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Exhibit 10.3    
    

AMERICAN DISTRIBUTED GENERATION INC.

2001 STOCK INCENTIVE PLAN (5/30/03 Revision)  

1.     Purposes of the Plan.  

        This 2001 Stock Incentive Plan (the "Plan"), as amended to date, is intended to provide incentives (a) to the officers and employees of American
Distributed Generation Inc., a Delaware corporation (the "Company"), and any parent or subsidiary of the Company, by providing such officers and employees with opportunities to purchase
stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code")
("ISO" or "ISOs"); (b) to directors, officers, employees, consultants and advisors of the Company and any present or future parent, subsidiary or affiliate of the Company (hereinafter
collectively "Related Corporations") by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs
("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers, employees, consultants and advisors of the Company and Related Corporations by providing
them with opportunities to receive awards of stock in the Company whether such stock awards are in the form of bonus shares, deferred stock awards, or of performance share awards ("Awards"); and
(d) to directors, officers, employees, consultants and advisors of the Company and Related Corporations by providing them with opportunities to make direct purchases of restricted stock in the
Company ("Restricted Stock Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter individually as an "Option" and collectively as "Options". Options, Awards and
authorizations to make Restricted Stock Purchases are referred to hereafter individually as a "Stock Right" and collectively as "Stock Rights". As used herein, the terms "parent" and "subsidiary" mean
"parent corporation" and "subsidiary corporation", respectively, as those terms are defined in Section 424 of the Code. 

2.     Administration of the Plan.  

        (a)    Board or Committee Administration.    This Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board may appoint a Compensation Committee or Human Resources Committee (as the case may be, the "Committee") of two (2) or more of its members to administer
this Plan and to grant Stock Rights hereunder, provided such Committee is delegated such powers in accordance with applicable state law. (All references in this Plan to the "Committee" shall
mean the Board if no such Compensation Committee or Stock Incentive Plan Committee has been so appointed). If the Company or any Related Corporation registers any class of any equity security pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be administered in accordance with the applicable rules set forth in
Rule 16b-3 or any successor provisions of the Exchange Act ("Rule 16b-3"). From and after the date the Company becomes subject to Section 162(m) of
the Code with respect to compensation earned under this Plan, each member of the Committee shall also be an "outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder. 

        (b)    Authority of Board or Committee.    Subject to the terms of this Plan, the Committee shall have the authority
to: (i) determine the employees of the Company and any Related Corporation (from among the class of employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of individuals and entities eligible under paragraph 3 to receive Non-Qualified Options and Awards and to make Restricted
Stock Purchases) to whom Non-Qualified Options, Awards and authorizations to make Restricted Stock Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Restricted Stock Purchases made; (iii) determine the exercise price of shares subject to each Option, which price 

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shall
not be less than the minimum price specified in paragraph 6, and the purchase price of shares subject to each Restricted Stock Purchase; (iv) determine whether each Option granted
shall be an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 8) the time or times when or what conditions must be satisfied before each Option shall become
exercisable and the duration of the exercise period; (vi) determine whether restrictions such as transfer restrictions, repurchase options and "drag along" rights and rights of first refusal
are to be imposed on shares subject to Options, Awards and Restricted Stock Purchases and the nature of such restrictions, if any; (vii) impose such other terms and conditions with respect to
capital stock issued pursuant to Stock Rights not inconsistent with the terms of this Plan as it deems necessary or desirable; and (viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. 

        If
the Committee determines to issue a Non-Qualified Option, the Committee shall take whatever actions it deems necessary, under the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Stock Right granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any
Stock Right granted under it. 

        (c)    Delegation of Authority to Grant Awards to Officer.    Without limiting the foregoing, the Board, in its
discretion, may also delegate to a single officer of the Company who is a member of the Board (to the extent consistent with state law) all or part of the Board's or Committee's authority and
duties with respect to the granting of Stock Rights to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act or "covered employees" within the
meaning of Section 162(m) of the Code, subject to such limitations as the Board or the Committee deems appropriate, including without limitation as to the amount of Stock Rights that may be
granted during the period of delegation, and guidelines as to the determination of the exercise price of any Option, the purchase price of other Stock Rights and the setting of vesting schedules or
criteria. Such officer (the "Delegated Officer") shall act as a one member committee of the Board, and shall in any event be subject to the same limitations as are applicable to the Committee.
References to the Committee in this Plan shall also include the Delegated Officer, but only to the extent consistent with the authorities and duties delegated to the Delegated Officer by the Board.
The Board may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Delegated Officer that were consistent with the terms of
this Plan. 

        (d)    Committee Actions.    The Committee may select one of its members as its chairman and shall hold meetings at
such time and places as it may determine. Acts by a majority of the Committee, acting at a meeting (whether held in person or by teleconference), or acts reduced to or approved in writing by all of
the members of the Committee, shall be the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefore, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer this Plan, subject to
compliance with paragraph 2(a). 

        (e)    Grant of Stock Rights to Board Members.    Stock Rights may be granted to members of the Board, subject to
compliance with Rule 16b-3 when required by paragraph 2(a). All grants of Stock Rights to members of the Board shall in all respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. 

3.     Eligible Employees and Others.  

        ISOs may be granted to any employee of the Company or any parent or subsidiary of the Company. Those officers and directors of the Company who are not employees
of the Company or any 

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parent
or subsidiary of the Company may not be granted ISOs under this Plan. Non-Qualified Options, Awards and authorizations to make Restricted Stock Purchases may be granted to any
employee, officer or director (whether or not also an employee) of or consultant or advisor to the Company or any Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. Granting a Stock Right to any individual or entity shall neither entitle that individual or entity to, nor disqualify him or her
from, participation in any other grant of Stock Rights. 

4.     Stock.  

        The stock subject to Stock Rights shall be the authorized but unissued shares of Common Stock of the Company (the "Common Stock"), or shares of Common
Stock reacquired by the Company in any manner. The aggregate number of shares of Common Stock which may be issued pursuant to this Plan is 4,000,000, subject to adjustment as provided in
paragraph 13 or amendment as provided in Section 15. Any such shares may be issued pursuant to the exercise of Stock Rights, so long as the aggregate number of shares so issued
does not exceed the number of such shares authorized under this paragraph 4. 

5.     Granting of Stock Rights.  

        Stock Rights may be granted under this Plan at any time on or after December 11, 2001 and prior to December 11, 2011. The date of grant of a Stock
Right under this Plan will be the date specified by the Committee at the time it grants the Stock Right or such date that is specified in the instrument or agreement evidencing such Stock Right;
provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant and that with respect to an ISO grant such date shall not be earlier than the date of
commencement of employment of the employee granted the ISO. The Committee shall have the right, with the consent of the optionee, to convert an ISO granted under this Plan to a
Non-Qualified Option pursuant to paragraph 17. 

6.     Minimum Option Price; ISO Limitations.  

        (a)    Price for ISOs.    The exercise price per share specified in the agreement relating to each ISO granted under
this Plan shall not be less than the fair market value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the Company, the price per share specified in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of grant. 

        (b)    $100,000 Annual Limitation on ISOs.    Each eligible employee may be granted ISOs only to the extent that, in
the aggregate under this Plan and all other incentive stock option plans of the Company and any parent or subsidiary of the Company, such ISOs do not become exercisable for the first time by such
employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the ISOs were granted) of Common Stock in
that year. Any Options granted to an employee in excess of such amount will be granted as Non-Qualified Options. 

        (c)    Determination of Fair Market Value.    If, at the time an Option is granted under the Plan, the Common Stock is
publicly traded, "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted
and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the
Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the NASDAQ National Market List, if the Common
Stock is not then traded 

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on
a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not then traded on a national securities exchange and is not reported on the NASDAQ National Market List. However, if the
Common Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors in good faith it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's
length, if any. 

7.     Option Duration.  

        Subject to earlier termination as provided in paragraphs 9, 10, and 13(b), each Option shall expire on the date specified by, or shall have such duration
as may be specified by, the Committee and set forth in the original stock option agreement granting such Option, but not more than ten years from the date of grant. Notwithstanding the foregoing, in
the case of ISOs granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, such ISOs shall expire not more
than five years from the date of grant.
Non-Qualified Options shall expire on the date specified in the agreement granting such Non-Qualified Options, subject to extension as determined by the Committee. ISOs, or any
part thereof, that have been converted into Non-Qualified Options may be extended as provided in paragraph 17. 

8.     Exercise of Options.  

        Subject to the provisions of paragraphs 9 through 13, each Option granted under the Plan shall be exercisable as follows: 

        (a)    Vesting.    As set forth in paragraph 2(b), and subject to paragraphs 9 and 10 with
respect to ISOs, the Committee shall determine the time or times when or what conditions must be satisfied before each Option shall become exercisable and the duration of the exercise period. The
Committee may also specify such other conditions precedent as it deems appropriate to the exercise of an Option. 

        (b)    Full Vesting of Installments.    Once an installment becomes exercisable it shall remain exercisable until
expiration or termination of the Option, unless otherwise specified by the Committee. 

        (c)    Partial Exercise.    Each Option or installment may be exercised at any time or from time to time, in whole or
in part, for up to the total number of shares with respect to which it is then exercisable, provided that the Committee may specify a certain minimum number or percentage of the shares issuable upon
exercise of any Option that must be purchased upon any exercise. 

        (d)    Acceleration of Vesting.    The Committee shall have the right to accelerate the date of exercise of any
installment of any Option, despite the fact that such acceleration may (i) cause the application of Sections 280G and 4999 of the Code if a Change in Control Event, as defined
below in paragraph 13(b), occurs, or (ii) disqualify all or part of the Option as an ISO. 

9.     Termination of Employment.  

        Subject to the provisions of paragraph 13(b), if an ISO optionee ceases to be employed by the Company and all Related Corporations other than by reason of
death or disability as defined in paragraph 10, no further installments of his or her ISOs shall become exercisable following the date of such cessation of employment, and his or her ISOs shall
terminate after the passage of ninety (90) days from the date of termination of his or her employment, but in no event later than on their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 17. Nothing in this Plan shall be deemed 

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to
give any grantee of any Stock Right the right to be retained in employment or other service by the Company or any Related Corporation for any period of time. 

        Notwithstanding
anything contained in this paragraph 9 to the contrary, the Board or Committee may establish rules in particular stock option agreements with respect to
Misconduct, as defined below, committed by a grantee of a Stock Right. 

10.   Death; Disability.  

        (a)    Death.    If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his
or her death, or if the employee dies within the thirty (30) day period after the employee ceases to be employed by the Company and all Related Corporations, any ISO of his or hers may be
exercised, to the extent of the number of shares with respect to which he or she could have exercised it on the date of his or her death, by his or her estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and distribution, at any time prior to the earlier of the specified expiration date of the ISO or one (1) year from the date of such
optionee's death. 

        (b)    Disability.    If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason
of his or her disability, he or she shall have the right to exercise any ISO held by the optionee on the date of termination of employment, to the extent of the number of shares with respect to which
he or she could have exercised it on that date, at any time prior to the earlier of the specified expiration date of the ISO or one (1) year from the date of the termination of the optionee's
employment. For the purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code or successor statute. 

11.   Assignability.  

        Except for Non-Qualified Options which may be transferred for estate planning purposes to the extent provided in the instrument or agreement granting
such Non-Qualified Options, no Stock Right shall be assignable or transferable by the grantee except by will or by the laws of descent and distribution, and during the lifetime of the
grantee each Stock Right shall be exercisable only by the optionee. No Stock Right, and no right to exercise any portion thereof, shall be subject to execution, attachment, or similar process,
assignment, or any other alienation or hypothecation. Upon any attempt so to transfer, assign, pledge, hypothecate, or otherwise dispose of any Stock Right, or of any right or privilege conferred
thereby, contrary to the provisions thereof or hereof or upon the levy of any attachment or similar process upon any Stock Right, right or privilege, such Stock Right and such rights and privileges
shall immediately become null and void. The foregoing shall not be construed to restrict the ability to assign or transfer shares of Common Stock issued upon the exercise or award of a Stock Right to
the extent that the instrument or agreement granting such Stock Right permits such assignment or transfer. 

12.   Terms and Conditions of Stock Rights.  

        Stock Rights shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in paragraphs 6 through 11 hereof to the extent applicable and may contain such other provisions as the Committee deems advisable which are
not inconsistent with this Plan. Without limiting the foregoing, such provisions may include transfer restrictions, rights of refusal, vesting provisions, repurchase rights, lock-up
provisions and drag-along rights with respect to shares of Common Stock issuable upon exercise of Stock Rights, and such other restrictions applicable to shares of Common Stock as the
Committee may deem appropriate. In granting any Non-Qualified Option, the Committee may specify that such Non-Qualified Option shall be subject to the restrictions set forth 

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herein
with respect to ISOs, or to such other termination, cancellation or other provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on
one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such instruments. 

13.   Adjustments.  

        Upon the occurrence of any of the following events, an optionee's rights with respect to Options granted to the optionee hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such Option: 

        (a)    Stock Dividends and Stock Splits.    If the shares of Common Stock subject to Options granted under this Plan
shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share
to reflect such subdivision, combination or stock dividend. 

        (b)    Acquisitions and Change in Control Events.    If the Company is to be subject to or engage in (x) a
merger (or reverse merger), consolidation, or other similar event affecting the Company in which outstanding shares of Common Stock are exchanged for cash, securities, and/or other property of
another entity, or (y) the sale or lease of all or substantially all of the Company's assets to another person or entity (any such event in such clauses (x) and (y) an
"Acquisition"), the Committee or the Board shall (i) provide that the entity that survives the Acquisition or purchases or leases the Company's assets in the Acquisition or any affiliate of
such entity (the "Surviving Entity") shall assume the Options granted pursuant to this Plan or substitute options to purchase securities of the Surviving Entity (or an affiliate thereof)
on an equitable basis, (ii) upon written notice to the optionees, provide that all Options will become exercisable in full subject to the consummation of the Acquisition as of a specified time
prior to the Acquisition and will terminate immediately prior to the consummation of such Acquisition or within a specified period of time after the Acquisition, and will not be exercisable after such
termination, or (iii) in the event of an Acquisition under the terms of which holders of Common Stock will receive upon consummation thereof an amount of cash, securities and/or other property
for each share of Common Stock surrendered pursuant to such Acquisition (the amount of cash plus the fair market value reasonably determined by the Committee of any securities and/or other
property received by holders of Common Stock in exchange for each share of Common Stock shall be the "Acquisition Price"), provide that all outstanding Options shall terminate upon consummation of
such Acquisition and that each optionee shall receive, in exchange for all vested shares of Common Stock under such Option on the date of the Acquisition, a payment in cash or in kind having a fair
market value reasonably determined by the Committee or the board of directors of the Surviving Entity equal to the amount (if any) by which (A) the Acquisition Price multiplied by the
number of such vested shares of Common Stock exceeds (B) the aggregate exercise price of such shares. If the Committee chooses under clause (iii) in the preceding sentence that all
outstanding Options shall terminate upon consummation of an Acquisition and that each optionee shall receive a payment for the optionee's vested shares, with respect to any optionee whose stock option
agreement specifies that no shares are vested until the first anniversary of the commencement of the optionee's employment, if the consummation of the Acquisition occurs prior to such first
anniversary, then the number of vested shares under such Option shall be deemed to be equal to the product of (x) the number of shares of stock subject to the Option that otherwise would vest
on the first anniversary and (y) the quotient obtained by dividing the number of days the optionee was employed by the Company, by 365. For purposes hereof, an Option shall be considered to be
assumed or substituted "on an equitable basis" 

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(without
limiting other ways in which an Option may be assumed or substituted on an equitable basis hereunder) if, following consummation of the Acquisition, the assumed or substituted option confers
the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Acquisition, the consideration received as a result of the Acquisition by the
holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Acquisition (and if holders of Common Stock were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Acquisition Event is not
solely common stock of the Surviving Entity (or an affiliate thereof), the Company may, with the consent of the Surviving Entity, provide for the consideration to be received upon the exercise
of each share of Common Stock subject to the Option to consist solely of common stock of the Surviving Entity (or an affiliate thereof) having a fair market value as reasonably determined by
the Committee or the board of directors of the Surviving Entity equal to the Acquisition Price. 

        If
a Change in Control Event, as defined below, occurs that either (a) does not also constitute an Acquisition or (b) does constitute an Acquisition and clause (i)
of the preceding paragraph is elected, and the optionee's employment with the Company, the Related Corporation or the Surviving Entity is terminated on or prior to the six month anniversary of the
date of the consummation of such Change in Control Event either by the optionee for Good Reason, as defined below, or by the Company, the Related Corporation or the Surviving Entity for reason(s)
other than Misconduct, as defined below, then all of the Options, or the equivalent to such Options in the form of assumed or substituted options granted in the Surviving Entity, that but for such
termination and such Change in Control Event would vest on or prior to the next following annual anniversary of the Grant Date thereafter shall become immediately exercisable in full and any
repurchase provisions applicable to Common Stock issued upon exercise thereof shall lapse, provided, however, that in particular stock option agreements
issued pursuant to this Plan, the Board may provide that the Options or assumed or substituted options covered by such agreement shall become immediately exercisable upon the consummation of such
Change in Control Event without regard to termination of employment, and that any repurchase provisions applicable to Common Stock issued upon exercise thereof shall lapse. 

        A
"Change in Control Event" shall occur upon the occurrence of (i) an Acquisition after which holders of the Common Stock before the Acquisition do not beneficially own, directly
or indirectly, at least 50% of the combined voting power of the then-outstanding securities of the Surviving Entity entitled to vote generally in the election of directors immediately
after the consummation of the Acquisition, (ii) a single transaction or a series of transactions pursuant to which any person (within the meaning of Section 13(d) or
Section 14(d)(2) of the Securities Exchange Act of 1934), excluding any employee benefit plan sponsored by the Company and any affiliates of the Company prior to such transaction or
transactions, acquires the beneficial ownership, directly or indirectly, of at least 50% of the combined voting power of the then-outstanding securities of the Company or the Surviving
Entity, as the case may be, entitled to vote generally in the election of directors immediately after the consummation of the transaction or transactions, except that any acquisitions of securities
directly from the Company shall be disregarded for purposes of this clause (ii), or (iii) the liquidation or dissolution of the Company. 

        If,
in connection with a Change in Control Event, a tax under Section 4999 of the Code would be imposed on the grantee of any Stock Right (after taking into account the exceptions
set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code), and the grantee, on an after-tax basis (taking into account such tax) would receive greater net compensation by
not having any or all of such Stock Rights accelerate, then at the discretion of the Committee, the number of Stock Rights of any such grantee which shall become immediately exercisable, realizable or
vested as provided in this Section 13 (or such provision of any other agreement or instrument governing such Stock Right that provides for such an acceleration in connection with a
Change in Control Event) may be reduced (or delayed), to the extent 

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necessary
to maximize such net compensation. For purposes of determining "net compensation" under this paragraph, the amount of compensation considered to be realized by the grantee of any Stock Right
as a result of the acceleration of the vesting of such Stock Right shall be determined in accordance with the principles set forth in the proposed Treasury Regulations under Section 280G of the
Code (or any final or temporary Treasury Regulations replacing such proposed Treasury Regulations) for determining the amount of any "parachute payment" resulting from the acceleration of
vesting of restricted stock, a stock option or any other unvested stock right. 

        "Misconduct"
shall mean any one or more of the following: (a) the commission of an act of embezzlement, fraud, dishonesty or deliberate disregard of the rules or policies of the
Company or any Related Corporation which results in material loss, damage or injury to the Company or any Related Corporation, whether directly or indirectly; (b) the unauthorized disclosure of
any trade secret or confidential information of the Company or any Related Corporation; (c) the breach by the optionee of any agreement with the Company or any Related Corporation, including
without limitation any noncompetition agreement between the optionee and the Company or any Related Corporation; or (d) the willful failure by the optionee to perform his or her material
responsibilities to the Company or any Related Corporation. 

        "Good
Reason" shall mean (i) any material diminution in the optionee's title, authority, or responsibilities from and after such Acquisition or Change in Control Event, as the
case may be, (ii) any reduction in the annual cash compensation payable to the optionee from and after such Acquisition or Change in Control Event, as the case may be or (iii) a change
of more than 100 miles in the optionee's permanent workplace without the optionee's consent. 

        (c)    Recapitalization or Reorganization.    If a recapitalization or reorganization of the Company (other than a
transaction described in subparagraph (b) above) occurs, pursuant to which securities of the Company or another entity are issued with respect to the outstanding shares of Common Stock, an
optionee, upon exercising an Option, shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised his or her
Option prior to such recapitalization or reorganization and had been the owner of the Common Stock receivable upon such exercise at such time. 

        (d)    Modification of ISOs.    Notwithstanding the foregoing, any adjustments made pursuant to the foregoing
subparagraphs (a), (b) or (c) with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would
constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code or any successor thereto) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments. 

        (e)    Issuances of Securities and Non-Stock Dividends.    Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, of the Company shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company (and, in the case of
securities of the Company, such adjustments shall be made pursuant to the foregoing subparagraph (a)). 

        (f)    Fractional Shares.    No fractional shares shall be issued under this Plan, and the optionee shall receive from
the Company cash in lieu of such fractional shares. 

        (g)    Adjustments.    Upon the happening of any of the foregoing events described in subparagraphs (a),
(b) or (c) above, the class and aggregate number of shares set forth in paragraph 4 hereof that are subject to Stock Rights which previously have been or subsequently may be
granted under this Plan shall also be appropriately adjusted to reflect the events described in such 

8

 

subparagraphs.
The Committee or the board of directors of the Surviving Entity (the "Successor Board"), as applicable, shall determine the specific adjustments to be made under this
paragraph 13 and its determination shall be conclusive. 

        If
any person or entity owning Common Stock obtained by exercise of a Stock Right made hereunder receives shares or securities or cash in connection with a corporate transaction
described in subparagraphs (a), (b) or (c) above as a result of owning such Common Stock, except as otherwise provided in subparagraph (b), such shares or securities or
cash shall be subject to all of the conditions and restrictions applicable to the Common Stock with respect to which such shares or securities or cash were issued, unless otherwise determined by the
Committee or the Successor Board. 

14.   Means of Exercising Options.  

        An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office address. Such notice
shall identify the Option being exercised and specify the number of shares as to which such Option is being exercised, accompanied by full payment of the purchase price therefor either (a) in
United States dollars in cash or by check, or (b) at the discretion of the Committee, by delivery of an irrevocable and unconditional undertaking, satisfactory in form and substance to
the Company, by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery to the Company of a copy of irrevocable and unconditional instructions,
satisfactory in form and substance to the Company, to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price, or (c) at the discretion of
the Committee, by delivery of the grantee's personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in
Section 1274(d) of the Code, or (d) at the discretion of the Committee, by any combination of (a), (b) and (c) above. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by his or her Option until the date of issuance of a stock certificate to the optionee for the shares subject to the Option. Except as expressly provided
above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date
such stock certificate is issued. 

15.   Term and Amendment of Plan.  

        This Plan was originally adopted by the Board on December 11, 2001 and will be presented to the stockholders of the Company for approval. This Plan shall
expire on December 11, 2011 (except as to Options outstanding on that date). Subject to the provisions of paragraph 5 above, Options may be granted under this Plan prior to the date of
stockholder approval of this Plan. The Board may terminate or amend this Plan in any respect at any time, except that (a) the total number of shares that may be issued under this Plan may not
be increased without stockholder approval (except by adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3 regarding eligibility for grants of ISOs may not be
modified; (c) the provisions of paragraph 6(b) regarding the exercise price at which shares may be offered pursuant to ISOs may not be modified (except by adjustment pursuant to
paragraph 13); and (d) the expiration date of this Plan may not be extended without the approval of the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the foregoing actions. 

16.   Section 162(m).  

        Notwithstanding anything in this Plan to the contrary, no Stock Right shall become exercisable, vested or realizable if such Stock Right is granted to an employee
that is a "covered employee" as defined in Section 162(m) of the Code and the Committee has determined that such Stock Right should be structured so that it is not "applicable employee
remuneration" under such Section 162(m) 

9

 

unless
and until the terms of this Plan, including any amendment hereto, have been approved by the Company's stockholders in the manner and to the extent required under such Section 162(m). 

17.   Amendment of Stock Rights.  

        The Board or Committee may amend, modify or terminate any outstanding Stock Rights including, but not limited to, substituting therefor another Stock Right of the
same or a different type, changing the date of exercise or realization, and converting an ISO to a Non-Qualified Option, provided, that, except as otherwise provided in paragraphs 9
or 10, the grantee's consent to such action shall be required unless the Board or Committee determines that the action, taking into account any related action, would not materially and
adversely affect the grantee. 

18.   Application of Funds.  

        The proceeds received by the Company from the sale of shares pursuant to Stock Rights issued or granted under this Plan shall be used for general corporate
purposes. 

19.   Governmental Regulation.  

        The Company's obligation to sell and deliver shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares. 

20.   Withholding of Additional Income Taxes.  

        Upon the exercise of a Non-Qualified Option, the making of a Restricted Purchase of Common Stock for less than its fair market value, the granting of
an Award, the making of a Disqualifying Disposition (as defined in paragraph 21) or the vesting of restricted Common Stock acquired on the exercise of a Stock Right hereunder, the
Company, in accordance with Section 3402(a) of the Code, may require the optionee or purchaser to pay additional withholding taxes in respect of the amount that is considered compensation
includible in such person's gross income. The Committee in its discretion may condition (i) the exercise of an Option, (ii) the making of a Restricted Stock Purchase of Common Stock for
less than its fair market value, or (iii) the granting of an award, or (iv) the vesting of restricted Common Stock acquired by exercising a Stock Right, on the grantee's payment of such
additional withholding taxes. 

21.   Notice to Company of Disqualifying Disposition.  

        Each employee who receives an ISO must agree to notify the Company in writing immediately after the employee makes a Disqualifying Disposition of any Common Stock
acquired pursuant to the exercise of an ISO. A "Disqualifying Disposition" is any disposition (including any sale) of such Common Stock before the later of 

        (a)   two
years after the date the employee was granted the ISO, or 

        (b)   one
year after the date the employee acquired Common Stock by exercising the ISO. If the employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter. 

22.   Governing Law; Construction.  

        The validity and construction of this Plan and the instruments evidencing Stock Rights shall be governed by the laws of the State of Delaware. 

10

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Exhibit 10.6    
    

FORM OF

ENERGY PURCHASE AGREEMENT  

        This Energy Purchase Agreement (this "Agreement") is made as of the
                         day of
                        , 2005 (the "Effective Date"), by and between AMERICAN DG ENERGY INC., a Delaware
corporation ("Lessor") and
                                         
         , a ("Lessee"), with reference to the following facts:
 

        The
parties desire to enter into this agreement to provide the Lease Terms and conditions upon which Lessor will lease to Lessee and Lessee will lease from Lessor equipment that will
provide thermal and electrical energy to Lessee's facility described on Schedule A hereto (the "Premises"). 

        NOW,
THEREFORE, in consideration of the mutual promises and agreements set forth herein, Lessee and Lessor hereby agree as follows: 

AGREEMENT  

ARTICLE 1

Defined Terms  

        Applicable Electric Rate means with respect to Electrical Energy, the rate per kilowatt hour and kilowatt that is
            percent (            %) below the rate per kilowatt hour and kilowatt that the Lessee Electric Utility
would have charged
the Lessee during the applicable billing period, in the absence of Electrical Energy being provided by Lessor, under the Lessee Electric Utility tariff applicable to the customer class which the
Lessee would have then qualified including the tariff charges for the transmission, delivery and energy/electric generation, stranded cost charge, system benefit charge, Taxes, or other charges
applicable to that customer class. 

        Applicable Thermal Rate means with respect to Thermal Energy, the rate per thermal unit that is
            percent (            %) below the rate per thermal unit that the Lessee would have incurred during the
applicable billing
period to produce the same quantity of Thermal Energy supplied by Lessor during such period using natural gas supplied by the Lessee Natural Gas Utility at the Lessee Natural Gas Rate or the
equivalent fuel oil supplied by the Lessee Oil Utility at the Lessee Oil Rate in the Lessee equipment installed on the date of this Agreement with an assumed Lessee boiler efficiency of 65%. 

        Claims means all claims or actions, threatened or filed, and whether groundless, false or fraudulent, that directly or indirectly relate
to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are
threatened or filed prior to or after the termination of this Agreement. 

        Designated Load means, with respect to Electrical Energy or Thermal Energy, as the case may be, the applicable quantity set forth on  Schedule 1. 

        Electrical Energy means the net electricity generated by the Equipment, as measured in kilowatt hours and kilowatts. 

        Electrical Interconnection Point means the location where the Equipment connects to the existing electrical systems serving
the Premises. 

        Electric Meter has the meaning provided in Section 2.2. 

1

 

        Equipment means the equipment described in Schedule 4.1 hereof for the production of Electrical Energy and Thermal Energy, which
Lessor shall install, operate and maintain at the Premises in the Designated Area pursuant to the terms of this Agreement. 

        Equipment Energy means both the Electrical Energy and the Thermal Energy produced by the Equipment. 

        Equipment Rental Payment has the meaning provided in Section 2.4. 

        Force Majeure means an event which is not within the reasonable control of a party or which by the exercise of its due diligence, it is
unable to overcome or to obtain or cause to be obtained a commercially reasonable substitute therefore. Force Majeure includes, but is not limited to, any changes in Law which prohibit or frustrate a
party from performing under this Agreement. 

        Governmental Authorities means the United States, the State of New York, and any political subdivision thereof and any
agency, department, commission, board, court or instrumentality thereof having appropriate jurisdiction. 

        Hazardous Materials means oil or petroleum products, asbestos, polychlorinated biphenyls or any biologically or chemically active or other
hazardous or toxic materials, substances or wastes whether in solid, liquid or gaseous state. 

        HVAC Equipment means the heating, ventilating and air conditioning system for the Premises, including any and all related equipment and
all HVAC steam, make-up water supply, condensate return, waste, potable water, and thermal fluid supply lines. 

        HVAC Interconnection Point means the point(s) where the Equipment connects to the existing HVAC and domestic hot water system serving
the Premises. 

        Interconnection Facilities means all facilities necessary to connect the Equipment to (i) the systems of Lessee Utilities and
(ii) the HVAC Equipment. 

        Invoice Payments has the meaning provided in Section 2.5. 

        Law means any law, statute, regulation, rule, decision, writ, order, decree or judgment, or any interpretation thereof, that is applicable
to the parties, the Lessee Plant Facilities, the Lessee Utilities, the Equipment or this Agreement. 

        Lease Term has the meaning set forth in Section 2.3 hereof. 

        Lessee Electric Utility means
                                    , or any successor thereto,
providing electric service to
the Premises. 

        Lessee Natural Gas Utility means
                                    , or any successor thereto,
providing natural gas service to
the Premises. 

        Lessee Natural Gas Rate means the delivered cost per Btu of natural gas that the Lessee Natural Gas Utility charged the Lessee during the
billing period preceding the applicable billing period. 

        Lessee Oil Utility means the Lessee oil supplier, or any successor thereto, providing fuel oil service to the Premises. 

        Lessee Oil Rate means the equivalent delivered cost per Btu of fuel oil that the Lessee Oil Utility charged the Lessee during the billing
period preceding the applicable billing period. 

        Lessee Plant Facilities means the existing HVAC Equipment serving the Premises, the existing electrical system serving the Premises, and
the other existing utility systems serving the Premises. 

2

 

        Lessee Utility means Lessee Electric Utility, Lessee Natural Gas Utility, or other companies providing tariffed or regulated utility
services to the Premises as of the Effective Date and any successor(s) thereto. 

        Stipulated Termination Charge has the meaning provided on Schedule 6.1. 

        Stipulated Rate means a rate per annum equal to 2.5% over the prime lending rate as from time to time may be published in the  Wall Street Journal under "Money Rates,"
compounded semiannually; provided that the Stipulated Rate charged and collected shall never exceed in the
aggregate, taking into account all payments constituting interest under Law, the maximum rate permitted by applicable law. 

        Taxes mean any and all governmental or quasi-governmental taxes, assessments, levies, duties, fees, charges or withholdings of any kind or
nature whatsoever and howsoever described, including but not limited to income, gross receipts, franchise, sales, use, excise, property, capital, value added, stamp, transfer, intangible, generation,
privilege, utility, BTU, gathering, energy, consumption, lease, permit, license, filing, custom and/or recording tax, together with any and all penalties, fines, additions or interest thereon. 

        Thermal Energy means the thermal energy produced by the Equipment as measured in British Thermal Units. 

        Thermal Meter has the meaning provided in Section 2.2 hereof. 

ARTICLE 2

Purchase and Sale of Energy  

        2.1    Agreement to Lease Equipment.    Effective as of the Effective Date and during the Lease Term hereof, Lessor
hereby leases to Lessee, and Lessee and Lessee hereby agrees to accept and leases from Lessor, the Equipment for the provision of Electrical Energy and Thermal Energy. Lessee shall retain during the
Lease Term possession and control over the Equipment, subject to the Lease Terms of this Agreement. Lessee shall accept and lease the Equipment for the provision of Electrical Energy and Thermal
Energy delivered by the Equipment prior to accepting any electrical energy or thermal energy from any other source and shall accept such electrical energy and thermal energy only to the extent that
the capacity of the Equipment does not supply electric energy or thermal energy to meet Lessee's requirements. It is understood, however, that the Equipment is intended to supply less than all of the
Electrical Energy and Thermal Energy required at the Premises. 

        2.2    Metering of Equipment Energy.    To determine the Equipment Rental Payments, actual amount of Electrical
Energy, kilowatt hours and kilowatts, derived by Lessee through the actual use of the Equipment shall be measured and recorded by a meter at the Electrical Interconnection Point (the "Electric
Meter"). The actual amount of Thermal Energy delivered to Lessee shall be measured and recorded by a meter at the HVAC Interconnection Point (the "Thermal Meter"). On occasion, Lessor shall be
permitted to use estimated readings for the Electric Meter and Thermal Meter, but the
estimates must be justified to match actual usage in a timely manner by Lessor. The Electric Meter and Thermal Meter shall be installed, operated and maintained by Lessor, at its sole cost and
expense, and each shall be of a quality and type that is customarily used by electric utilities or providers of thermal energy, as the case may be. Lessor shall cause each such Meter to be tested
periodically. If either Meter is found to be inaccurate, Lessor shall promptly provide Lessee with corrected invoices for the period since the prior test, based on other meters, past usage, or other
applicable correction factors, and will provide Lessee with reasonable supporting documentation. 

        2.3    Term of Agreement.    Unless sooner terminated in accordance with the applicable provisions of this Agreement,
the Lease Term of this Agreement (the "Lease Term") shall be the period of fifteen (15) years, commencing on the Effective Date of this Agreement and ending on the fifteenth
(15th) 

3

 

anniversary
thereof. Upon expiration of the Lease Term, this Agreement may be extended for two additional five (5) year period upon the mutual agreement of the parties. 

        2.4    Invoicing and Payment.    Lessor shall render to Lessee an invoice for each monthly billing period (on a
calendar month basis) during the Term of this Agreement setting forth the rent due Lessor for the lease of the Equipment (the "Equipment Rental Payment", which shall be (i) based on the
actual amounts of Electrical Energy and Thermal Energy delivered to Lessee during the prior billing period, as determined under Section 2.2. hereof, and (ii) calculated as shown on  Schedule 2.4 hereto. Lessee will remit full payment with each invoice to Lessor within ten (10) calendar days following the date of the
applicable invoice. Amounts invoiced that are not paid by the date due shall accrue interest at the Stipulated Rate from (and including) the date due to (but excluding) the date on which
payment is received by Lessor, and the failure of Lessee to pay any amount invoiced within ten (10) Business Days after the date due shall constitute a breach by Lessee of this Agreement. If
Lessee in good faith disputes an invoice, Lessee shall provide Lessor with a written explanation specifying in detail the basis for the dispute, and Lessee shall pay the entire invoice including the
amount in dispute no later than the due date therefor. All disputes shall be resolved as provided in Section 9.7 hereof. If any amount disputed by Lessee is determined not to be owed to Lessor,
it shall be paid to Lessor within five (5) days of such determination, along with the interest accrued at the Stipulated Rate from the original due date until the date paid. 

        2.5    Lessee Utility Information.    Lessee shall provide Lessor with copies of the invoices Lessee receives from the
Lessee Electric Utility, the Lessee Natural Gas Utility and the Lessee Oil Utility, each month and, upon request by Lessor, copies of invoices that Lessee receives from any other Lessee Utility, for
which Lessee shall pay the Lessee Electric Utility, the Lessee Natural Gas Utility and the Lessee Oil Utility at the Lessee Electric Utility tariff, the Lessee Oil Rate and the Lessee Natural Gas
Rate, respectfully (the "Invoice Payments"). If Lessee fails to provide Lessor with copies of the invoices Lessee receives from the Lessee Electric Utility, the Lessee Natural Gas Utility and
the Lessee Oil Utility, each month, when determining energy rate pricing for the Equipment Rental Payment, the Lessor may use estimates calculated to the best of its ability by Lessor. 

        2.6    Limitation on Lessor's Responsibility.    In no event shall Lessor incur any liability to Lessee for the
Equipment's failure or inability to provide Electrical Energy or Thermal Energy to Lessee, it being understood that Lessee's sole and exclusive remedy for any such failure shall be the right to
terminate this Agreement in the manner and to the extent permitted by Section 6.1 hereof. 

        2.7    Reductions in Designated Load.    When the Equipment is in operation Lessor will adjust the output of Equipment
from time-to-time as Lessee's actual requirements for Electrical Energy and Thermal Energy vary with time of day, climatic conditions, or season. Lessee agrees to not reduce
its average or peak requirements for Equipment Energy through self-generation, conservation, or other changes to the Lessee Plant Facilities or the Premises or to Lessee's use of or demand
for Equipment Energy if such changes would reduce Lessee's requirements to a level below the Designated Load. 

        2.8    Rebates and Other Benefits.    Lessee acknowledges and agrees that any demand-side management, peak
sharing, conservation, or other similar rebates, credits, allowances, or other benefits from any Lessee Utility, governmental authority, equipment manufacturer, or other person or entity received by
or available to either party as a consequence of the installation or operation of the Equipment or of the supply of Equipment Energy to Lessee shall, to the extent consistent with the terms of this
Agreement, be for the benefit of Lessor. Lessee shall cooperate with and assist Lessor in applying for and obtaining such benefits, and shall assign or pay to Lessor any such rights or amounts
received in connection therewith. 

        2.9    Adjustment of Applicable Rates.    If Lessee's cost of natural gas required to fuel the Equipment increases,
the percentage discounts used to calculate the Applicable Electric Rate and Applicable Thermal Rate will be adjusted as calculated in  Schedule 2.6. 

4

 

ARTICLE 3

Lease of Designated Area  

        3.1    Lease of Designated Area.    In consideration for Lessor's agreement to install and maintain the Equipment,
Lessee hereby leases to Lessor, at no cost to Lessor, the location on the Premises identified and described on Schedule 3.1
hereto (the "Designated Area"). Lessor shall place the Equipment in the Designated Area and shall use and occupy the Designated Area for the purpose of installing and maintaining the
Equipment in order to supply Equipment Energy as provided in this Agreement, along with such other ancillary activities as may be reasonably related thereto. The parties
may, by mutual agreement, change the Designated Area pursuant to a written agreement providing for the amendment and restatement of Schedule 3.1.
The term of this Lease shall be equal to the Lease Term. 

        3.2    Appurtenant Rights.    Lessor shall have, as an appurtenant right to its occupancy and use of the Designated
Area, the right to enter upon and to access such portions of the Premises (including the common areas thereof) and such utility lines, gas lines, ductwork, electrical lines, metering equipment and the
like as is reasonably necessary for the construction, reconstruction, replacement, installation, maintenance, care, repair and operation of the Equipment and to carry out activities thereon. Lessor
shall exercise its access rights granted herein in such a manner so as not to materially interfere with the operations of the Premises, including the operations of other tenants of Lessee. Any
ductwork, utility lines and other facilities installed by Lessor shall be installed to the extent practicable in areas of the Premises controlled by Lessee and in such manner so as not to materially
interfere with the tenant improvements installed by other tenants of the Premises. It is understood that all existing Lessee Plant Facilities are, and shall remain, the property of Lessee. If such
access or installation activities cause material damage to the Lessee Plant Facilities or the Premises, Lessor shall, at its own expense, promptly make repairs and restore the Lessee Plant Facilities
or the Premises to substantially their condition prior to such damage. 

        3.3    Lessor Property.    The Equipment and all alterations, additions, improvements or installations made thereto by
Lessor and all Lessor property used in connection with the installation, operation and maintenance of the Equipment is, and shall remain, the personal property of Lessor ("Lessor Property"). In no
event shall any Lessor Property be deemed to be a fixture, nor shall Lessee, nor anyone claiming by, through, or under Lessee (including but not limited to any present or future mortgagee of the
Premises or the Designated Area) have any rights in or to the Lessor Property at any time. Lessee acknowledges and agrees that Lessor may be required to grant or cause to be granted to its lender a
security interest in Lessor Property in connection with a lease or debt financing of the Lessor Property, and Lessee expressly disclaims and waives any rights it may have in the Lessor Property, at
any time and from time to time, pursuant to this Agreement, at law or in equity. Lessee agrees to cooperate with Lessor's financing efforts, and to provide to Lessor's lenders such consents to
collateral assignment of this Agreement, estoppel certificates, and other documents as Lessor reasonably may request. 

        3.4    Lessee's Access.    Lessee shall have the right to enter the Designated Area at all reasonable times for the
purposes of inspection, repair and maintenance, provided that: (i) Lessor is given written notice of such entry not less than 48 hours in advance; (ii) Lessor or any agent or
employee of Lessor designated thereby shall be permitted to be present during such entry; and (iii) Lessee shall indemnify, hold harmless, and agree to defend with counsel reasonably acceptable
to Lessor, Lessor from and against any and all loss, cost, Claim, damage, or expense, caused directly or indirectly, in whole or in part, by such entry, including but not limited to damage to the
Equipment, the Designated Area, or any other property or person. The provisions of this Section 3.4 shall survive the expiration or earlier termination of this Agreement. 

5

 

        3.5    Non-Disturbance.    Lessee shall use its best efforts to obtain from any lender or mortgagee of the
Premises a written undertaking in favor of Lessor to the effect that such lender or mortgagee will not disturb Lessor's right of possession of the Designated Area if Lessor is not then or thereafter
in breach of this Agreement, and in no case shall such lender interfere with Lessor's right to possession and/or ownership of the Equipment. 

        3.6    Emergencies.    Either party may take such action as reasonably may be required to respond to emergencies
respecting the Equipment, Lessee Plant Facilities, and the Interconnection Facilities, and to prevent loss of life or property damage. Each party promptly shall notify the other of any such emergency
or action. 

ARTICLE 4

Installation and Operation of Equipment  

        4.1    Installation, Repair and Permits.    Lessor shall, at its sole cost and expense, design, and install the
Equipment in the Designated Area, substantially in compliance with the specifications set forth on Schedule 4.1. Lessor, at its sole cost and
expense, shall operate, maintain and repair the Equipment in a commercially reliable manner and in accordance with prevailing industry standards. Lessor shall obtain, at Lessor's sole cost, any
permits or regulatory approvals required for the installation and operation of the Equipment and the installation and operation of the Equipment shall be in compliance with all Laws; provided that
Lessee shall cooperate with Lessor in obtaining any such permits or approvals that are required to be held by Lessee. Lessee shall be responsible for all cost and expense related to the proper removal
of existing asbestos or any other banned material including any related testing and evaluations. 

ARTICLE 5

Maintenance and Repair of Facilities  

        5.1    Maintenance of Premises.    Lessee agrees to keep in good order, condition, and repair the structural
components and the roof of the Premises, the common utility and systems, the common hallways, entrances, restrooms and elevators, the paved surface of the parking areas serving the Premises and the
sprinkler system of the Premises (including within the Designated Area). If Lessee fails to make such repairs, Lessor may make such repairs as required to permit Lessor to fulfill its obligations
hereunder or to prevent damage to the Equipment. Lessee shall not be liable for any failure to make such repairs
unless Lessor has given notice to Lessee of the need to make such repairs and Lessee has failed to make such repairs within a reasonable time, not to exceed thirty (30) days, thereafter. 

        5.2    Maintenance of Utility Connections and Equipment.    

        (a)   Lessee
shall at all times during the Term maintain the Lessee Plant Facilities in good condition and repair so as to be able to safely receive and utilize the Electrical
Energy and Thermal Energy delivered to the Lessee from the Equipment and to receive and utilize electrical energy and or thermal energy from the Lessee Utilities. Lessee shall maintain in good working
order and available at all times on an immediate demand basis, its hookup to and its service contract with, the relevant Lessee Utilities, or any successors thereto, so that during periods when the
Equipment is not in operation, for any reason, Lessee can immediately obtain its full requirements for electrical energy and thermal energy from such Lessee Utilities. 

        (b)   Lessor
may make repairs, conduct inspections, or perform routine or extraordinary maintenance, or make upgrades or other modifications to the Equipment or the
Interconnection Facilities, at any time during the Term. 

6

 

        5.3    Connection and Services to Equipment.    Lessee shall cooperate with Lessor in obtaining from any the Lessee
Utility such separate and metered connections for water supply, sewer, natural gas, electric or other services as Lessor may determine necessary for the installation of the Equipment. The cost of such
connections, including any hook-up fees assessed by a Lessee Utility shall be paid for by Lessor. Lessee shall provide to Lessor, without cost to Lessor, such water supply and sewer
services as may be required for the installation or operation of the Equipment. Lessee shall provide to Lessor full telephony capability to the Equipment approved by Lessor in order for the Lessor to
remotely monitor and control Equipment. Lessee shall pay for all natural gas used by the Equipment (Lessee Natural Gas Operating Costs) under either a direct billing arrangement between Lessee and the
Lessee Natural Gas Utility, or such other arrangement as Lessor and Lessee may mutually agree upon. Lessee shall also pay for all electricity used by the Equipment (Lessee Electricity Operating Cost)
under either a direct billing arrangement between Lessee and the Lessee Electric Utility, or such other arrangement as Lessor and Lessee may mutually agree upon. The Lessee Natural Gas Operating Costs
and Lessee Electricity Operating Cost shall be calculated after applying all related rebates, credits and incentives that occur during the term of the Agreement. The Lessee Natural Gas Operating Costs
plus the Lessee Electricity Operating Costs equals the Lessee Utility Operating Costs. 

        5.4    Interference with Lessor's Operations.    Lessee reserves the use of the land, walls and roof of the Premises,
together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements leading through the Premises in locations which will not materially
interfere with Lessor's use of the Premises, or if such action would cause material interference with the Lessor's use of the Premises, Lessee shall conduct such installation, maintenance, repair or
replacement
only after at least forty-eight (48) hours advance notice to Lessor and at a time that minimizes such interference, outside of normal business hours, if reasonably practical (except in the
event of an emergency, in which case Lessee shall be entitled to make such repairs immediately). Notwithstanding any preclusion of the full operation of the Equipment that may be caused by any such
interference, Lessee shall remain obligated to pay Lessor a stipulated price per hour of such interference equal to fifty percent 50% of average the invoiced cost of Equipment Energy for the
equivalent hours over most recently ended preceding two-month period, except where such interference is due to Force Majeure. The remedies set forth in this Section 5.4 shall be
Lessor's sole remedies as a result of any such interference, provided that the continuation of any such interference for a period in excess of thirty (30) days shall be a breach of this
Agreement entitling Lessor to receive the applicable Stipulated Termination Charge pursuant to Section 6.1 hereof in the event that Lessor elects to terminate this Agreement. 

        5.5    Environmental Compliance.    Notwithstanding anything above to the contrary, Lessee shall be responsible for
the removal in accordance with all applicable Laws of all Hazardous Materials released or threatened to be released in, on, under or about or emanating from the Premises, known or unknown, as of the
date of this Agreement or hereafter coming to be released or threatened to be released on, under or about or to emanate from the Premises from the act or omission of Lessee, other tenants and/or other
persons. In the event of any current or future release or threat of release of Hazardous Materials upon adjacent lands (if caused or permitted by Lessee or its agents or its representatives or
persons claiming under Lessee) or upon the Building (if caused by any party other than Lessor or its agents or representatives), Lessee shall promptly remedy the problem in accordance with all
applicable Laws and requirements. Furthermore, Lessee shall indemnify, defend and hold Lessor harmless from and against all loss, cost, liability and damage, including without limitation reasonable
attorneys' fees and litigation costs, arising from the past, current or future release or threat of release of Hazardous Materials to the extent caused or permitted by Lessee or its agents or
representatives or other tenants or other persons. The indemnity obligation set forth in this Section 5.5 shall survive the expiration or earlier termination of this Agreement. 

7

 

ARTICLE 6

Termination; Limitation of Liability  

        6.1    Termination.    

        (a)   Lessor
may suspend or terminate this Agreement at any time and for any reason. If Lessor terminates this Agreement when Lessee is in breach of its obligations hereunder
or upon any bankruptcy or insolvency proceeding with respect to Lessee, then Lessee shall pay to Lessor the applicable Stipulated Termination Charge set forth on  Schedule 6.1. This Agreement shall
terminate upon the delivery of such notice and neither party shall have any further liability to the other
party hereunder, except for any provisions contained herein that are intended to survive the expiration or earlier termination of this Agreement. Within a reasonable period of time after termination,
Lessor shall either leave in place or remove the Equipment from the Designated Area, at Lessor's sole decision, and Lessee shall continue to provide Lessor access to the Designated Area and the
Premises for these purposes. 

Lessee
may terminate this Agreement at any time on 60 days' prior written notice, provided that Lessee shall pay to Lessor the applicable Stipulated Termination Charge set forth on  Schedule 6.1.
Within a reasonable period of time after termination, Lessor shall either leave in place or remove the Equipment from the
Designated Area, at Lessor's sole decision, and Lessee shall continue to provide Lessor access to the Designated Area and the Premises for these purposes. 

        (b)   The
parties acknowledge and agree that because of the unique nature of the arrangement between Lessee and Lessor it would impracticable or difficult to fix the actual
damage to Lessor arising out of termination of this Agreement under the provisions of Section 6.1. Therefore, the parties agree that any sums payable under Section 6.1 are in the nature
of liquidated damages, and not a penalty and are fair and reasonable and represent a reasonable estimate of the fair compensation to Lessor for losses that may be reasonably anticipated from such
termination. 

        6.2    Limitation of Liability.    Except for the Stipulated Termination Charge payable under Section 6.1 (a),
in no event, whether as a result of breach of contract, breach of warranty, tort liability (including negligence or strict liability), strict liability, or otherwise, and whether arising under any of
the terms of this Agreement or otherwise, shall Lessee be liable to Lessor, or Lessor be liable to Lessee for any special, indirect, incidental, exemplary, punitive, economic or consequential damages
whatsoever including, but not limited to, loss of profits or revenue, loss of use of equipment, cost of capital, cost of temporary equipment, overtime, business interruption, spoilage of goods, claims
of customers or tenants of Lessee or other economic harm. Without limiting the foregoing, Lessor shall not be responsible for any increased utility costs suffered by Lessee or Lessee's tenants on
account of any breach or termination of the Agreement by Lessor. 

ARTICLE 7

Insurance; Indemnification; Takings  

        7.1    Insurance Coverage.    Throughout the Lease Term, Lessor shall maintain, at its sole cost and expense: 

        (a)   Commercial
general liability insurance against the risks of personal injury and property damage occurring on, in or about the Premises, or arising from Lessor's
ownership, installation, use or maintenance of the Equipment, in an amount of not less than $1,000,000 per occurrence, $2,000,000 annual aggregate including broad form property damage. Excess
liability coverage shall be provided on a form following basis, with a limit not less than $3,000,000. 

        (b)   Worker's
Compensation Insurance to provide statutory workers compensation benefits, as required by the laws of the states in which the Premises and Lessor's employees
are located and 

8

 

Employers'
Liability Insurance on an "occurrence" basis with a limit of not less than $500,000 for each employee. 

        (c)   Prior
to the Commencement Date, installation risk insurance in an amount equal to 100% of the projected completed value of the work associated with the installation of
the Equipment with "increased cost of construction" endorsement. Such insurance shall be on an all-risk policy form and shall insure against the perils of fire and extended coverage and
physical loss or damage. 

        (d)   After
the Commencement Date, insurance covering loss or damage to the Equipment in an amount not less than the amount of insurance that is generally carried by the
owners of comparable equipment in the region in which the Premises are located, providing protection against all perils included within the classification of fire and extended coverage, vandalism
coverage and malicious mischief, sprinkler leakage, water damage, and special extended coverage. 

        7.2    Lessee's Insurance.    Lessee agrees, at its own expense, to procure and maintain at all times during the Lease
Term, a policy or policies of (a) insurance covering loss or damage to the Premises in an amount not less than the amount of insurance that is generally carried by the owners of comparable
buildings in the vicinity of the Premises, providing protection against all perils included within the classification of fire and extended coverage, vandalism coverage and malicious mischief,
sprinkler leakage, water damage, and special extended coverage, and (b) commercial general liability in form and amounts reasonably satisfactory to Lessor. 

        7.3    Insurance Policies.    All insurance policies required under this Article 7 shall be issued by insurers
of recognized responsibility which are licensed to do business in the state in which the Premises is located. Each party's policy of commercial general liability insurance shall name the other party
as an additional insured and shall contain an agreement by the insurer that such policy shall not be terminated or canceled without at least thirty (30) days' prior written notice to such
additional insured; provided such notice shall be ten (10) days in the case of a failure to pay premiums. 

        7.4    Waiver of Subrogation.    Each party releases and waives on behalf of itself and on behalf of such party's
insurers, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss sustained from any peril to property required to be insured
against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Agreement. The policies of the
respective parties shall contain an express waiver of subrogation to this effect. 

        7.5    Mutual Indemnification.    

        (a)   To
the extent permitted by law, Lessor, on behalf of itself, its successors and assigns, shall save, indemnify and hold Lessee harmless from and against any and all
Claims for personal injury to or death of and for loss or damage to any property resulting from the performance of this Agreement and to the extent caused by (i) the gross negligence or willful
misconduct of Lessor, its agents, employees or subcontractors in carrying out its obligations hereunder or (ii) the breach by Lessor of any covenant contained herein. 

        (b)   To
the extent permitted by law, Lessee, on behalf of itself, its successors and assigns, shall save, indemnify and hold Lessor harmless from and against any and all
Claims for personal injury to or death of and for loss or damage to any property resulting from the performance of this Agreement and to the extent caused by (i) the gross negligence or willful
misconduct of Lessee, its agents, employees or subcontractors in carrying out its obligations hereunder or (ii) the breach by Lessee of any covenant contained herein. In addition, Lessee hereby
indemnifies Lessor and holds it harmless from and against all Claims arising out of any dispute between Lessee and any of its tenants regarding the Equipment Energy to be supplied hereunder or
Lessee's obligations under its lease with any tenant regarding the supply or charges for electrical energy or thermal energy, or the amounts paid by Lessor to Lessee under this Agreement. 

9

 

        (c)   The
indemnity obligations set forth in this Section 7.5 shall survive the expiration or earlier termination of this Agreement. 

        7.6    Eminent Domain.    If the Premises, or a portion thereof, is taken by condemnation or the right of eminent
domain, or by agreement between Lessee and those authorized to exercise such right, then any award made in respect thereof shall belong to and be paid to Lessee, and Lessor hereby assigns to Lessee
all of its right, title and interest in any such award; provided, however, that Lessor shall be entitled to receive any portion of the award that is made to Lessee (i) for the taking of
personal property, inventory or trade fixtures belonging to Lessor, including the Equipment (ii) for the interruption of Lessor's business, goodwill or its moving costs, or (iii) for the
value of any leasehold improvements installed thereon and paid for by Lessor, including the Equipment. 

ARTICLE 8

Representations, Warranties and Covenants  

        8.1    General Representations and Warranties of Lessor and Lessee.    Lessee and Lessor each hereby represent and
warrant to the other that the following statements are true and correct as of the date hereof: (a) it is duly organized, validly existing and in good standing under the laws and jurisdiction of
its formation and is qualified to conduct its business in those jurisdictions necessary to its performance under this Agreement; (b) the execution, delivery and performance of this Agreement
are within its powers, have been duly authorized by all necessary action and do not violate any of the terms or conditions of its governing documents or any contract to which it is a party or any Law
applicable to it; (c) this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms, subject to Laws affecting creditor's rights
generally, and with regard to equitable remedies, subject to the discretion of the court before which proceedings to obtain the same may be pending; (d) there are no bankruptcy, insolvency,
reorganization, receivership or other similar proceedings pending or being contemplated by it, or to its knowledge threatened against it; (e) to the best of its knowledge, there are no suits,
proceedings, judgments, rulings or orders by or before any court or any governmental authority that could materially adversely affect its ability to perform under this Agreement; and (f) it has
sufficient knowledge and experience in business matters that enable it to evaluate the merits and risks of entering into this Agreement. 

        8.2    Representations and Warranties of Lessee.    Lessee further represents and warrants that (a) Lessee
shall not re-sell any Equipment Energy to any third party, provided, however, Equipment Energy may be provided to tenants and other occupants of the Premises by Lessee and payment for such
Equipment Energy may be included in the lease payments from such tenants to Lessee, and (b) that Lessor shall be the exclusive provider of distributed generation services to the Premises during
the term of this Agreement, whether such generation facilities are owned by Lessee or any other party and whether they are located on the Premises or elsewhere. 

        8.3    Disclaimer; Limitation on Representations.    Except as otherwise provided in this Agreement, the provisions of
the Uniform Commercial Code ("UCC") of the State of New York shall be deemed to apply to this Agreement, and Electric Energy and Thermal Energy sold and purchased hereunder shall be deemed to
be "goods" for purposes of the UCC. EXCEPT AS EXPRESSLY SET FORTH HEREIN, LESSOR MAKES NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE EQUIPMENT, ITS PERFORMANCE OR AS TO THE AVAILABILITY, RELIABILITY OR QUALITY OF THE EQUIPMENT ENERGY.  

        8.4    Lessee Covenants.    Lessee agrees that title to each item of Equipment shall remain
with Lessor at all times and Lessee shall have no right, title or interest therein except as expressly set forth in the Agreement. Lessee agrees that it will keep the Equipment free and clear from all
claims, liens and encumbrances (except in favor of Lessor) arising by, under or through it and will not assign, sublet, 

10

 

or
grant a security interest in the Equipment or in the Agreement without Lessor's prior written consent. As additional security for the performance of Lessee's obligations hereunder and under the
Agreement, Lessee hereby grants to Lessor a first priority security interest in Lessee's interest in the Equipment and any proceeds thereof. Lessee irrevocably appoints Lessor its
attorney-in-fact to execute such instruments as Lessor shall deem necessary or expedient to perfect or protect such security interest. Lessee shall notify Lessor in writing,
with full particulars, within 10 days after it learns of the attachment of any lien to any Equipment in violation of this Section 8.4 and of the Equipment's location. 

ARTICLE 9

Miscellaneous Provisions  

        9.1    Notices.    Any notice, statement, certificate, request or demand required or permitted to be given or
delivered under this Agreement shall be in writing, and sent by either (i) registered or certified mail, postage prepaid, return receipt requested, or (ii) nationally recognized
overnight courier service (such as Federal Express), in either case addressed, as the case may be, to the intended recipient at the address set forth beneath its signature to this Agreement,
(or to such other addresses as Lessee or Lessor shall designate in the manner herein provided). Should Lessee designate a managing agent and provide notice thereof to Lessor, such managing
agent shall be authorized and designated to sign, give or deliver to Lessor and receive from Lessor, any notice under this Agreement. Any such notice, statement, certificate, request or demand shall,
in the case of registered or certified mailing, be deemed to have been given on the date mailed as aforesaid in any post office or branch post office regularly maintained by the United States
Government, and in the case of delivery by nationally recognized overnight courier service, shall be deemed to have been given upon the date of delivery to an authorized agent of such courier service,
except in each case for notice of change of address or revocation of a prior notice, which shall only be effective upon receipt. 

        9.2    Survival of Obligations.    Any sums due from either party that by the Lease Terms herein would be payable, or
are incapable of calculation until, after the expiration or earlier termination of this Agreement shall survive and remain a continuing obligation until paid. Any obligations of either party that by
the Lease Terms hereof are to be performed after the expiration or earlier termination of this Agreement shall survive and remain a continuing obligation until performed. 

        9.3    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but all of which taken together shall constitute one and the same agreement. 

        9.4    Assignment.    This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns. Lessee may sell, exchange or otherwise transfer or assign this Agreement to any party succeeding to Lessee's interests in the Premises, provided that
(a) such successor agrees in writing to assume Lessee's obligations under this Agreement through the end of the Lease Term, (b) such successor's financial condition is sufficient to
enable it to perform Lessee's obligations hereunder, and (c) Lessee pays all sums owed to Lessor through the date of such assignment. Lessor may at any time, sell, exchange or otherwise
transfer or assign its interests in the Equipment and this Agreement, provided that such successor (a) assumes in writing Lessor's obligations under this Agreement and (b) has the
technical experience and financial resources to fulfill Lessor's obligations hereunder. 

        9.5    Governing Law; Successors and Assigns.    This Agreement, and any dispute concerning this Agreement, shall be
governed by the laws of the state in which the Premises is located, without regard to that state's choice of law provisions, and any dispute concerning an interpretation of any portion of the
Agreement or the conduct of the parties hereunder shall be brought in the state where the 

11

 

Premises
is located. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, except as expressly provided otherwise. 

        9.6    Complete Agreement; Waiver.    This Agreement contains and embraces the entire agreement between the parties
with respect to the matters contained herein. Neither this Agreement nor any part hereof may be changed, altered, modified, limited, terminated, or extended orally unless by an agreement in writing
signed by the parties hereto. 

        9.7    Negotiation of Disputes; Arbitration.    If a dispute arises under this Agreement, the parties shall first
promptly attempt in good faith to resolve the dispute by negotiation. If such negotiations are unsuccessful, any disputes or claims between the parties arising out of or relating to this Agreement, or
the breach hereof, not settled by negotiation, shall be settled by arbitration conducted in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA") in effect
at that time, at a location specified by Lessor in the state where the Premises is located. A single arbitrator shall decide all disputes. The arbitrator shall not have been previously employed by
either party, shall have knowledge and experience in the competitive electricity sales industry, and shall not have a direct or indirect interest in either party or the subject matter of the
arbitration. Such arbitrator shall be designated as mutually agreed by the parties within twenty (20) business days after either party requests in a writing sent to the other party that a
dispute or claim be arbitrated. If the parties fail to select an arbitrator, the arbitrator shall be selected under the expedited rules of the AAA. The arbitrator shall issue a scheduling order that
shall not be modified except by the mutual agreement of the parties. The arbitrator shall render a decision no later than sixty (60) days after his selection, and the arbitrator shall state in
writing the factual and legal basis for the award. Any award rendered by the arbitrator shall be
final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. The arbitrator may award the prevailing party its costs, including attorney's
fees, incurred as a result of the dispute. 

        9.8    Severability.    If any term or provision of this Agreement or the application thereof to any person or
circumstance is, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law. 

        9.9    No Joint Venture, etc.    Nothing contained herein shall be deemed or construed by the parties hereto nor by
any third party as creating a relationship of principal and agent or of partnership or of joint venture between the parties hereto. 

        [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS] 

12

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. 

	Lessor:	 	Lessee:
	American DG Energy INC.,

a Delaware corporation	 	 	 	 
	

By:	
 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	

	

Name:	
 	

 	
 	

Name:	
 	

 
	 	 	
	 	 	 	

	

Title:	
 	

 	
 	

Title:	
 	

 
	 	 	
	 	 	 	

	

Address for notices:	
 	

Address for notices:
	

American DG Energy Inc.	
 	

 
	45 First Avenue, Waltham, MA 02451	 	

	Attention:	 	 
	 	 	

	

 	
 	

	

 	
 	

	 	 	Attention:

13

SCHEDULE A

DESCRIPTION OF PREMISES  

Building &
Installation 

Natural
Gas Account #'s: 

Electricity
Account #'s: 

SCHEDULE 1

DESIGNATED LOAD  

        Up to                        
(            ) Tecogen Cogeneration Modules (Equipment) rated up to 75kW and 490,000 Btu/hr each. 

SCHEDULE 2.4

CALCULATION OF CHARGES  

        The monthly Equipment Rental Payment to be made by Lessee to Lessor in consideration for the lease of the Equipment shall be calculated as follows: 

ERP = [EE1 * ARE1] + [EE2 * ARE2] + [TE * ART]
/ 0.65-LUOC  

	
 where:	
 	

 	
 	

 	
 	

 
	
 	
 	

ERP	
 	

=	
 	

Monthly Equipment Rental Payment, in $
	
 	
 	

EE1	
 	

=	
 	

Electrical Energy for such month, in kWh, as measured by the Electric Meter at the Electrical Interconnection Point.
	
 	
 	

ARE1	
 	

=	
 	

Applicable Electrical Rate, in $/kWh
	
 	
 	

EE2	
 	

=	
 	

Electrical Energy for such month, in kW, as measured by the Electric Meter at the Electrical Interconnection Point.
	
 	
 	

ARE2	
 	

=	
 	

Applicable Electrical Rate, in $/kW
	
 	
 	

TE	
 	

=	
 	

Thermal Energy for such month, in BTUs, as measured by the Thermal Meter at the HVAC Interconnection Point.
	
 	
 	

ART	
 	

=	
 	

Applicable Thermal Rate, in $/BTU
	
 	
 	

LUOC	
 	

=	
 	

Lessee Utility Operating Costs for such month as defined in Article 5.3

SCHEDULE 2.6

ADJUSTMENT OF APPLICABLE RATES  

        The percentage discount used to calculate the Applicable Electric Rate and Applicable Thermal Rate shall be adjusted on a monthly basis when Lessor's cost of
natural gas required to fuel the equipment rises above $1.00 per therm. For every $0.10 per therm increase in Lessor's cost of natural gas required to fuel the equipment above $1.00 per therm, the
percentage discount will be reduced by 2%. The new percentage discount will never fall below 0%. 

        The
percentage discount adjustment calculation is the following: 

PD =
YP-[GP-1.00] * 0.2

PD =
New Percentage Discount

YP = Your Percentage Discount Rate

GP = Lessor's higher price for natural gas in $/therm above $1.00 (rounded to the nearest tenth of a point) 

SCHEDULE 3.1

DESIGNATED AREA  

Per
installation drawings 

SCHEDULE 4.1

EQUIPMENT SPECIFICATIONS  

Cogeneration Units  

        The Tecogen Cogeneration Modules each provide 75kW of generation and contain a natural gas reciprocating engine, generator, control panel with power and
electronic controls, emission controls and heat recovery. Modules are enclosed in a weather-tight outdoor enclosure. 

Engine:  

        The TecoDrive 7400 engine is a GM automotive derivative 454 CID naturally aspirated natural gas engine, first introduced in 1984 and used
extensively in Tecogen's cogeneration units, engine driven chillers and refrigeration packages. 

	Efficiency:	 	91.6% @ LHV of 905 BTU/scf
	 	 	81.31% @ HHV of 1020 BTU/scf
	Fuel consumption:	 	900 SCFH

Generator:  

        The generator is induction type, designed to run in parallel with the utility grid. Independent operation separated from the grid is not possible. 

Heat Output:  

        Heat is recovered from the engine jacket, oil cooler and exhaust, with a total heat availability of 490,000 BTU/Hr at full load conditions. 

Interconnection:  

        Tecogen modules has been certified by Intertek Testing Services (ITS) ETL Semko to be in conformance with the IEEE P1547/D07—Draft Standard for
Interconnecting Distributed Resources with Electric Power Systems. 

SCHEDULE 6.1

STIPULATED TERMINATION CHARGE  

        In the event of a termination of this Agreement pursuant to Section 6.1 or 6.2 for which a Stipulated Termination Charge is payable, Lessee shall
pay to Lessor an early termination payment amount equal to (x) $250,000, multiplied by, (y) the percentage shown below corresponding to
the year in which the early termination occurs (the "Stipulated Termination Charge"), multiplied by, (z) the number of Equipment
installed: 

	Year 1	 	[100]%
	Year 2	 	[90]%
	Year 3	 	[80]%
	Year 4	 	[70]%
	Year 5	 	[60]%
	Years 6-11	 	[50]%
	Years 12-16	 	[40]%
	Years 17-21	 	[30]%
	Years 22-25	 	[20]%

        The
Stipulated Termination Charge shall be paid by Lessee within 30 days of the early termination date. 

QuickLinks

Exhibit 10.7

Exhibit 10.6

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