Exhibit 10.4

 
BEACON POWER CORPORATION
 
Restricted Stock Unit and Option Agreement
 
This Restricted Stock Unit and Option Agreement (this “Agreement”), dated as of
February 14, 2008 (the “Effective Date”), is by and between Beacon Power
Corporation (the “Company”) and F. William Capp (“Executive”), an executive
officer of the Company.
 
WHEREAS, this Agreement is intended to provide Executive compensation in the
form of restricted stock units (or “RSUs”) that convert into shares of the
Company’s common stock, $.01 par value per share (the “Common Stock”);
 
WHEREAS, this Agreement is also intended to provide Executive with a
non-qualified stock option to purchase shares of the Common Stock pursuant to
the terms and conditions set forth herein;
 
NOW THEREFORE, it is agreed as follows:
 
ARTICLE I. RESTRICTED STOCK UNIT AWARD
 
1.1 Restricted Stock Unit Award. Subject to the terms and conditions of this
Agreement and pursuant to the Company’s Third Amended and Restated 1998 Stock
Incentive Plan (the “Plan”), the Company hereafter will grant RSUs to Executive
in accordance with the vesting table set forth below. On each vesting date set
forth below (each a “Vesting Date”), the Company shall be considered to have
awarded RSUs in the indicated amount to the Executive.

% of total RSUs Vested
 
Vesting Date
 
RSUs Vesting
on Vesting Date
 
Total RSUs Vested
to Date
8.33%
 
March 31, 2008
 
2,695
 
2,695
8.33%
 
June 30, 2008
 
2,695
 
5,390
8.33%
 
September 30, 2008
 
2,695
 
8,085
8.33%
 
December 31, 2008
 
2,695
 
10,780
8.33%
 
March 31, 2009
 
2,695
 
13,475
8.33%
 
June 30, 2009
 
2,695
 
16,170
8.33%
 
September 30, 2009
 
2,695
 
18,865
8.33%
 
December 31, 2009
 
2,695
 
21,560
8.33%
 
March 31, 2010
 
2,695
 
24,255
8.33%
 
June 30, 2010
 
2,695
 
26,950
8.33%
 
September 30, 2010
 
2,695
 
29,645
8.37%
 
December 31, 2010
 
2,705
 
32,350

 
1.2 Conversion to Common Stock. Each vested RSU shall convert into one (1) share
of Common Stock on the applicable Vesting Date; provided, that, if the
applicable Vesting Date occurs during a period in which Executive is (a) subject
to a lock-up agreement restricting Executive’s ability to sell Common Stock in
the open market, (b) restricted from selling Common Stock in the open market
because a trading window is not available, in the opinion of Company, or (c)
trading is otherwise not appropriate, in the reasonable and good faith opinion
of Company, such conversion of vested RSUs into shares of Common Stock shall be
delayed until the date immediately following the expiration of the lock-up
agreement or the opening of a trading window or confirmation by Company that
trading is appropriate, as the case may be.
 

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ARTICLE II. NON-QUALIFIED STOCK OPTION GRANT
 
2.1 Grant of Option. The Company hereby grants Executive an option (the
“Option”) to purchase, as a whole or in part, on the terms provided herein and
in the Plan the shares (the “Shares”) of Common Stock at an exercise price per
share, as set forth below:

Shares:
 
Exercise Price:
 
291,279
 
$
1.25
 

Unless earlier terminated, the Option shall expire one day before its 10th
anniversary (the “Final Exercise Date”). It is intended that the Option shall be
a non-qualified stock option.

2.2 Vesting Schedule. Subject to the other terms of this Agreement regarding the
exercisability of the Option, the Shares shall vest and become exercisable, as
follows; provided, however, that as of each relevant Vesting Date, Executive’s
employment with the Company has not terminated:

% of total Shares Vested
 
Vesting Date
 
Shares Vesting
on Vesting Date
 
Total Shares Vested
to Date
8.33%
 
March 31, 2008
 
24,264
 
24,264
8.33%
 
June 30, 2008
 
24,264
 
48,528
8.33%
 
September 30, 2008
 
24,264
 
72,792
8.33%
 
December 31, 2008
 
24,264
 
97,056
8.33%
 
March 31, 2009
 
24,264
 
121,320
8.33%
 
June 30, 2009
 
24,264
 
145,584
8.33%
 
September 30, 2009
 
24,264
 
169,848
8.33%
 
December 31, 2009
 
24,264
 
194,112
8.33%
 
March 31, 2010
 
24,264
 
218,376
8.33%
 
June 30, 2010
 
24,264
 
242,640
8.33%
 
September 30, 2010
 
24,264
 
266,904
8.37%
 
December 31, 2010
 
24,375
 
291,279

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, as a 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
the Option under this Agreement or the Plan.

2.3 Exercise of Option.

(a) Form of Exercise. Each election to exercise the Option shall be in writing,
signed by Executive, and received by the Company at its principal office,
accompanied by a copy of this Agreement and by payment in full as provided
below. Executive may purchase less than the number of Shares covered by the
Option, provided that no partial exercise of the Option may be for any
fractional share or for fewer than 100 whole shares of Common Stock. Payment
shall be as follows:

(i) in cash or by check, payable to the order of the Company;

(ii) in the sole discretion of the authorized administrator of the Plan, (A)
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price or (B) delivery by Executive to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price;

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(iii) delivery of shares of Common Stock owned by Executive valued at fair
market value, as determined in the sole discretion of the board of directors of
the Company, which Common Stock was owned by Executive at least six months prior
to such delivery;

(iv) to the extent permitted by the authorized administrator of the Plan, in its
sole discretion, by payment of such other lawful consideration as the authorized
administrator of the Plan may determine; or

(v) any combination of the above permitted forms of payment.

A certificate or certificates for the Shares purchased shall be issued by the
Company after the exercise of the Option and payment therefor, including the
provision for any federal and state withholding taxes, and other applicable
employment taxes.

(b) Continuous Relationship with the Company Required. Except as otherwise
provided in Article III, the Option may not be exercised unless Executive, at
the time he exercises the Option, is, and has been at all times since the
Effective Date, an employee of the Company or any parent or subsidiary of the
Company as defined in Section 424(e) or (f) of the Internal Revenue Code of
1986, as amended (the “Code”).

ARTICLE III. TERMINATION OF EMPLOYMENT
 
3.1 Termination of Employment.  
 
(a)  General. Except as indicated below in (b), if Executive terminates his
employment for any reason, including by resignation, or if the Company
terminates his employment with or without a Breach of Conduct (as defined
below), Executive may retain all RSUs and Shares underlying the Option that have
vested before the Termination Notice Date (as defined below). However, he will
not be entitled to receive and shall forfeit any interest in RSUs and Shares
underlying the Option that are scheduled to be vested after the Termination
Notice Date.
 
The “Termination Notice Date” means the date on which Executive resigns (or if
earlier, the date on which Executive notifies Company that Executive will
resign), or the date on which Company terminates the employment for or without a
Breach of Conduct (or if earlier, the date on which the Company notifies
Executive that employment will be so terminated).
 
(b) Special Rules for Options. In the case of termination of employment by
reason of death, disability (as defined under the Executive's employment
agreement), resignation or without Breach of Conduct, the vested Shares
underlying the Option will expire if not exercised within 365 days after the
Termination Notice Date. In the case of termination of employment for Breach of
Conduct, all vested Shares underlying the Option will expire immediately on the
written declaration of the authorized administrator of the Plan.
 
Such declaration shall be communicated in writing to Executive. In addition, the
Company may, in its sole discretion, by written notice, demand that any or all
stock certificates for Shares acquired pursuant to the exercise of the Option,
or any profit realized from the sale or transfer of such Shares, be returned to
the Company within five days of receipt of such notice, and any exercise price
paid by Executive shall be returned to Executive by the Company immediately
thereafter, without interest. The Company shall be entitled to reimbursement of
reasonable attorney fees and expenses incurred in seeking to enforce its rights
under this paragraph.

“Breach of Conduct” shall mean activities which constitute a serious breach of
conduct that, only if possible to cure as determined by the authorized
administrator of the Plan in its sole discretion, is not cured within 30 days
after receipt of written notice to Executive, including, but not limited to: (i)
the disclosure or misuse of confidential information, trade secrets or other
intellectual property of the Company or third parties who have disclosed such
information, secrets or intellectual property to the Company or a company that
controls, is controlled by or is under common control with the Company
(collectively, an “Affiliate”), (ii) activities in violation of the policies of
the Company or any Affiliate, including without limitation, the Company’s
insider trading policy; (iii) the violation or breach of any material provision
in any applicable contract or agreement between Executive and the Company (or an
Affiliate), including, for example, a violation or breach which is grounds for
discharge for cause; (iv) engaging in conduct relating to Executive’s employment
for which either criminal or civil penalties have been sought; (v) engaging in
activities which adversely affect or which are contrary or harmful to the
interests of the Company or Affiliate, or (vi) in the event that Executive and
Company have not signed a noncompetition agreement (which therefore otherwise
would govern issues of noncompetition), engaging in competition with the Company
or any Affiliate or soliciting their respective employees or customers on behalf
of some other entity during employment or within one year following termination
of employment with the Company or Affiliate. The determination of Breach of
Conduct shall be determined by the authorized administrator of the Plan in good
faith and in its sole discretion.

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ARTICLE IV. GENERAL PROVISIONS

4.1 Acquisition Events. Upon the occurrence of an Acquisition Event (as defined
below), or the execution by the Company of any agreement with respect to an
Acquisition Event, the authorized administrator of the Plan shall take any one
or more of the following actions with respect to the RSUs and the Option: (i)
provide that the RSUs and/or the Option shall be assumed, or equivalent equity
compensation shall be substituted, by the acquiring or succeeding corporation
(or an affiliate thereof); (ii) upon written notice to Executive, provide that
any portion of the RSUs that are vested but not converted and/or any portion of
the Shares underlying the Option that are vested but not exercised will become
converted or exercisable, as the case may be, in full as of a specified time
(the “Acceleration Time”) prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by Executive between the Acceleration Time and the consummation
of such Acquisition Event; (iii) in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each share of Common Stock surrendered pursuant to such
Acquisition Event (the “Acquisition Price”), provide that (A) the unvested RSUs
shall terminate upon consummation of such Acquisition Event and Executive shall
receive, in exchange therefor, a cash payment equal to the amount equal to the
Acquisition Price multiplied by the number of shares of Common Stock subject to
such unvested RSUs, (B) the Option shall terminate upon consummation of such
Acquisition Event and Executive shall receive, in exchange therefor, a cash
payment equal to the amount (if any) by which (x) the Acquisition Price
multiplied by the number of shares of Common Stock subject to the Option
(whether or not then convertible or exercisable), exceeds (y) the aggregate
exercise price of the Option; and (iv) provide that the unvested RSUs and/or the
Option (A) shall become exercisable, realizable or vested in full, or shall be
free of all conditions or restrictions, as applicable to the Option, prior to
the consummation of the Acquisition Event, or (B), if applicable, shall be
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof).

An “Acquisition Event” shall mean: (a) any merger or consolidation which results
in the voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; or (c) the complete liquidation of the Company.

4.2 Acceleration. The authorized administrator of the Plan may at any time
provide that the Option shall become immediately exercisable in full or in part,
that the Option may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.

4.3 Golden Parachute Payment Excise Tax Protection. In the event that the excise
tax imposed by Section 4999 of the Code, (or any successor penalty or excise tax
subsequently imposed by law) applies to any payments or benefits specifically
paid or conferred only under this Agreement (the “Excise Tax”), an additional
amount shall be paid by the Company to the Executive equal to the amount of such
Excise Tax (the “Gross Up Payment”); provided, however in no event shall the
aggregate amount payable by the Company to Executive for any excise tax imposed
by Section 4999 of the Code pursuant to this Agreement and all other agreements
between the Company and Executive exceed $250,000. The Company and its advisers
shall make the determination of the amount of the Gross Up Payment. To the
extent that the amount of such Gross Up Payment exceeds the amount of Excise Tax
actually paid by Executive, Executive shall promptly pay to the Company such
excess amount.

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ARTICLE V. TRANSFERABILITY
 
5.1 Nontransferability of Agreement, RSUs and the Option. This Agreement, the
RSUs and the Option may not be sold, assigned, transferred, pledged or otherwise
encumbered by Executive, either voluntarily or by operation of law, except by
will or the laws of descent and distribution. Notwithstanding the foregoing,
Executive’s transfer to a revocable trust that is solely for the benefit of
Executive and Executive’s spouse and/or issue during Executive’s lifetime and
transfer under such trust at Executive’s death to the trust’s intended
beneficiaries shall not be deemed to be prohibited by the foregoing provisions.
If any person other than Executive, Executive’s then current spouse, and
Executive’s issue shall possess a vested interest in such trust during the
lifetime of Executive, such interest shall not be recognized hereunder as giving
such person any right to the benefit of any RSUs or the shares of Common Stock
issuable upon conversion thereof. In such event the RSUs shall revest in
Executive as if such transfer in trust had not occurred. During the lifetime of
Executive, the RSUs and the Option shall be exercisable only by Executive.
 
ARTICLE VI. MISCELLANEOUS
 
6.1 Provisions of the Plan. This Agreement is subject to the provisions of the
Plan, a copy of which Executive hereby acknowledges receiving with this
Agreement.

6.2 No Right to Continued Employment. This Agreement shall not confer upon
Executive any right with respect to continuance of employment by the Company,
nor shall it interfere in any way with the right of the Company to terminate
Executive’s employment at any time.

6.3 No Right as Stockholder. Executive shall not be entitled to vote any shares
of Common Stock that may be acquired through conversion of RSUs or the Shares
underlying the Option to Common Stock, shall not receive any dividends
attributed to such shares of Common Stock, and shall have no other rights of a
stockholder with respect to the RSUs and/or the Option unless and until the
Common Stock issuable upon conversion of the RSUs has been delivered to
Executive or the Option is duly exercised by Executive and the Common Stock is
issued.

6.4 Compliance with Law and Regulations. This Agreement and the obligation of
the Company to issue, sell and deliver shares of Common Stock hereunder shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for Shares or
to remove restrictions from shares of Common Stock previously delivered until
(a) the listing of such Shares on any stock exchange on which the Shares may
then be listed, (b) all conditions have been met or removed to the satisfaction
of the Company, (c) in the opinion of the Company’s counsel, all other legal
matters in connection with the issuance and delivery of such shares have been
satisfied, including any applicable securities laws and any applicable stock
exchange or stock market rules and regulations, (d) Executive has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations and (e) the completion of any registration or qualification of
such Shares under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to be
necessary or advisable. Moreover, the Option and the RSUs may not be exercised
or converted to Common Stock if its exercise or conversion, or the receipt of
Shares pursuant thereto, would be contrary to applicable law.

6.5 Adjustment to Common Stock. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a normal cash
dividend, the number and class of securities each RSU shall be convertible into
under this Agreement and the number of Shares underlying the Option shall be
appropriately adjusted by Company to the extent the authorized administrator of
the Plan shall determine, in good faith, that such an adjustment is necessary
and appropriate.

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6.6 Withholding. Executive shall pay to Company, or make provision satisfactory
to Company for payment of, any taxes required by law to be withheld in
connection with this Agreement no later than each Vesting Date upon which
Company vests RSUs to Executive. No shares of Common Stock will be issued
pursuant to the exercise of the Option unless and until Executive pays to the
Company, or makes provision satisfactory to the Company for payment of, any
federal, state or local withholding taxes required by law to be withheld in
respect of the Option. Executive may satisfy such tax obligations by delivering
to Company cash in the form of wire transfer or check and Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to Executive.

6.7 Common Stock Reserved. Company shall at all times during the term of this
Agreement reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.

6.8 Notices. Any notice hereunder to the Company shall be addressed to Beacon
Power Corporation, Attn: Compensation Committee, 234 Ballardvale Street,
Wilmington, MA 01887, and any notice hereunder to Executive shall be sent to the
address reflected on the payroll records of the Company, subject to the right of
either party to designate at any time hereafter in writing some other address.

6.9 Delaware Law to Govern. This Agreement shall be construed and administered
in accordance with and governed by the laws of the State of Delaware (without
giving effect to any conflict or choice of laws provisions thereof that would
cause the application of the domestic substantive laws of any other
jurisdiction).

6.10 Certain Special Rules. To the extent that this Agreement and the grant of
the RSUs and the Option hereunder become subject to the provisions of Section
409A of the Code, the Company and Executive agree that the RSUs and the Option
may be amended, modified, rescinded or substituted by the Company with an award
of comparable economic value as required to maintain compliance with the
provisions of Section 409A of the Code.

6.11 Amendment of Agreement. Company may amend, modify or terminate this
Agreement, provided that Executive’s consent to such action shall be required
unless Company determines that the action, taking into account any related
action, would not materially and adversely affect Executive.

6.12 Successors and Assigns; No Third Party Beneficiaries. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto. There are no third party beneficiaries of
this Agreement.

6.13 Entire Agreement. This Agreement and the Plan constitute the full and
entire understanding and agreement of the parties with regard to the RSUs and
the Option and supersede in their entirety all other prior agreements, whether
oral or written, with respect thereto.

6.14 Severability; Titles and Subtitles; Gender; Singular and Plural;
Counterparts; Facsimile.
 
(a) In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
 
(b) The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
 
(c) The use of any gender in this Agreement shall be deemed to include the other
genders, and the use of the singular in this Agreement shall be deemed to
include the plural (and vice versa), wherever appropriate.
 
(d) This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together constitute one instrument.
 
(e) Counterparts of this Agreement (or applicable signature pages hereof) that
are manually signed and delivered by facsimile transmission shall be deemed to
constitute signed original counterparts hereof and shall bind the parties
signing and delivering in such manner.
 
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the Effective Date.

EXECUTIVE: 
 
BEACON POWER CORPORATION 
     
By:
/s/ F. William Capp
 
By:
/s/ Jack P. Smith
 
Signature 
 
 
Signature 
         
Name: F. William Capp 
 
Name: Jack P. Smith
         
Address: 
 
Title:  Chairman, Compensation Committee

 
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