Document:

Subsequent Investment Warrant dated August 24, 2007

 Exhibit 10.2 
 EXECUTION VERSION 
 SUBSEQUENT INVESTMENT WARRANT 
 THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH
SECURITIES. NEITHER THE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR OTHERWISE DISPOSED OF WITHOUT
AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED. 
  

			
	No. 2:	 	August 24, 2007

 WARRANT 
 TO PURCHASE COMMON SHARES 
 OF 
 DISTRIBUTED ENERGY SYSTEMS CORP. 
 1. Issuance of Warrant. FOR VALUE RECEIVED, on and after the date
of issuance of this Warrant, and on the terms and subject to the conditions herein set forth, the Holder (as defined below) is entitled to purchase from Distributed Energy Systems Corp., a corporation incorporated under the laws of the State of
Delaware (the “Company”), at any time before 5:00 p.m. New York time on August 24, 2012 (the “Termination Date”), at a price per share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment as described below) upon exercise of this warrant (this “Warrant”) pursuant to Section 6 hereof or conversion of this Warrant pursuant to
Section 7 hereof. 
 2. Definitions. As used in this Warrant, the following terms have the definitions ascribed to them below:

 (a) “Business Day” means any day other than a Saturday, Sunday or other day on which the national or state banks located
in the State of New York, the State of Connecticut or the District of Columbia are authorized to be closed. 
 (b) “Commencement
Date” means Issue Date August 24, 2007. 
 (c) “Common Shares” means shares of the common stock, par value
$0.01 per share, of the Company. 

 (d) “Holder” means Perseus Partners VII, L.P., or its successors or assigns. 

(e) “Purchase Agreement” means the Securities Purchase Agreement by and between the Company and Perseus Partners VII, L.P., dated
May 10, 2007. 
 (f) “Warrant Price” means as to each tranche of Warrant Stock, the price set forth on Schedule 1
to this Warrant adjacent to the Warrant Stock comprising such tranche, subject to adjustment as described in Section 3 hereof. 
 (g)
“Warrant Stock” means the number of Common Shares set forth in tranches on Schedule 1 to this Warrant, in each case, subject to adjustment as described in Section 3 hereof or in accordance with Section 7 hereof.

 Any other capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement. 
 3. Adjustments and Notices. The Warrant Price and the number of shares of Warrant Stock shall be subject to adjustment
from time to time in accordance with this Section 3. 
 (a) Adjustment for Splits and Combinations. If the Company shall at any
time or from time to time after the Commencement Date effect a stock split of the outstanding Common Shares, the Warrant Price in effect immediately before that stock split shall be proportionately decreased, and, conversely, if the Company shall at
any time combine the outstanding Common Shares into a smaller number of shares, the Warrant Price in effect immediately before that combination shall be proportionately increased. Any adjustment under this Section 3(a) shall become effective at
the close of business on the date the stock split or combination becomes effective. 
 (b) Adjustment for Common Shares Dividends and
Distributions. If the Company at any time or from time to time after the Commencement Date issues, or fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution payable solely in
additional Common Shares, in each such event the Warrant Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the
Warrant Price then in effect by a fraction (i) the numerator of which is the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the sum of the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such
dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefore, the Warrant Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Warrant Price shall be adjusted pursuant to this Section 3(b) to reflect the actual payment of such dividend or distribution. 
 (c) Adjustments for Other Dividends and Distributions. If the Company at any time or from time to time after the Commencement Date issues, or
fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution 

  

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payable in securities of the Company other than Common Shares or other property, in each such event provision shall be made so that the Holder shall receive
upon exercise or conversion of this Warrant, in addition to the number of Common Shares receivable hereupon, the amount of securities of the Company or other property which such Holder would have received had this Warrant been exercised for or
converted into Common Shares on the date of such event and had they thereafter, during the period from the date of such event to and including the exercise or conversion date, retained such securities or other property receivable by them as
aforesaid during such period, subject to all other adjustments called for during such period under this Section 3 with respect to the rights of the Holders of this Warrant or with respect to such other securities or other property by their
terms. As used herein, the term “other property” does not include cash. 
 (d) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Commencement Date, the Common Shares issuable upon the exercise or conversion of this Warrant is changed into the same or a different number of shares of any class or series of stock,
whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 3), then in any
such event the Holder shall have the right upon the exercise or conversion of this Warrant to receive the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders
of the number of Common Shares which the Holder of this Warrant could have received had such Warrant been exercised or converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided in
this Warrant or with respect to such other securities or property by the terms thereof. 
 (e) Reorganizations. If at any time or from
time to time after the Commencement Date, there is a capital reorganization of the Common Shares (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this
Section 3), as a part of such capital reorganization provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise or conversion of this Warrant the number of shares or other securities or property of the
Company to which a holder of the number of Common Shares deliverable upon such exercise or conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such securities by their terms. In any such case,
appropriate adjustment shall be made in the application of the provisions of this Section 3 with respect to the rights of the Holder after such capital reorganization to the end that the provisions of this Section 3 (including adjustment
of the Warrant Price then in effect and the number of shares issuable upon exercise or conversion of this Warrant) shall be applicable after that event and be as nearly equivalent as practicable. 
 (f) Certificate of Adjustment. In each case of an adjustment or readjustment of the Warrant Price for the number of common Shares or other
securities issuable upon exercise or conversion of this Warrant, the Company, at its own expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions of this Warrant and prepare a
certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder at the Holder’s address as shown in the Company’s books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. No adjustment in the Warrant Price shall be required to be made unless it would result in an increase or decrease of at least one cent, but
any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder. 
  

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 (g) Adjustment to Number of Shares of Warrant Stock. In the event the Warrant Price is adjusted
under any provision of this Section 3, the number of shares of Warrant Stock shall be simultaneously adjusted by multiplying the number of shares of Warrant Stock by a fraction, the numerator of which is the Warrant Price in effect immediately
prior to such adjustment and the denominator of which is the Warrant Price in effect immediately after such adjustment. 
 (h) Notices of
Record Date. Upon (i) the establishment by the Company of a record of the holders of any class of securities for the purpose of determining the holders of such securities who are entitled to receive any dividend or other distribution, or
(ii) any capital reorganization of the Company, any reclassification or recapitalization of the shares of the Company, any merger or consolidation of the Company with or into any other Company, or any transfer of all or substantially all the
assets of the Company to any other Person or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder at least twenty Business Days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Shares (or other securities) shall be entitled to exchange
their Common Shares (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up. 
 (i) No Impairment. The Company shall not amend its Certificate of Incorporation or Bylaws or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the
Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the rights of the Holder of this Warrant against dilution or other impairment as provided herein.
If the Company takes any action in breach of this Warrant, the Holder shall be entitled to any and all remedies available at law or in equity. 
 (j) Fractional Share. No fractional share shall be issuable upon exercise or conversion of this Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If the exercise or conversion of this
Warrant shall result in the issuance of any fractional share, the Company shall eliminate such fractional share by paying the Holder an amount computed by multiplying such fraction by the fair market value of a full share. 
 (k) Other Adjustments. If and whenever the Company shall take any action affecting or relating to the Warrants, other than any action described in
this Section 3, which in the opinion of the Board would prejudicially affect the rights of the Holder, the Warrant Price and, if required, the number of Common Shares to be issued upon exercise or conversion of the 

  

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Warrant will be adjusted by the Board in such manner, if any, and at such time, as the Board may, in its sole discretion, subject to the approval of any
stock exchange(s) on which the Common Shares are listed and posted for trading, reasonably determine to be equitable in the circumstances to such Holder. 
 4. No Shareholder Rights. This Warrant, by itself, as distinguished from any Common Shares purchased hereunder, shall not entitle its Holder to any of the rights of a shareholder of the Company. 
 5. Reservation of Stock. On and after the Commencement Date, the Company shall at all times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting the exercise or conversion of this Warrant and all other Warrants, such number of its Common Shares as shall from time to time be sufficient to effect the exercise or conversion of this
Warrant and all other Warrants; and if at any time the number of authorized but unissued Common Shares shall not be sufficient to effect the exercise or conversion of this Warrant and all other Warrants, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose. Issuance of this Warrant shall constitute full authority to the
Company’s officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Warrant Stock issuable upon the exercise or conversion of this Warrant. 
 6. Exercise of Warrant. 
 (a)
Voluntary Exercise. This Warrant may be exercised as a whole or in part by the Holder, at any time after the date of issuance of this Warrant and prior to the termination of this Warrant, by the surrender of this Warrant, together with the
Notice of Exercise and Investment Representation Statement in the forms attached hereto as Attachments 1 and 2, respectively, duly completed and executed, and containing a form of signature guarantee reasonably acceptable to the
Company, at the principal office of the Company, specifying the portion of the Warrant to be exercised and accompanied by payment in full of the Warrant Price in cash or by bank draft or wire transfer with respect to the shares of Warrant Stock
being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the Person entitled to receive the shares of Warrant Stock issuable upon
such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, and in any event within three Business Days, the Company shall issue and
deliver to the Person or persons entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such exercise. If this Warrant shall be exercised for less than the total number of shares of
Warrant Stock then issuable upon exercise, promptly after surrender of this Warrant upon such exercise, and in any event within three Business Days, the Company will execute and deliver a new warrant, dated the date hereof, evidencing the right of
the Holder to the balance of this Warrant Stock purchasable hereunder upon the same terms and conditions set forth in this Warrant. 
 (b)
Payment of Taxes. The Company will pay all transfer taxes or charges that may be imposed with respect to the issue or delivery of Common Shares upon exercise or 

  

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conversion of this Warrant, except for any tax or other charge imposed in connection with any transfer involved in the issue and delivery of Common Shares in
a name other than that in which this Warrant was registered. 
 7. Conversion. In lieu of exercising this Warrant or any portion of
this Warrant, at any time the Holder of this Warrant shall have the right to convert this Warrant or any portion of this Warrant into Warrant Stock by the surrender of this Warrant, together with the written Notice of Conversion and Investment
Representation Statement in the forms attached hereto as Attachments 3 and 2, respectively, duly completed and executed, and containing a form of signature guarantee reasonably acceptable to the Company, at the principal office of the
Company, specifying the portion of the Warrant to be converted. The number of shares of Warrant Stock to be issued to the Holder upon such conversion shall be computed using the following formula: 
 X=(P)(Y)(A-B)/A 
  

					
	 where
	  	X =	  	the number of Common Shares to be issued to the Holder for the portion of the Warrant being converted.
			
		  	P =	  	the portion of the Warrant being converted expressed as a decimal fraction.
			
		  	Y =	  	the total number of Common Shares issuable upon exercise of the Warrant in full.
			
		  	A =	  	the fair market value of one share of Warrant Stock which means the fair market value of the Warrant Stock as of the last Business Day immediately prior to the date the Notice of Conversion
is received by the Company, as reported in the principal market for such securities or, if no such market exists, as determined in good faith by the Company’s Board.
			
		  	B =	  	the Warrant Price on the date of conversion.

 Any portion of this Warrant that is converted shall be immediately canceled. This Warrant or any
portion of this Warrant shall be deemed to have been converted immediately prior to the close of business on the date of its surrender for conversion as provided above, and the Person entitled to receive the shares of Warrant Stock issuable upon
such conversion shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, and in any event within three Business Days of the conversion, the Company
shall issue and deliver to the Person or Persons entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such conversion. If the Warrant shall be converted for less than the total
number of shares of Warrant Stock then issuable upon conversion, promptly after surrender of the Warrant upon such conversion, the Company will execute and deliver a new warrant, dated the date of this Warrant, evidencing the right of the Holder to
the balance of the Warrant Stock purchasable hereunder upon the same terms and conditions set forth in this Warrant. If this Warrant is converted, as a whole or in part, after the occurrence of an event as to which Section 3(c) is applicable,
the Holder shall receive the consideration contemplated by Section 3(c) in lieu of Common Shares. 
  

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 8. Transfer of Warrant. This Warrant may be transferred or assigned by the Holder hereof as a
whole or in part, provided that the transferor provides, at the Company’s request, an opinion of counsel or other evidence reasonably satisfactory to the Company that such transfer does not require registration under the Securities Act or any
similar requirement under the securities law applicable with respect to any other applicable jurisdiction. 
 9. Termination. This
Warrant shall terminate at 5:00 p.m. New York time on the Termination Date. 
 10. Governing Law; Jury Waiver. This Warrant and all
actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of laws provisions of the State of New York or of any other state. IN THE
EVENT OF ANY DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS WARRANT ARISING OUT OF THE TERMS OF THIS WARRANT, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR RESOLUTION OF SUCH DISPUTE, AND AGREE NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION OR SEEK TO TRANSFER ANY ACTION RELATING TO SUCH DISPUTE TO ANY OTHER JURISDICTION. THE COMPANY
AND THE HOLDER AGREE TO ACCEPT SERVICE OF PROCESS PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 11. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT.

 11. Miscellaneous; Notices. The headings in this Warrant are for purposes of convenience and reference only, and shall not be
deemed to constitute a part hereof. Neither this Warrant nor any term of this Warrant may be changed or waived except by an instrument in writing signed by the Company and the Holder of this Warrant. All notices and other communications from the
Company to the Holder of this Warrant shall be delivered personally, by facsimile or mailed via overnight courier, to the address, facsimile number furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an
address or facsimile number to the Company in writing. If such communication is delivered by facsimile, delivery shall be deemed given once the Holder receives a receipt confirmation, and if mailed via overnight courier delivery shall be deemed
given on the next Business Day thereafter. 
  

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 ISSUED: August 24, 2007 
  

			
	 DISTRIBUTED ENERGY SYSTEMS CORP.

		
	 By:
	 	 /s/ Peter J. Tallian

	 Name:
	 	Peter J. Tallian
	 Title:
	 	CFO

  

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 Schedule 1 
  

			
	 Number of Shares1
	 	 Exercise Price Per Share

	 1,989,629
	 	$0.80
	 6,600,000
	 	$1.00
	 6,600,000
	 	$1.50
	 6,600,000
	 	$2.00
	 6,600,000
	 	$2.50
	 6,600,000
	 	$3.00

	 1
	 To be adjusted proportionately to reflect any stock splits, reverse stock splits,
stock dividends or other recapitalization transactions occurring after the date of execution of the Purchase Agreement and the issuance of this Warrant. 

  

 Schedule 1-1 

 Attachment 1 
 NOTICE OF EXERCISE 
 TO: Distributed Energy Systems Corp. 
 1. The undersigned hereby elects to purchase
                                        
shares of the Warrant Stock of Distributed Energy Systems Corp. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full. 
 2. Please issue a certificate or certificates representing said shares of Warrant Stock in the name of the undersigned or in such other name as is specified below: 
  

					
			
		 	  
	 	
		 	(Name)	 	
			
		 	  
	 	
		 	(Address)	 	

  

							
			
	  
	 		  	  

	 (Date)
	 		  	(Name of Warrant Holder)
				
		 		  	By:	 	  

		 		  	 Title:
	 	  

  

 Attachment 1-1 

 Attachment 2 
 INVESTMENT REPRESENTATION STATEMENT 
 Common Shares 
 (as defined in the attached Warrant) of 
 Distributed Energy Systems Corp. 
 In connection with the purchase of the above-listed securities, the undersigned hereby represents to Distributed Energy Systems Corp. (the
“Company”) as follows: 
 (a) The securities to be received upon the exercise of the Warrant (the
“Securities”) will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this statement, the undersigned further represents
that it does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer, or grant participation to such Person or to any third person, with respect to any Securities issuable upon exercise of the Warrant.

 (b) The undersigned understands that the Securities issuable upon exercise of the Warrant at the time of issuance may not be registered
under the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Securities Act and state
law exemptions relating to offers and sales not by means of a public offering, and that the Company’s reliance on such exemptions is predicated on the undersigned’s representations set forth herein. 
 (c) The undersigned agrees that in no event will it make a disposition of any Securities acquired upon the exercise of the Warrant unless and until
(i) it shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and (ii) it shall have furnished the Company with an opinion
of counsel or other evidence reasonably satisfactory to the Company and Company’s counsel to the effect that (A) appropriate action necessary for compliance with the Securities Act and any applicable state securities laws has been taken or
an exemption from the registration requirements of the Securities Act and such laws is available and (B) the proposed transfer will not violate any of said laws. 
 (d) The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents
that it has had the opportunity to ask questions of the Company concerning the Company’s business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company’s
disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. The undersigned represents that it is an “accredited investor” within the meaning of Regulation D of the Securities Act.

  

 Attachment 2-1 

 (e) The undersigned acknowledges that the Securities issuable upon exercise or conversion of the Warrant
must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold from the Company or any affiliate of the Company, the sale being through a “broker’s transaction” or in transactions
directly with a “market maker” (as provided by Rule 144(f)) and the number of shares being sold during any three month period not exceeding specified limitations. 
 Dated:                      
  

			
	
	  

	 (Typed or Printed Name)

		
	 By:
	 	  

		 	 (Signature)

	  

	 (Title)

  

 Attachment 2-2 

 Attachment 3 
 NOTICE OF CONVERSION 
 TO: Distributed Energy Systems Corp. 
 1. The undersigned hereby elects to acquire
                                        
Common Shares of Distributed Energy Systems Corp. pursuant to the terms of the attached Warrant, by conversion of                      percent
(     %) of the Warrant. 
 2. Please issue a certificate or certificates representing said shares of Common
Shares in the name of the undersigned or in such other name as is specified below: 
  

					
			
		 	  
	 	
		 	(Name)	 	
			
		 	  
	 	
		 	(Address)	 	

  

							
			
	  
	 		  	  

	 (Date)
	 		  	(Name of Warrant Holder)
				
		 		  	By:	 	  

		 		  	 Title:
	 	  

		 		  		 	(Title and signature of authorized person)

  

 Attachment 3-1Letter Agreement between the registrant and Perseus Partners VII, L.P.

 Exhibit 10.3 
 [DESC Letterhead] 
 August 24, 2007 
 Perseus Partners VII, L.P. 
 c/o Perseus, L.L.C. 
 2099 Pennsylvania Avenue, NW 
 Suite 900 
 Washington, DC 20006-1813 

			
	Attention:	 	John C. Fox
		 	Senior Managing Director

  

	 	Re:	Securities Purchase Agreement (as amended through the date hereof, the “Purchase Agreement”) dated as of May 10, 2007 by and between Distributed Energy Systems
Corp. (the “Company”), and Perseus Partners VII, L.P. (the “Purchaser”) 

 Dear Ladies and Gentlemen:

 The Company and the Purchaser (collectively, the “Parties”) have agreed that the Subsequent Investment Closing under the
Purchase Agreement will be held on the date hereof. In connection with the Subsequent Investment Closing and to induce the other Party to consummate the transactions contemplated to be consummated at the Subsequent Investment Closing, the Parties
hereby agree as follows: 
 1. All capitalized terms defined in the Purchase Agreement and used herein without definition have the same
meanings herein as in the Purchase Agreement. 
 2. The Purchaser hereby waives satisfaction of the condition specified in
Section 2.3(k) of the Purchase Agreement that the size of the Board be reduced to five members effective as of the Subsequent Investment Closing. The Parties hereby agree that the size of the Board, as of the Subsequent Investment Closing,
shall be seven. After the Subsequent Investment Closing, the Company shall not permit the size of the Board to be increased without the prior written consent of the Purchaser. Moreover, in the event the Purchaser delivers to the Company a written
notice (a “Reduction Notice”) requesting that the size of the Board be reduced to five members, the Company shall take all actions within its control to reduce the size of the Board to five members as promptly as practicable after
receipt of such Reduction Notice and in any event by no later than the date of the Company’s next annual meeting of stockholders. 
 3.
The Parties hereby agree that, notwithstanding anything to the contrary in Section 5.6 of the Purchase Agreement, the Requisite Number of Perseus Directors shall initially be two and that, effective as of the Subsequent Investment Closing, John
C. Fox 

 
and Michael L. Miller shall be appointed as Perseus Directors. Such appointment shall be a condition to the obligations of the Purchaser to consummate the
transactions contemplated at the Subsequent Investment Closing. The Parties further agree that at any time the Purchaser shall have right to increase the Requisite Number of Perseus Directors to a number not in excess of the “Requisite
Number” determined under Section 5.6(b)(i) of the Purchase Agreement (without giving effect to this letter agreement) by delivering to the Company a written notice requesting such increase and specifying the names of the additional Perseus
Directors (an “Increase Notice”). Upon the receipt of an Increase Notice, the Company shall take all actions required under Section 5.6 of the Purchase Agreement to appoint such additional directors as Perseus Directors as
promptly as practicable. 
 4. The Parties further agree that, notwithstanding anything to the contrary in Section 5.6 of the Purchase
Agreement, the Purchaser shall continue to be allowed one Perseus Observer of its choice, who shall be Teresa Y. Bernstein or another person reasonably acceptable to the Board, to attend all meetings of the Board in a nonvoting capacity. In
connection therewith, the Company shall provide the Perseus Observer with copies of all notices, minutes, consents and other materials, financial or otherwise, which the Company provides to its Board. The Company reserves the right to exclude such
Perseus Observer from access to any material or meeting or portion thereof if the Company in good faith believes that such exclusion is necessary to preserve the attorney-client privilege or for other similar reasons. The Perseus Observer shall be
entitled to reimbursement for reasonable out-of-pocket expenses (including but not limited to travel and lodging) incurred in connection with attendance at meetings of the Board. The Company shall pay all reimbursement for expenses for the Perseus
Observer in accordance with the terms set forth in Section 5.6(c) of the Purchase Agreement. This right shall terminate at such time as Perseus’ right to have a Perseus Director on the Board terminates. 
 5. The Purchaser hereby waives the closing conditions for the Subsequent Investment Closing set forth in Sections 2.3(c) and (j) of the Purchase
Agreement with regard to the default caused by the Company’s breach of the covenant set forth in sub-section 2(a) of the Pre-Closing Waivers and Post-Closing Agreement, dated June 1, 2007, by and between the Purchaser and the Company, as
amended, due to the Company’s failure to close all accounts not covered by a deposit control agreement in favor of the Purchaser and transfer all funds in such accounts to another commercial bank located in the United States that is subject to
an account control agreement in favor of the Purchaser that is reasonably satisfactory to the Purchaser. The parties agree that the Company’s failure to comply with this covenant constitutes and shall continue to constitute an Event of Default
under the provisions of the Promissory Notes. 
 6. This letter agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without regard to principles of conflicts of laws. All notices hereunder shall be provided in accordance with Section 8.7 of the Purchase Agreement. This letter agreement may be executed in any number of counterparts.
Signatures on this letter agreement may be communicated by facsimile or electronic transmission and shall be binding upon the Parties so transmitting their signatures. 

  

 -2- 

 
Counterparts with original signatures shall be provided to the other Party following the applicable facsimile or electronic transmission, provided that the
failure to provide the original counterpart shall have no effect on the validity or the binding nature of this letter agreement. No Party shall raise facsimile or electronic delivery of a signature or the fact that any signature or agreement or
instrument was transmitted or communicated by a facsimile or e-mail as a defense to the formation or enforceability of a contract and each such Party forever waives any such defense. This letter agreement shall be deemed to be an amendment to, and
constitute part of, the Purchase Agreement and any breach of this letter agreement shall be deemed to be a breach of the Purchase Agreement for all purposes. 
 [Remainder of this Page Intentionally Left Blank] 
  

 -3- 

 If the foregoing accurately sets forth the agreements of the Parties with respect to the subject matter
hereof, please sign this letter agreement in the space indicated below. 
  

			
	Very truly yours,
	
	DISTRIBUTED ENERGY SYSTEMS CORP.
		
	 By:
	 	 /s/ Ambrose L. Schwallie

	Name:	 	Ambrose L. Schwallie
	Title:	 	Chief Executive Officer

 ACCEPTED AND AGREED TO: 
  

			
	PERSEUS PARTNERS VII, L.P.
		
	 By:
	 	 Perseus Partners VII GP, L.P., 
 its general partner

		
	 By:
	 	 Perseus Partners VII GP, L.L.C.,
 its general partner

		
	 By:
	 	 /s/ Rona Kennedy

		 	Rona Kennedy
		 	Chief Financial Officer, Treasurer and Secretary

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