Document:

Senior Secured Promissory Note dated June 1, 2007

 Exhibit 10.1 
 EXECUTION COPY 
 SENIOR SECURED PROMISSORY NOTE 
 THE SECURITIES REPRESENTED BY THIS NOTE HAVE BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH
SECURITIES. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR 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 AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED. 
  

			
	$12,500,000 (the “Principal Amount”)	 	June 1, 2007
		 	Wallingford, Connecticut

 FOR VALUE RECEIVED, DISTRIBUTED ENERGY SYSTEMS CORP., a corporation incorporated under the Laws of
the State of Delaware (the “Company”), promises to pay to the order of Perseus Partners VII, L.P., or its registered assigns (the “Holder”), the Principal Amount, or such lesser amount as shall then equal the
outstanding Principal Amount, together with interest thereon at a rate equal to 12.5% per annum, and computed on the basis of a year consisting of 365 days in accordance with the terms set forth in Section 2 of this senior secured
promissory note (this “Note”). 
 This Note is issued pursuant to the Securities Purchase Agreement
(the “Purchase Agreement”) dated as of May 10, 2007 by and between Perseus Partners VII, L.P. and the Company. 
 The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees: 
 1. Definitions. Capitalized terms defined in the Purchase Agreement and used herein without definition have the same meaning herein as in the
Purchase Agreement. In addition, as used in this Note, the following capitalized terms have the following meanings. 
 (a) “Additional
Secured Note” shall have the meaning set forth in Section 2(a). 
 (b) “Change of Control” means any of the
following: 
 (i) any merger, consolidation, reorganization, recapitalization, or other business combination involving the Company or any
Material Subsidiary, in which the shareholders of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving entity in
such merger, consolidation, reorganization, recapitalization or other business combination; 
  

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 (ii) the sale of all, or substantially all, of the assets of the Company or any Material Subsidiary to a
third party not wholly owned, directly or indirectly, by the Company; 
 (iii) the sale of voting securities of the Company in a transaction
or a series of related transactions to any Person (or group of Persons acting in concert), other than any Affiliates of the Holder or any Person who is or has been a Holder, that results in such Person (or group of Persons) (together with their
Affiliates) owning more than 50% of the outstanding voting securities of the Company or any Material Subsidiary; or 
 (iv) the termination
or removal of either Ambrose L. Schwallie from his position as Chief Executive Officer or Peter Tallian from his position as Chief Financial Officer with the Company without cause, unless approved by holders of a majority of the outstanding
principal amount of the Senior Secured Note(s). For purposes of clause 1(b)(iv), “cause” shall mean any (i) willful failure, which failure is not cured within 30 days of written notice to Ambrose L. Schwallie or Peter Tallian, as
applicable, to perform his material responsibilities to the Company or (ii) willful misconduct which materially and adversely affects the business reputation of the Company. 
 (c) “Closing Price” means the closing price of the Common Shares as reported on the Nasdaq Global Market. 
 (d) “Common Shares” means shares of the common stock, par value $0.01 per share, of the Company. 
 (e) “Date of Issuance” means the date of issuance of this Note by the Company under the Purchase Agreement. 
 (f) “Default Interest Rate” means the lesser of 20% or the maximum rate allowed by applicable Law. 
 (g) “Lien” means any lien, security interest, mortgage, pledge, charge, license, adverse claim, reversion or encumbrance of any kind,
and includes conditional sales contracts, title retention agreements and capital leases. 
 (h) “Maturity Date” means March
1, 2008. 
 (i) “Normal Course Liens” means: 
 (i) any builder’s, mechanic’s, materialman’s, worker’s, repairman’s or other similar statutory Lien incurred in the ordinary course of business, that has not at the time been filed pursuant to
applicable Laws and any such Lien that, although filed, relates solely to an obligation not overdue or, if overdue, is being contested in good faith or is bonded or in respect of which the appropriate amount has been withheld in accordance with
applicable Laws; 
 (ii) any right reserved to, or vested in, any applicable Governmental Entity by the terms of any applicable Laws, any
applicable authorization by a Governmental 

  

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Entity, or any property interest, easement, right-of-way or servitude issued or granted by applicable Laws or by any applicable authorization by a
Governmental Entity, to terminate any such authorization, easement, right-of-way or servitude or to purchase, expropriate, appropriate or recapture or designate a purchaser of any property; 
 (iii) any Lien for Taxes, assessment, water or sewer, or other rents or charges not at the time overdue or, if overdue, being contested in good faith;

 (iv) any Lien arising in connection with workers’ compensation, unemployment or employment insurance or other social benefits
required by applicable Laws not at the time overdue or, if overdue, being contested in good faith; 
 (v) Liens, deposits or pledges to
secure statutory obligations or performance of bids, tenders, contracts (other than for the repayment of money) or leases, in an aggregate amount not to exceed $50,000; 
 (vi) involuntary Liens (including the Lien of an attachment, judgment or execution) in an aggregate amount not to exceed $10,000 and not at the time overdue or, if overdue, contested in good faith; 
 (vii) Purchase Money Liens; 
 (viii) Liens
granted or created by the Transaction Documents; and 
 (ix) any other Liens consented to by the Holder or approved pursuant to
Section 6(b); 
 provided that in each case where it is in good faith contesting any obligations, Taxes or assessments as contemplated herein,
(A) it shall have established to the satisfaction of the Holder (acting reasonably) a reserve in accordance with GAAP unless there is a reasonable likelihood that the amount will be required to be paid, in which case it shall establish
sufficient reserve for or deposit with a court of competent jurisdiction or the assessing authority, or to such other Person as is acceptable to the Holder, acting reasonably, sufficient funds or a surety bond, for the total amount claimed to be
secured by such Liens, where the application of such reserve, funds or bond would result in their discharge, and (B) such Lien shall only be a Permitted Lien for so long as such contestation effectively postpones or stays the enforcement of the
rights of the holder thereof. 
 (j) “Obligations” means the principal, interest and other amounts payable under this Note.

 (k) “Permitted Indebtedness” means (i) the amount permitted by (A) the Permitted Existing Secured Indebtedness
and (ii) indebtedness permitted to be incurred under the terms of the Purchase Agreement. 
 (l) “Permitted Liens”
means Liens granted pursuant to the Permitted Existing Secured Indebtedness or a Normal Course Lien. 
  

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 (m) “Purchase Money Lien” means a Lien incurred in the ordinary course of business only
to secure the purchase price of an asset, or to secure debt used only to finance or refinance the purchase of an asset, in the aggregate amount not to exceed $50,000. 
 (n) “Secured Note” means this Note, any Additional Secured Notes issued or any notes issued in replacement of the foregoing. 
 (o) “Trading Day” means any day on which Nasdaq is open for trading. 
 (p) “Transaction Documents” shall mean each of the Promissory Notes, the Purchase Agreement, the Warrants, the Security and Pledge
Agreement, the Subsidiary Security and Pledge Agreements, the Guaranties, the Registration Rights Agreement, the Intercreditor Agreement, the Management Rights Letter and any other instrument or agreement at any time delivered in connection with the
foregoing to secure the Obligations. 
 (q) “Warrants” shall mean warrants to purchase Common Shares issued pursuant to the
Purchase Agreement. 
 2. Interest. 
 (a) All unpaid principal, together with any accrued but unpaid interest and other amounts payable under this Note, shall be due and payable on (i) the Maturity Date, or (ii) when such amounts are declared
due and payable by the Holder or made automatically due and payable upon or after (A) the occurrence of an Event of Default (as defined below), (B) the liquidation or dissolution of the Company, or (C) any Change of Control. Interest
on this Note shall be payable (and if not paid when due, shall be compounded) quarterly in arrears on each September 1, December 1, March 1 and June 1 after the date of issuance of this Note and shall be payable at the
option of the Company either (i) in lawful money of the United States of America, or (ii) or by the issuance of an additional senior secured promissory note identical in all respects to this Note except that it shall have a principal
amount equal to such interest payment and a different date of issuance (each, an “Additional Secured Note”). 
 (b) If the
Company elects to pay interest by issuing an Additional Secured Note, it shall give notice to the Holder on the day such payment is due and deliver such Additional Secured Note to the Holder within five Business Days. 
 (c) Interest shall be calculated based on the weighted average principal outstanding for such period. The first payment of interest shall be on
September 1, 2007 and shall be calculated from the Date of Issuance to August 31, 2007. 
 3. Secured Obligations;
Collateral. In order to secure the Company’s payment and performance of the Obligations and to secure the Company’s prompt, full and faithful performance and observance of all of the provisions under this Note and the other Transaction
Documents, the Company has delivered to the Holder, the Security and Pledge Agreement, pursuant to which the Company has granted to the Holder as security and collateral for the payment and performance of the Obligations, a security interest in all
of the property and assets of the Company, whether now existing or hereafter arising, and all as more specifically described, and on the terms and conditions set forth in, the Security and Pledge Agreement. The 

  

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Company’s Material Subsidiaries have also entered into and delivered to the Holder, as further protection, the Guaranties and the Subsidiary Security
and Pledge Agreements. The security interest granted by the Company under the Security and Pledge Agreement, and by the Company’s Material Subsidiaries under the Subsidiary Security and Pledge Agreement, securing the indebtedness evidenced by
this Note, including all Obligations, is senior to all other liens, security interests or encumbrances securing any other indebtedness of each of the Company and its Material Subsidiaries other than the Permitted Existing Secured Indebtedness
(pursuant to the Intercreditor Agreement). 
 4. Events of Default. The occurrence of any of the following shall constitute an
“Event of Default” under this Note: 
 (a) Failure to Pay. The Company shall fail to pay when due any principal
payment on this Note, or any interest or other payment required under the terms of this Note, and such failure continues for three Business Days thereafter; 
 (b) Breaches of Representations and Warranties. Any representation or warranty made by the Company in this Note or in any of the other Transaction Documents shall not have been true in any material respect when
made; provided, that if the facts or events making such representation or warranty untrue are capable of correction or cure, then the Company shall have ten Business Days after notice of the breach is delivered to the Company to correct or
cure such breach; 
 (c) Breaches of Other Covenants. The Company shall fail to observe or to perform any other covenant, obligation,
condition or agreement in any material respect contained in this Note or the other Transaction Documents, other than those specified in Section 4(a) of this Note, and such failure continues for ten Business Days after notice of the breach is
delivered to the Company; 
 (d) Cross-Default. (i) The Company shall default under (A) any Secured Note, or (B) its
payment obligations pursuant to any Transaction Document, and such failure continues for five Business Days thereafter, or (ii) the Company or any of its Subsidiaries shall default under any other agreement, bond, debenture, note or other
evidence of indebtedness for money borrowed, under any guaranty or under any mortgage, or indenture pursuant to which there shall be issued or by which there shall be secured or evidenced any indebtedness for money borrowed by the Company or any of
its Subsidiaries, whether such indebtedness now exists or shall hereafter be created, including but not limited to, default under the Permitted Existing Secured Indebtedness, which default (other than a default under a Secured Note) pursuant to
clause (ii) shall have resulted in indebtedness of at least $250,000 being due and payable prior to the date on which it would otherwise become due and payable; 
 (e) Undischarged Judgment. One or more judgments for the payment of money in an amount in excess of $250,000 in the aggregate shall be rendered against the Company or any of its Material Subsidiaries (or any
combination thereof) and shall remain undischarged for a period of ten consecutive Business Days during which execution shall not be effectively stayed, or any action is legally taken by a judgment creditor to levy upon any such judgment;

  

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 (f) Voluntary Bankruptcy or Insolvency Proceedings. The Company (or any Subsidiary thereof) shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v) become insolvent (as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other Proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or consent to
any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other Proceeding commenced against it or (vii) take any action for the purpose of effecting any of the foregoing;

 (g) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company (or any Subsidiary thereof) or of all or a substantial part of the property thereof, or an involuntary case or other Proceeding seeking liquidation, reorganization or other relief with respect to the Company (or any
Subsidiary thereof) or the debts thereof under any bankruptcy, insolvency or other similar Law now or hereafter in effect shall be commenced and an order for relief entered, or such case or Proceeding shall not be dismissed or discharged within 30
days of commencement; 
 (h) Board Observer; Protective Provisions. Any of the following conditions exist: (i) the Company shall
have failed to allow the Perseus Observer to attend and observe any meeting of the Board, pursuant to and subject to the limitations set forth in Section 5.6(a) of the Purchase Agreement or (ii) the Company breaches any of its obligations
under Section 5.6 or 5.14 of the Purchase Agreement; and, in the case of any such breach described in this clause (ii) that is reasonably susceptible to cure, such breach continues uncured for ten Business Days after notice of such breach
is delivered to such Company; or 
 (i) Stockholder Approval. The Board shall fail to recommend to the Company’s stockholders
that they grant the Stockholder Approval (or shall revoke or rescind its recommendation), the Board shall otherwise advise the Company’s stockholders not to grant the Stockholder Approval or the Company shall fail to include the Board’s
recommendation in its proxy solicitation materials delivered to the Company’s stockholders. 
 5. Rights of Holder upon Default.

 (a) Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Section 4(f) or 4(g) of
this Note) and at any time thereafter during the continuance of such Event of Default, holders of a majority of the outstanding principal amount of the Senior Secured Note(s) may declare all outstanding Obligations payable by the Company under this
Note to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained in this Note or in the other Transaction Documents to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 4(f) or 4(g) of this Note, immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, 

  

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anything contained in this Note or in the other Transaction Documents to the contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it by the Transaction Documents or otherwise permitted to it by Law, either by suit in equity or by action at Law, or both.

 (b) Notwithstanding anything to the contrary contained in this Note, in addition to the rights of the Holder specified in
subsection (a) of this Section 5, on the date an Event of Default under this Note occurs, the interest rate on this Note shall increase, from that date forward, to the Default Interest Rate, which interest shall be compounded quarterly and
payable solely in lawful money of the United States of America. 
 6. Covenants. 
 (a) Affirmative Covenants. The Company covenants that, so long as any Obligations remain outstanding, the Company shall: 
 (i) Security and Pledge Agreement. Grant to the Holder, and maintain for the benefit of the Holder, a lien on and security interest in all of its
assets and properties, whether now or hereafter existing, owned or acquired, which the Company shall perfect by filing UCC-1 financing statements in the appropriate jurisdictions and taking other actions to perfect the security interest as the
Holder may reasonably request, all in accordance with the terms of the Security and Pledge Agreement, and cause its Material Subsidiaries to do the same. 
 (ii) Preservation of Corporate Existence. Preserve and maintain its and its Material Subsidiaries’ corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is required, unless the failure to so preserve, maintain or qualify does not and will not have a Material Adverse Effect, and preserve and
maintain all of its Proprietary Assets that are material to it and its Subsidiaries’ business. 
 (iii) Compliance with Laws.
Comply with all applicable Laws of any Governmental Entity, except non-compliance being contested in good faith through appropriate Proceedings so long as the Company shall have set up and funded sufficient reserves, if any, required under GAAP with
respect to such items. 
 (iv) Performance Under the Note. Pay, observe or perform any other covenant, obligation, condition or
agreement contained in this Note. 
 (v) Payment Defaults on Other Indebtedness. If the Company defaults on a payment required under
any indebtedness (other than any indebtedness owed to the Holder) and, pursuant to a binding agreement, the Company is or would be precluded from making a payment in cash to the Holder during the continuance of such default (a “Payment
Default”), or the Company believes that a Payment Default may occur, (A) consult with the Holder prior to the occurrence of such Payment Default and (B) during the continuance of such Payment Default pay interest on this Note only
in the form of Additional Secured Notes. 
  

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 (b) Negative Covenants. The Company covenants that so long as any Obligations remain outstanding,
neither the Company nor any Subsidiary shall directly or indirectly take any of the following actions without the prior written consent of the Holder: 
 (i) Create, incur, assume, guarantee or be or remain liable for, contingently or otherwise, or suffer to exist any indebtedness for borrowed money, except Indebtedness incurred pursuant to the Transaction Documents or
Permitted Indebtedness; 
 (ii) Create, incur, assume or suffer to exist any Lien of any kind on any of its assets, except for Liens created
in connection with the Transaction Documents or Permitted Liens; 
 (iii) Enter into any transaction, or a series of related transactions,
which would result in a Change of Control; 
 (iv) Amend the Permitted Existing Secured Indebtedness, except as otherwise permitted pursuant
to the terms of this Note; or 
 (v) Alter the Business Plan in a manner that is material and adverse to the Company. 
 7. Prepayment. The Company shall have no right to prepay this Note or any interest or fees accruing or incurred with respect to this Note, without
the prior written consent of the Holder. 
 8. Waiver and Amendment. Any provision of this Note may be amended, waived or modified
upon the written consent of both the Company and the holders of a majority of the outstanding principal amount of the Senior Secured Note(s). Additionally, the holders of a majority of the outstanding principal amount of the Secured Note(s) shall be
deemed to have waived any breach of any covenant set forth in Section 6(b) hereof in the event that each Perseus Director votes in favor of the action that causes such breach, provided that all material terms related to the cause thereof
were disclosed to such Board members. 
 9. Transfer of this Note or Payment Hereunder. This Note may not be transferred in violation
of any restrictive legend set forth hereon. Each new Note issued upon transfer of this Note shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of
counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing,
transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as
the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the
contrary. 
 10. Assignment. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation
of law or otherwise, as a whole or in part, by the 

  

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Company without the prior written consent of the Holder. The Holder may assign the rights, interests or obligations under this Note, as a whole or in part,
at any time, subject to compliance with Section 9 of this Note, upon written notice to the Company of such assignment. Notwithstanding the foregoing, until the Company receives notice in accordance with this Section 10, the Company shall
treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest on this Note and for all other purposes whatsoever, whether or not this Note shall be overdue. 
 11. Treatment of Note. To the extent permitted by GAAP, the Company will treat, account and report the Note as debt and not equity for accounting
purposes and with respect to any returns filed with federal, state or local tax authorities. 
 12. Notices. Any notice, request or
other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or by recognized overnight courier, personal
delivery or facsimile transmission at the respective addresses or facsimile number of the parties as set forth in or otherwise designated by either party pursuant to the Purchase Agreement or on the register maintained by the Company. Any party
hereto may by notice so given change its address or facsimile number for future notice hereunder. Notice shall conclusively be deemed to have been given when received if received prior to 4:00 p.m. (local time) otherwise it shall be deemed to have
been received the following Business Day. 
 13. Interaction with other Secured Notes. The Company and the Holder agree that all
Secured Notes shall rank pari passu notwithstanding date of issue. 
 14. Expenses; Waivers. If action is instituted to collect
this Note, the Company shall pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument. 
 15. Successors and
Assigns. Subject to the restrictions on transfer described in Sections 9 and 10 of this Note, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties. 
 16. Governing Law; Jury Waiver. This Note and all actions arising out of or in connection with this
Note 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 NOTE ARISING OUT OF THE TERMS OF THIS NOTE, 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 

  

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ACCEPT SERVICE OF PROCESS PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 14. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE. 
 [signatures appear on following page] 
  

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 IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written
above. 
  

			
	DISTRIBUTED ENERGY SYSTEMS CORP.
		
	By:	 	 /s/ Ambrose L. Schwallie

	Name:	 	Ambrose L. Schwallie
	Title:	 	Chief Executive Officer

 [Signature Page to Senior Secured Promissory Note]Initial Investment Warrant dated June 1, 2007

 Exhibit 10.2 
 EXECUTION VERSION 
 INITIAL 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. 1	 	June 1, 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 June 1, 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 June 1, 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 $0.80 per share, subject to adjustment as described in Section 3
hereof. 
 (g) “Warrant Stock” means 7,954,536 Common Shares, 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 payable in securities of the Company other than Common Shares or other property, in each such 

  

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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.

  

 3 

 (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 

  

 4 

 
and, if required, the number of Common Shares to be issued upon exercise or conversion of the 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. 
  

 5 

 (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 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, 

  

 6 

 
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. 
 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. 
  

 7 

 ISSUED: June 1, 2007 
  

			
	DISTRIBUTED ENERGY SYSTEMS CORP.
		
	By:	 	 /s/ Ambrose L. Schwallie

	Name:	 	Ambrose L. Schwallie
	Title:	 	Chief Executive Officer

 [Signature Page to Initial Investment Warrant] 

 EXECUTION VERSION 
  

 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 

 EXECUTION VERSION 
  

 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 

 EXECUTION VERSION 
  

 (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)

 EXECUTION VERSION 
  

 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 3-1

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