Nonstatutory Stock Option Agreement Granted Under 2003 Stock Incentive Plan

Exhibit 10.1

Distributed Energy Systems Corp.

Nonstatutory Stock Option Agreement

Granted Under 2003 Stock Incentive Plan

This agreement evidences the grant by Distributed Energy Systems Corp., a Delaware corporation (the “Company”), on December 7, 2007 (the “Grant Date”) to Bernard H. Cherry, an officer and director of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2003 Stock Incentive Plan (the “Plan”), a total of 418,818 shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”), at a price of $0.50 per share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on October 31, 2012 (the “Final Exercise Date”).

It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

(a) Vesting . This option will become exercisable (“vest”) in twelve equal monthly installments on the last day of each calendar month, beginning with November 2007, provided that the Participant has continued to serve as the interim or permanent chief executive officer or the chairman of the board of directors of the Company through such day. The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option hereunder or under the Plan.

(b) Form of Exercise . Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share.

(c) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 2, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, a consultant, advisor, employee or director of the Company or any other entity the employees, advisors, directors or consultants of which are eligible to receive option grants under the Plan (an “Eligible Participant”).

(d) Termination of Relationship with the Company . If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (e) and (f) below, the

right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the fore