Exhibit 10.1

PROMISSORY NOTE

$5,000,000.00
June 30, 2008

FOR VALUE RECEIVED, on the Maturity Date, as such term is defined in Section 1.1
below, BEACON POWER CORPORATION, a Delaware corporation with its chief executive
office and principal place of business presently at 65 Middlesex Road,
Tyngsboro, MA 01879 ("Borrower") promises to pay to the order of MASSACHUSETTS
DEVELOPMENT FINANCE AGENCY, a body politic and corporate created by Chapter 289
of The Acts of 1998 and established under Massachusetts General Laws Chapter 23G
as amended, ("Lender") at its principal offices at 160 Federal Street, Boston,
MA 02110, or at such other place as the holder of this note may from time to
time designate in writing, the principal sum of FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00), or such lesser amount advanced by Lender pursuant to Section
1.1 below (the “Loan”), or so much thereof then remaining unpaid, in lawful
money of the United States with interest at the rate or rates set forth below,
until fully paid. Borrower further agrees to pay upon an Event of Default, as
such term is defined below, all costs, including reasonable attorneys’ fees
reasonably incurred in the collection of Borrower’s obligations and the defense,
preservation, enforcement or protection of Lender’s rights and remedies under
this Note, or in the foreclosure of any mortgage or security interest now or
hereafter securing the same or in any proceedings to otherwise enforce or
protect upon an Event of Default Lender’s rights and remedies under this Note or
any security therefor. Interest on this Note shall be computed on the basis of a
year of three hundred sixty (360) days and actual days elapsed.

1.0. Funding; Term; Interest Rate; Payments.

1.1. Funding; Term.

(a) Borrower may request one (1) or more advances of up to the entire principal
amount of this Note for the purchase of equipment and installation of certain
tenant improvements more specifically defined in a certain Collateral Assignment
of Lease Agreement of even date herewith, at the Borrower’s manufacturing
facility at 65 Middlesex Road, Tyngsboro, Massachusetts (the “Premises”).

(b) Provided no Event of Default has occurred and is continuing on the date of
each request for an advance, and no event or circumstance exists on such date,
which with the passage time, or notice, or both would result in an Event of
Default, Lender shall advance the full requested amount within ten (10) business
days of the date of such request. Borrower may request one (1) or more advances,
subject to availability of funds hereunder as a result of advances made pursuant
to Section 1.1(a) above, and the limitation on the total aggregate advances made
pursuant to this Section 1.1(b) set forth below, for the purposes of performing
tenant improvements to the Premises (the “Tenant Improvements”), as more fully
described on Schedule A attached to that certain Security Agreement of even or
near date herewith (the “Security Agreement”), and purchasing new equipment (the
“Equipment”), also as more fully described on Schedule A to the Security
Agreement, to be operated and maintained at the Premises, provided that, prior
to the first advance of the Loan under this Section 1.1(b), in the case of
Equipment, (i) Borrower’s request for the advance is accompanied by Borrower’s
invoices evidencing the purchase of the Equipment for which the advance is
sought and evidence of delivery of the same to the Premises, and (ii) such
advance does not exceed eighty-five percent (85%) of the invoice cost of the
Equipment purchased with the funds advanced hereunder; and in the case of Tenant
Improvements, Borrower’s request for the advance is accompanied by (x)
architect’s and contractor’s contracts in a form reasonably satisfactory to
Lender, (y) plans and specifications for the Borrower’s tenant improvements to
the Premises, and (z) a budget for such improvements. Prior to the final advance
for the Tenant Improvements, Borrower shall provide an unconditional certificate
of occupancy for the Premises permitting the use thereof for Borrower’s intended
purpose, and such other items as would customarily be required by a conventional
institutional construction lender.
 

 
 

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(c)  The term of this Note shall commence on June 30, 2008 (the “Effective
Date”) and shall mature on the same date of the 84th calendar month following
the Initial Funding Date (as defined below) (the “Maturity Date”). Borrower’s
obligation to make payments of principal and interest under Section 1.2 commence
when Lender first advances funds to Borrower in accordance with Section 1.1 (the
“Initial Funding Date”).

1.2. Payments of Principal and Interest. Payments of interest only during the
first twelve (12) months after the Effective Date, at the rate provided in
Section 1.3 below, shall be due and payable and shall commence on the first
(1st) day of the calendar month next following the Initial Funding Date (the
“Payment Start Date”). Each such payment of accrued interest shall be paid in
arrears. Thereafter, the then balance of the principal outstanding under this
Note shall be amortized such that monthly payments of principal and interest (at
the rate provided in Section 1.3 below) shall commence on the first anniversary
of the Payment Start Date and shall continue on the first day of each successive
month thereafter in as equal monthly installments as possible over the remaining
term of this Note. No further advances of principal shall be made hereunder
after the first anniversary of the Payment Start Date.

1.3. Interest Rate. So long as no Event of Default has occurred and is
continuing (but subject to applicable cure or grace periods), and subject to the
terms hereof, the principal outstanding hereunder from time to time shall bear
interest at a fixed annual rate of six and one-half (6.50%) percent.

2.0. Default Rate. To the extent allowed by applicable law, after the occurrence
of any Event of Default and during the continuation thereof (and after giving
effect to any applicable grace or cure periods), after the Maturity Date, or
after judgment has been rendered on this Note, all outstanding principal and
unpaid interest shall bear, until paid, interest at a rate per annum equal to
five (5%) percentage points greater than that which would otherwise be
applicable assessed retroactive to the date that the Event of Default first
occurs (the “Default Rate”).

3.0. Late Charge. If a regularly scheduled payment is five (5) business days or
more late, Borrower will be charged five percent (5%) of the unpaid portion of
the regularly scheduled payment or ten dollars ($10.00), whichever is greater.
If Lender demands payment in writing of this Loan after the occurrence and
during the continuation of an Event of Default (after giving effect to any
applicable grace or cure periods), and Borrower does not pay the Loan within
fifteen (15) days after Lender’s demand, Borrower will be charged five percent
(5%) of the unpaid principal amount plus accrued and unpaid interest.

4.0. Expenses. Borrower further promises to pay to Lender, as incurred, and as
an additional part of the unpaid principal, all costs, expenses and reasonable
attorneys' fees incurred (except such as shall result from Lender’s gross
negligence or willful misconduct): (a) in the protection, modification,
collection, defense or enforcement of all or part of this Note or any guaranty
hereof; or (b) in the foreclosure or enforcement of any mortgage or security
interest which may now or hereafter secure the debt hereunder, or (c) with
respect to any action reasonably taken to protect, defend, modify or sustain the
lien of any such mortgage or security agreement; or (d) with respect to any
litigation or controversy arising from or connected with this Note or any
mortgage or security agreement or collateral which may now or hereafter secure
this Note; or (e) with respect to any act during the continuance of an Event of
Default to protect defend, modify, enforce or release any of its rights or
remedies with regard to, or otherwise effect collection of, any collateral which
may now or in the future secure this Note or with regard to or against Borrower
or any endorser, guarantor or surety of this Note. Borrower also promises to pay
Lender, on the date hereof, all reasonable third party costs incurred in making
this loan to Borrower including without limitation Lender’s legal fees and
costs, and filing fees.
 
 
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5.0. Optional Prepayment. Borrower may at any time elect to prepay the unpaid
amount of this Note, or any part thereof, without penalty or premium; provided,
however, that, any such prepayment shall first be applied to (i) any unpaid
expenses required by Section 4.0 above, then to (ii) late fees, if any are due,
then to (iii) Default Rate interest, if any is due, then to (iv) regularly
accrued but unpaid interest pursuant to Section 1.3 above, and then finally to
(v) the principal.

6.0 Warrants. As part of the consideration in making the Loan on favorable terms
and conditions, Borrower shall issue to the Lender on the date of this Note  two
(2) separate warrants with identical terms entitling Lender to purchase an
aggregate of 171,958 shares (85,979 shares per warrant) of voting common stock
in the Borrower with an exercise price of $1.89 per share, subject to any
adjustments as set forth in Section 8 of each warrant (the “Warrants”). The
above description of the Warrants does not purport to be complete and is
qualified in its entirety by reference to the full text of the Warrants, a copy
of which has been provided to the Lender and is incorporated herein by
reference.

7.0. Default. The happening of any of the following events or conditions shall
constitute an “Event of Default” under this Note:

7.1. Failure to make any payment of principal or interest on any sum due under
this Note within ten (10) days after the same shall be due and payable.

7.2. Failure by Borrower to observe or perform any covenant contained herein or
a default or the occurrence of an event of default in any agreement between
Borrower and Lender in connection herewith, including the Security Agreement and
that certain Collateral Assignment of Lease Agreement (the “Collateral
Assignment”) by and between Borrower and Lender of even date herewith beyond the
applicable grace or cure period (or, if no such grace or cure period is
specified, then beyond thirty (30) days following written notice by Lender to
Borrower of the occurrence of any such default or event of default).

7.3. A material default by Borrower under that certain Lease Agreement by and
between Borrower and GFI Tyngsboro, LLC ("Landlord") dated July 23, 2007,
including all addenda and riders thereto (the “Lease”), such default continuing
beyond the applicable cure or grace period. A “material” default as provided in
this Section 7.3 shall mean any default of any covenant, term or condition of
the Lease, the failure by Borrower to cure which default gives Landlord the
right to terminate the Lease in accordance with the terms and conditions
thereof.

7.4. The term of the Lease ends, for any reason other than what is permitted
Borrower under the Lease, prior to the Maturity Date.

7.5. Any amendment to the Lease without the Lender’s prior written consent (not
to be unreasonably withheld, conditioned or delayed) which has the effect of (i)
terminating the Lease before the Maturity Date, (ii) defining Premises as set
forth in the Lease in a manner materially adverse to the collateral securing
this Note, (iii) increasing the rent due, (iv) making the rent payment terms
less favorable to the Borrower, (v) materially increasing any repair obligation
(vi) imposing any escalators as additional rent or (vii) amending any other
financial provision of the Lease in a manner materially adverse to the Borrower,

7.6. As of the Effective Date, any representation or warranty made by Borrower
herein or in any agreement executed in connection herewith, including the
Security Agreement or any statement, certificate or other data furnished by
Borrower in connection herewith or with such agreements, proves to have been
incorrect in any material respect when made.
 
 
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7.7. A judgment or judgments for the payment of money shall be rendered against
Borrower in an amount, individually or in the aggregate, of at least two hundred
thousand dollars ($200,000.00), and any such judgment shall remain unbonded or
unsatisfied and in effect for any period of thirty (30) consecutive days without
a stay of execution, and the Lender holds the good faith belief that such
unsatisfied judgment or unstayed execution is materially adverse to the
condition (financial or otherwise) of the Borrower or the Lender’s collateral
for this Note.

7.8. Borrower shall: (a) apply for or consent to the appointment of a receiver,
trustee or liquidator of all or a substantial part of any of its assets; (b)
admit in writing its inability to pay its debts as they mature; (c) file or
permit the filing of any petition, case arrangement, reorganization, or the like
under any insolvency or bankruptcy law, or be adjudicated as a bankrupt, or make
an assignment for the benefit of creditors or consent to any form or arrangement
for the satisfaction, settlement or delay of debt or the appointment of a
receiver for all or any part of its properties; or (d) any action shall be taken
by Borrower for the purpose of effecting any of the foregoing.

7.9. An order, judgment or decree shall be entered, or a case shall be
commenced, against Borrower, without its application, approval or consent by any
court of competent jurisdiction, approving a petition or permitting the
commencement of a case seeking reorganization or liquidation of Borrower or
appointing a receiver, trustee or liquidator of Borrower, or of all or a
substantial part of the assets of Borrower, and Borrower, by any act, indicates
its approval thereof, consent thereto, or acquiescence therein, or such order,
judgment, decree or case shall continue unstayed and in effect for any period of
sixty (60) consecutive days, or an order for relief in connection therewith
shall be entered.

7.10. If Borrower shall dissolve or liquidate, or be dissolved or liquidated, or
cease to legally exist, or merge or consolidate, or be merged or consolidated
with or into any other corporation or entity, other than (i) a merger or
reorganization involving only a change in the state of incorporation of the
Borrower or (ii) the acquisition by the Borrower of another business where the
Borrower survives as a going concern (in the case of an event listed in (i) and
(ii) above, Borrower must provide Lender with written notice of such event
within less than ten (10) business days prior to the effective date thereof).

7.11. If any other indebtedness or obligation shall be accelerated, or if there
exists any event of default under any instrument, document or agreement
governing, evidencing or securing such other indebtedness or obligation, in any
event, in an amount, individually or in the aggregate, of at least two hundred
thousand dollars ($200,000.00); and any such amount remains unpaid or any such
indebtedness or obligations remain accelerated or any such event of default
remains uncured, in each case, for any period of thirty (30) consecutive days;
and the Lender holds the good faith belief that such unpaid indebtedness or
event of default is materially adverse to the condition (financial or otherwise)
of the Borrower or the Lender’s collateral for this Note.
 
7.12. If Borrower relocates any material portion of its manufacturing
operations, or any other Massachusetts-based operations financed with any
portion of the Loan proceeds, from the Premises to another site outside the
Commonwealth of Massachusetts, or for any reason ceases such manufacturing or
other financed operations at the Premises for any reason other than (i) a
default by Landlord under the Lease for a thirty (30) day period (consecutive or
cumulative in any ninety (90) day period), or (ii) force majeure which prevents
such manufacturing or other financed operations at the Premises for a continuous
six (6) month period.
 
 
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7.13. If Borrower fails to maintain at all times during the term a minimum cash
balance of $1,500,000.00 in the Borrower’s principal bank depository.
 
7.14. If by December 31, 2008, the Borrower fails to file or cause to be filed
with the Securities and Exchange Commission a Registration Statement providing
for the resale of all shares received upon exercise of the Warrants then
outstanding for an offering to be made by the Lender, or its permitted assignee,
the Massachusetts Technology Park Collaborative (“MTPC”), and fails thereafter
to use commercially reasonable efforts to both have such registration statement
declared effective as soon thereafter as reasonably practicable and to maintain
the effectiveness of such registration statement after it is declared effective
until the earlier date of when: (i) all shares received upon exercise of the
Warrants have been sold or (ii) all shares received upon exercise of the
Warrants are covered by such registration statement may be sold immediately
without registration under the Securities Act and without volume restrictions
pursuant to Rule 144, as determined by the counsel to the Borrower pursuant to a
written opinion letter to such effect, addressed and acceptable to the
Borrower’s transfer agent and the affected warrant holder.
 
Upon and after an Event of Default, the entire unpaid balance of said
indebtedness, both principal and interest, and including any other sums which
may become due under this Note, shall, upon written notice from the holder and
at the holder’s option, immediately become due and payable without presentment,
further demand, protest, notice of protest, or other notice of dishonor of any
kind, all of which are hereby expressly waived by Borrower; in addition, Lender
shall have those remedies available to it under Section 8 of the Security
Agreement. Notice of an Event of Default shall be provided in accordance with
Section 8(a) of the Security Agreement.
 
8.0. Maximum Permissible Interest Rate. Borrower shall not be obligated to pay
and Lender shall not collect interest at a rate higher than the maximum
permitted by law or the maximum that will not subject Lender to any civil or
criminal penalties. If, because of the acceleration of maturity, the payment of
interest in advance or any other reason, Borrower is required, under the
provisions hereof, pursuant to the provisions of any other agreements,
instruments, documents, security agreements, mortgages, financing statements,
and supplements thereto and relating to the Loan, or entered into between
Borrower in favor of, or with, Lender, at any time, for any purpose (the “Loan
Documents”) or otherwise, to pay interest at a rate in excess of such maximum
rate, the rate of interest under such provisions shall immediately and
automatically be reduced to such maximum rate and any payment made in excess of
such maximum rate shall be applied to principal outstanding hereunder or, if
received by applicable law, shall be returned to Borrower.
 
9.0. Source of Loan; Limited Recourse. Borrower hereby acknowledges that the
Loan is being made by Lender from the Commonwealth of Massachusetts’s Emerging
Technology Fund created pursuant to Section 27 of Chapter 23G of Massachusetts
General Laws (the “Fund”) which is administered by Lender. In consideration of
the Lender’s agreement to make the Loan, to the extent that the Borrower ever
has any off-sets, defenses or claims against the Lender, its subsidiaries,
affiliates, any members of the Fund’s advisory committee, parents, officers,
directors, employees, agents, predecessors, successors and assigns, both present
and former (collectively, the “Lender Affiliates”), the Borrower and its
partners, subsidiaries, affiliates, parents, officers, directors, employees,
agents, heirs, successors, assigns, and executors, (collectively, the “Obligor
Parties”), agree that any recourse an Obligor Party may have against the Lender
or the Lender Affiliates will be limited to the Fund for any action and actions,
cause and causes of action, suits, debts, controversies, damages, judgments,
executions, claims and demands whatsoever asserted or unasserted, in contract,
tort, law or in equity which the Obligor Parties may have upon or against the
Lender or the Lender Affiliates by reason of any matter, cause, causes or thing
whatsoever including, without limitation, to any claim that relates to, in whole
or in part, directly or indirectly (a) the making or administration of the Loan,
including, without limitation, such claims and defenses based on mistake, usury,
misrepresentation, or negligence; (b) any covenants, agreements, duties, or
obligations set forth in the Loan Documents; (c) the actions or omissions of any
of the Lender and/or the Lender Affiliates in connection with the initiation or
continuing exercise of any right or remedy contained in the Loan Documents or at
law or in equity; (d) lost profits; (e) loss of business opportunity; (f)
increased financing costs; (g) increased legal or administrative fees; or (h)
damages to business reputation, but excluding in each of the foregoing cases the
gross negligence and willful misconduct of the Lender and/or the Lender
Affiliates.
 
 
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10.0. Replacement Documents. Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of the Note or any other
security document(s), together with an agreement reasonably satisfactory to the
Borrower to indemnify the Borrower from any loss incurred by it in connection
therewith, and, in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such Note or other document(s), Borrower will
issue, in lieu thereof, a replacement Note or other document(s) in the same
principal amount thereof and otherwise of like tenor.
 
11.0. Consent To Jurisdiction. Borrower hereby agrees that any state or local
court of the Commonwealth of Massachusetts or any United States District Court
for the District of Massachusetts or, at the option of Lender, any court within
the Commonwealth of Massachusetts in which Lender shall initiate legal or
equitable proceedings and which has subject matter jurisdiction over the matter
in controversy, shall have exclusive jurisdiction to hear and determine any
claims or disputes between Borrower and Lender pertaining directly or indirectly
to this Note or to any matter arising in connection with this Note.

12.0 Waivers. Borrower agrees that no delay or failure on the part of the holder
in exercising any power, privilege, remedy, option or right hereunder shall
operate as a waiver thereof or of any other power, privilege, remedy or right;
nor shall any single or partial exercise of any power, privilege, remedy, option
or right hereunder preclude any other or future exercise thereof or the exercise
of any other power, privilege, remedy, option or right. The rights and remedies
expressed herein are cumulative, and may be enforced successively, alternately,
or concurrently and are not exclusive of any rights or remedies which holder may
or would otherwise have under the provisions of all applicable laws, and under
the provisions of all agreements between Borrower and Lender.

Borrower hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note. Borrower hereby assents to any extension or
postponement of the time of payment or any other indulgence, to the addition or
release of any party or person primarily or secondarily liable, and to the
addition, release and/or substitution of all or any portion of any collateral
now or hereafter securing this Note.

BORROWER AND LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY.
THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN AND
ACCEPT THIS NOTE.

[SIGNATURES ON FOLLOWING PAGE]

 
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This Note is executed as a sealed instrument and shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
 
WITNESS:
BORROWER:
             
BEACON POWER CORPORATION
                   
/s/ Lynn Hall
 
By:
/s/ James M. Spiezio
       
Name: James M. Spiezio
     
Title: Chief Financial Officer
     
Hereunto Duly Authorized

 
 
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