Document:

INDEMNITY LETTER

 Exhibit 10.7 
 INDEMNIFICATION LETTER OF ENVIRONMENTAL POWER CORPORATION 
 November 9, 2006

 Ziegler Capital Markets Group 
 One South Wacker Drive, Suite
3080 
 Chicago, Illinois 60606 
  

	 	Re:	$60,000,000 Gulf Coast Industrial Development Authority Environmental  

	 	  	Facilities Revenue Bonds (Microgy Holdings Project) Series 2006

 Ladies and Gentlemen: 
 Pursuant to the Bond Purchase Agreement dated as of November 7, 2006 between the Gulf Coast Industrial
Development Authority and you (the “Bond Purchase Agreement”), Environmental Power Corporation (the “Company”) makes the representations contained in Section 1 and agrees to the provisions contained in Section 2 below.
Capitalized terms used and not defined shall have the meanings given to such terms in the Bond Purchase Agreement. 
 1. Disclosure.

 As of their respective dates and at all times subsequent thereto up to and including the Closing, the information in the Preliminary
Limited Offering Memorandum and the Final Limited Offering Memorandum relating to the Company and Microgy, Inc. was, is and will be true and correct in all material respects, and the Preliminary Limited Offering Memorandum and the Final Limited
Offering Memorandum did not, do not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements described above, in the light of the circumstances under which they were made, not
misleading. 

 2. Indemnification and Contribution. 
 (a) The Company will indemnify and hold harmless the Underwriter and each of its officers, directors, employees and agents against any losses, claims,
damages or liabilities to which any of them may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an allegation or
determination that registration of a security under the Securities Act should have been made in connection with the offering of the Bonds or an indenture should have been qualified under the Trust Indenture Act; or (ii) an untrue statement or
alleged untrue statement of a material fact in the Limited Offering Memorandum, or any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the
statements therein not misleading under the circumstances under which they were made, and will reimburse any indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action
or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the Underwriter or any officer, director, employee or agent of the Underwriter to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Limited Offering Memorandum under the caption “UNDERWRITING.” 
 (b) Promptly after receipt by an indemnified party under subsection (a) above of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the claim or commencement of the action; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability which it may have to the indemnified party otherwise than under such subsection except to the extent that any rights, remedies or defenses available to the indemnifying
party are prejudiced thereby. In case any such claim or action shall be brought against an indemnified party and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that
it shall wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party (such consent not to be unreasonably withheld), be counsel to the
indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. The indemnifying party shall not be liable for any
settlement of any such action effected without its consent, but if settled with the consent of the indemnifying party or if there is a final judgment for the plaintiff in any such action, the indemnifying party will indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such settlement or judgment. The indemnity agreement in this letter shall survive delivery of the Bonds and shall survive any investigation made by or on behalf of the Issuer, the
Underwriter or the Company. 
 (c) If the indemnification provided for in this letter is unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or 

 liabilities (or actions in respect thereof) referred to therein, then the indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company’s indirect subsidiary, Microgy Holdings, LLC, on the one hand and the Underwriter on the other from the offering of the Bonds. If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (b) above, then the indemnifying party shall contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting expenses) received by the Company’s indirect subsidiary, Microgy Holdings, LLC, bear to the total underwriting discount and commissions received by the Underwriter. The
relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or
its affiliates or the Underwriter and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this subsection (c) were determined by pro rata allocation or by any other method of allocation which does not take account the equitable considerations referred to above in this subsection (c). The amount
paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (c), the Underwriter shall not be required to contribute any amount in excess of the amount
by which the total public offering price of the Bonds exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution with respect to damages arising out of such misrepresentation from any person who was not guilty of such fraudulent
misrepresentation. 
 (d) The provisions of this letter shall be governed by, construed, interpreted and the rights of the parties
determined in accordance with the laws, including equitable principles but without regard to principles of conflict of laws, of the State of New York. The Company agrees that all actions and proceedings arising out of this letter shall be brought in
the United States District Court in the County of New York, consents to the jurisdiction of such courts and irrevocably waives to the fullest extent permitted by law any claim that any such proceeding has been brought in an inconvenient forum.

 3. Consent. 
 The Company consents to the inclusion of all references to the Company and Microgy, Inc. in the Preliminary Limited Offering Memorandum and the Final Limited Offering Memorandum. 
  

			
	Very truly yours,
	
	ENVIRONMENTAL POWER CORPORATION
		
	By:	 	 /s/ John F. O’Neill

	Name:	 	John F. O’NeillMANAGEMENT SERVICES AGREEMENT

 Exhibit 10.8 
 MANAGEMENT SERVICES AGREEMENT 
 This Agreement is made effective this 9th day of November, 2006 (the “Agreement”) between MICROGY HOLDINGS, LLC, a Delaware limited liability company
(“Microgy Holdings”), and ENVIRONMENTAL POWER CORPORATION, a Delaware corporation (“EPC”). 
 RECITALS 

A. Microgy Holdings is primarily engaged in the business of holding the equity interests in (i) MST Production Ltd., a Texas limited partnership
(“MST”), (ii) MST GP, LLC, a Texas limited liability company, (iii) MST Estates, LLC, a Texas limited liability company, (iv) Rio Leche Estates, L.L.C., a Texas limited liability company (“Rio Leche Estates”),
(v) Mission Biogas, L.L.C., a Texas limited liability company (“Mission Biogas”) and (vi) Hereford Biogas, L.L.C., a Texas limited liability company (“Hereford Biogas” and, together with MST, Rio Leche Estates and
Mission, the “Subsidiaries”). 
 B. Microgy Holdings is a wholly owned subsidiary of EPC. 
 C. It would be more cost-effective for certain corporate functions of Microgy Holdings and EPC to be conducted on a unified basis. 
 D. Microgy Holdings is engaging in a financing transaction under (i) that certain Loan Agreement, dated as of October 1, 2006, between the Gulf
Coast Industrial Development Authority (the “Issuer”) and Microgy Holdings (the “Loan Agreement”), (ii) a Trust Indenture Agreement, dated as of October 1, 2006, between the Issuer and Wells Fargo Bank, National
Association, as Trustee (the “Indenture”), which financing transaction will have direct material benefits to EPC, and one of the conditions of such transaction is that Microgy Holdings and EPC enter into this Management Services Agreement.

 E. EPC is willing, for a fee, to perform certain corporate functions on behalf of Microgy Holdings. 
 AGREEMENT 
 1. Definitions.
Capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Loan Agreement. 
 2. Description of
Services. EPC hereby agrees to provide advisory and consulting services for the benefit of Microgy Holdings, which services shall include, without limitation, accounting functions, tax planning and preparation of income tax returns, assisting
with financial planning, and participating in the oversight of and activities relating to the functions of the Subsidiaries (but only to the same extent that Microgy Holdings has such oversight of the Subsidiaries’ activities). 

 3. Level of Service. Except as otherwise expressly provided in this Agreement, all services,
consultation, or other support which EPC renders or causes to be rendered to Microgy Holdings pursuant to this Agreement will be provided on a “reasonable efforts” basis. For purposes of this Agreement, a “reasonable efforts”
basis means performing, or causing to be performed, identified tasks at the same level or degree of service EPC would provide in its own internal operations. Unless particular personnel are designated as being dedicated to Microgy Holdings, the
services provided by any particular person to Microgy Holdings will not be given priority over reasonable and necessary services required to meet EPC’ other requirements. The services which EPC renders or causes to be rendered to Microgy
Holdings hereunder will be of a nature and quality substantially similar to that which EPC requires for its own internal operations with respect to comparable services. 
 4. Third Party. Services to be rendered by EPC to Microgy Holdings under this Agreement may be subcontracted, in whole or in part, by EPC without the express written approval of Microgy Holdings, but EPC will
at all times remain fully liable for the performance by any subcontractor in accordance with the terms of this Agreement; provided, however, that in no event shall EPC increase the fee which may result from such actions. 
 5. Non-Exclusivity. Microgy Holdings hereby acknowledges that EPC may also provide services of the type described above for its own operations and
to other third parties. Nothing contained in this Agreement shall be interpreted as requiring EPC to perform services exclusively for Microgy Holdings. 
 6. Term. The term of this Agreement shall commence on the date hereof and shall continue through December 31, 2036; provided, however, that EPC may terminate this Agreement if an Event of Default occurs
under the Loan Agreement or the Indenture and the Trustee exercises any remedies available to it under the Indenture. Notwithstanding the foregoing, the Issuer or the Trustee shall have the right to cause Microgy Holdings and EPC to terminate this
Agreement at any time for cause or if an Event of Default has occurred and is continuing. 
 7. Fees. Microgy Holdings agrees to pay
to EPC, on or about January 2, 2007 and each January 2nd (or, if not a business day, the next following
business day) thereafter until termination of this Agreement (each a “Payment Date”), the sum of Seventy-Five Thousand dollars ($75,000) (the “Fee”) for the provision of services under this Agreement and the Tax Sharing
Agreement. Each payment on a Payment Date shall be compensation for services rendered from January 1st of the
year in which the Payment Date occurs through December 31st of such year (a “Payment Period”). To the
extent that this Agreement terminates prior to the expiration of a full Payment Period, the fee payable in respect of such Payment Period shall not be refunded or prorated. In addition to the foregoing fees, Microgy Holdings will promptly reimburse
EPC for its costs and expenses, including any amounts due to third parties (such as accounting and legal fees), incurred in the performance of EPC’s services under this Agreement and the Tax Sharing Agreement, within thirty (30) days after
receipt of EPC’s invoices therefor. Upon an Event of Default, and for so long an Event of Default is continuing, EPC’s right to payment hereunder shall be subordinate to payment of amounts owed by Microgy Holdings in respect of the Bonds.

  

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 8. Miscellaneous. 
 (a) Third Party Rights. The Issuer and its successors and assigns, including the Trustee, shall enjoy the rights and not the
obligations of a third-party beneficiary hereunder. No other third party beneficiary rights are created hereunder. 
 (b)
Headings. Section and article headings used in this Agreement have no legal significance and are used solely for convenience of reference. 
 (c) Governing Law. This Agreement shall be construed and enforced in accordance with the internal laws of the State of New Hampshire, without regard to its principles of conflicts of laws, and each party hereby
submits to the non-exclusive jurisdiction of the state courts of New Hampshire and the federal courts of the Untied States of America sitting in New Hampshire. 
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 IN WITNESS WHEREOF the parties have executed this Agreement the date first above written, and
agree to be bound by the terms hereof and the documents issued pursuant hereto. 
  

			
	ENVIRONMENTAL POWER CORPORATION
		
	By:	 	 /s/ John F. O’Neill

		 	John F. O’Neill
		 	Chief Financial Officer
	
	MICROGY HOLDINGS, LLC
		
	By:	 	 /s/ Richard E. Kessel

		 	Richard E. Kessel
		 	President

 [Signature Page to Management Services Agreement] 
  

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