Agreement</U>&#148; shall mean a project participation agreement between South-Tex Treaters, LP and Microgy, substantially in the form attached to this Agreement as <U>Exhibit D</U>.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">All other capitalized terms used in this Agreement but not otherwise defined herein will have the respective meanings ascribed to them in
the Limited Partnership Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2. <U>Purchase Option</U>. South-Tex hereby grants to Microgy Holdings or its assigns the right and
option to purchase from South-Tex, for the consideration and on the terms set forth in this Agreement, all of the Equity Interests (the &#147;<U>Option</U>&#148;). The Option must be exercised, if at all, by delivering written notice to South-Tex on
or before November&nbsp;10, 2006 (or such later date as the parties may mutually agree). Notwithstanding the foregoing, Microgy shall be required to exercise the Option, and shall be deemed to have exercised the Option without any further notice to
South-Tex hereunder, in the event that the closing of the tax-exempt bond offering referred to in that certain Preliminary Limited Offering Memorandum, dated September&nbsp;27, 2006 (Microgy Holdings, LLC Project) occurs. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3. <U>Purchase Price</U>. The purchase price for the Equity Interests upon exercise of the Option will be
the sum of Ten Dollars and No Cents ($10.00), which sum shall be paid in cash upon the closing of the sale of the Equity Interests to Microgy or its assigns (the &#147;<U>Closing</U>&#148;), and such Closing shall take place within five
(5)&nbsp;business days after the date of the written notice of exercise described in Section&nbsp;2. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4. <U>Closing</U>. At the Closing,
the signatory parties will execute and deliver the following documents: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) the Assignment and Assumption Agreement; </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) the Huckabay Gas Facility Agreement; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman"
SIZE="2">(c) the Additional Facilities Agreement; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(d) the Project Participation Agreement. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">5. <U>Miscellaneous</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(a) This Agreement
shall be deemed to amend or supersede any prior agreements of the parties with respect to the subject matter hereof, including any such agreements set forth in the Limited Partnership Agreement or the other Organizational Documents of MST
Production, General Partner or Estates. Without limiting the foregoing, this Agreement shall supersede Section&nbsp;11.9 of the Limited Partnership Agreement, <U>provided</U>, <U>that</U>, in the event that the Option is not exercised within the
time period described in Section&nbsp;1, this Agreement shall be of no further force or effect and the provisions of Section&nbsp;11.9 shall control. South-Tex, Microgy and Microgy Holdings each agree to enter into, or cause MST GP to enter into,
such further amendments to or consents under the Organizational Documents of MST Production, MST GP or MST Estates as are necessary to carry into effect the provisions of this Agreement or the purchase and sale of the Equity Interest pursuant to the
exercise of the Option. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(b) The obligations of the parties hereunder to consummate the purchase and sale of the Equity Interests shall be
subject to compliance with all applicable federal and state securities laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(c) This Agreement shall be governed by the laws of the State
of Texas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT FACE="Times New Roman" SIZE="2">(d) This Agreement may be executed in one or more counterparts and by facsimile signatures. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">(the remainder of this page intentionally left blank &#150; signature page follows) </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties have executed this Equity Interest Option Agreement as of the date first
written above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="bottom" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">MICROGY, INC.</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ John F. O&#146;Neill</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">John F. O&#146;Neill</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Chief Financial Officer</FONT></TD></TR>
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<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">MICROGY HOLDINGS, LLC</FONT></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ John F. O&#146;Neill</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">John F. O&#146;Neill</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Vice President and Treasurer</FONT></TD></TR>
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<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">SOUTH-TEX MORROW, INC.</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ David Morrow</FONT></P></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">David Morrow</FONT></TD></TR>
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<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4 </FONT></P>

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