UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              ---------------------

                                    FORM 10-Q


    [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the quarterly period ended September 30, 2002,

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                   Act of 1934
                      (For the transition period from to ).



                            Beacon Power Corporation
             (Exact name of registrant as specified in its charter)



                                    Delaware
                                   04-3372365
                          (State or other jurisdiction
                              of (I.R.S. Employer
                         incorporation or organization)
                              Identification No.)



                             234 Ballardvale Street
                      Wilmington, Massachusetts 01887-1032
               (Address of principal executive offices) (Zip code)

                              (978) 694-9121 Phone
                               (978) 694-9127 Fax
              (Registrant's telephone number, including area code)
                            ------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes _X_ No ___

The number of shares of the Registrant's common stock, par value $.01 per share,
outstanding as of November 11, 2002 was 42,812,897.


<page>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                                Table of Contents


                                                                           Page

PART I.  Financial Information

     Item 1.  Financial Statements:

         Consolidated Balance Sheets at September 30, 2002
         and December 31, 2001.                                              2

         Consolidated Statements of Operations for the three and
         nine months ended September 30, 2002 and 2001 and for the
         Period May 8, 1997 (date of  inception) to September 30, 2002.      3

         Consolidated Statements of Cash Flows for nine months ended
         September 30, 2002 and 2001 and for the Period May 8, 1997
         (date of inception) to September 30, 2002.                          4

         Notes to Consolidated Financial Statements.                       6-8

     Item 2.  Management's Discussion and Analysis of Consolidated
              Financial Condition and Results of Operations.              9-18

     Item 3.  Quantitative and Qualitative Disclosures about Market Risk    19

     Item 4.  Controls and Procedures                                       19

PART II.  Other Information

     Item 1.  Legal Proceedings                                             20
     Item 2.  Changes in Securities                                         20
     Item 3.  Defaults on Senior Securities                                 20
     Item 4.  Submission of Matters to a Vote of Security Holders           20
     Item 5.  Other Information                                             20
     Item 6.  Exhibits, Financial Statements Schedules and
              Reports on Form 8-K                                           20

Signatures                                                                  21

Certifications                                                           22-23



<page>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                           Consolidated Balance Sheets
<table>

                                                                   <c>                       <c>
                                                                         (Unaudited)
                                                                        September 30,           December 31,
                                                                            2002                    2001
                                                                    ----------------------  ---------------------
Assets
Current assets:
   Cash and cash equivalents                                                $  21,760,816         $   34,601,585
   Prepaid expenses and other current assets                                      328,715              1,131,065
   Assets held for sale                                                            53,715                      -
                                                                    ----------------------  ---------------------
      Total current assets                                                     22,143,246             35,732,650


Property and equipment, net (Note 3)                                              736,812              6,188,507
Other assets                                                                      251,384                209,796
                                                                    ----------------------  ---------------------

Total assets                                                                 $ 23,131,442           $ 42,130,953
                                                                    ======================  =====================

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                          $    214,490           $    911,465
   Accrued compensation and benefits                                              177,443                721,130
   Due to related party                                                                 -                 35,532
   Other accrued expenses                                                         451,613                941,100
   Restructuring reserve                                                        1,835,625                      -
   Current portion of capital lease obligations                                   263,425                335,145
                                                                    ----------------------  ---------------------
      Total current liabilities                                                 2,942,596              2,944,372

Capital lease obligations, net of current portion                                  13,307                205,352
Commitments (Note 4)

Stockholders' equity:
   Preferred Stock, $.01 par value; 10,000,000 shares authorized
   no shares issued or outstanding                                                      -                      -
   Common stock, $.01 par value; 110,000,000 shares authorized;
   42,809,361 and 42,770,856 shares issued and outstanding at
   September 30, 2002 and December 31, 2001, respectively                         428,094                427,709
   Deferred stock compensation                                                   (15,430)              (211,564)
   Additional paid-in-capital                                                 132,746,944            132,911,256
   Deficit accumulated during the development stage                         (112,884,409)           (94,146,172)
   Less: treasury stock, at cost                                                 (99,660)                      -
                                                                    ----------------------  ---------------------
      Total stockholders' equity                                               20,175,539             38,981,229

Total liabilities and stockholders' equity                                 $   23,131,442         $   42,130,953
                                                                    ======================  =====================

                                           See notes to consolidated financial statements
</table>
<page>
                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                Consolidated Statements of Operations (Unaudited)
<table>

                                     <c>             <c>                     <c>             <c>             <c>
                                                                                                                  Cumulative from
                                                                                                                     May 8, 1997
                                                                                                                (date of inception)
                                    Three months ended September 30,        Nine months ended September 30,      through September
                                        2002                2001                2002               2001              30, 2002
                                  ------------------  ------------------  -----------------  -----------------  --------------------

Revenue                                    $      -            $      -           $      -           $      -           $   551,184

Operating expenses:
   Selling, general and administrative    1,054,819           2,336,726          4,560,568          6,188,323            22,046,691
   Research and development               1,284,746           5,380,092          6,194,870         14,136,688            45,858,884
   Loss on sales commitments                      -                   -                  -                  -               375,974
   Depreciation and amortization            462,849             346,583          1,475,084            903,778             3,496,857
   Restructuring charges                  2,159,280                   -          2,159,280                  -             2,159,280
   Loss on impairment of assets           4,297,128                   -          4,297,128                  -             4,297,128
                                  ------------------  ------------------  -----------------  -----------------  --------------------
         Total operating expenses         9,258,822           8,063,401         18,686,930         21,228,789            78,234,814
                                  ------------------  ------------------  -----------------  -----------------  --------------------

Loss from operations                    (9,258,822)         (8,063,401)       (18,686,930)       (21,228,789)          (77,683,630)

Interest income                             115,514             462,187            418,252          1,917,074             3,476,221
Interest expense                            (8,770)             (3,154)           (36,958)           (18,080)           (1,082,017)
Other income (expense)                        1,920              15,958          (432,602)          (360,134)             (588,789)
                                  ------------------  ------------------  -----------------  -----------------  --------------------
   Total other income (expense), net        108,664             474,991           (51,308)          1,538,860             1,805,415
                                  ------------------  ------------------  -----------------  -----------------  --------------------
Net loss                                (9,150,158)         (7,588,410)       (18,738,238)       (19,689,929)          (75,878,215)

Preferred stock dividends                         -                   -                  -                  -          (36,825,680)
Accretion of redeemable convertible
    preferred stock                               -                   -                  -                  -             (113,014)
                                  ------------------  ------------------  -----------------  -----------------  --------------------
Loss to common shareholders           $ (9,150,158)       $ (7,588,410)      $(18,738,238)      $(19,689,929)       $ (112,816,909)
                                  ==================  ==================  =================  =================  ====================
Loss per share, basic and diluted       $    (0.21)         $    (0.18)        $    (0.44)        $    (0.46)
                                  ==================  ==================  =================  =================
Weighted-average common shares
    outstanding                          42,809,361          42,739,635         42,792,154         42,479,667
                                  ==================  ==================  =================  =================

                                          See notes to consolidated financial statements.
</table>
<page>
                    BEACON POWER CORPORATION AND SUBSIDIARY
                         (A Development Stage Company)
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
<table>

                                                             <c>                     <c>                 <c>
                                                                                                         Cumulative from
                                                                                                           May 8, 1997
                                                                                                       (date of inception)
                                                                  Nine months ended September 30,       through September
                                                                      2002                2001              30, 2002
                                                              --------------------------------------------------------------
Cash flows from operating activities:
    Net loss                                                       $  (18,738,238)     $  (19,689,929)      $  (75,878,216)
    Adjustments to reconcile net loss to net cash used in
    operating activities:
        Depreciation and amortization                                    1,475,084             903,778            3,496,857
        Loss on sale of fixed assets                                         7,342              86,523              163,729
        Impairment of assets                                             4,297,128                   -            4,297,128
        Restructuring charge net of severance paid                       1,835,625                   -            1,835,625
        Reserve for officers note                                          425,130                   -              425,130
        Interest expense relating to issuance of warrants                        -                   -              371,000
        Non-cash charge for change in option terms                               -                   -              346,591
        Non-cash charge for settlement of lawsuit                                -             303,160              303,160
        Amortization of deferred consulting expense, net                         -                   -            1,160,784
        Amortization of deferred stock compensation                         19,442             334,342            1,290,161
        Warrants issued for consulting services                                  -                   -            1,569,366
        Accrued loss on sales commitments                                        -                   -              375,974
        Services and interest expense paid in preferred stock                    -                   -               11,485
    Changes in operating assets and liabilities:
        Inventory                                                                -              82,180                    -
        Prepaid expenses and other current assets                          277,560           (957,449)            (853,505)
        Accounts payable                                                 (696,975)           (408,407)              214,490
        Accrued compensation and benefits                                (543,687)             945,641              177,443
        Accrued interest                                                         -                   -              275,560
        Due to related party                                              (35,532)             188,626                    -
        Accrued loss on sales commitments                                        -                   -            (375,974)
        Other accrued expenses and current liabilities                   (489,486)              66,280              460,284
                                                              --------------------------------------------------------------

        Net cash used in operating activities                         (12,166,607)        (18,145,255)         (60,332,928)

Cash flows from investing activities:
    (Increase)/decrease in other assets                                          -             607,014            (175,218)
    Purchases of property and equipment                                  (423,162)         (4,086,360)          (8,370,796)
                                                              --------------------------------------------------------------

        Net cash used in investing activities                            (423,162)         (3,479,346)          (8,546,014)

Cash flows from financing activities:
    Initial public stock offering, net of expenses                               -                   -           49,341,537
    Payment of dividends                                                         -         (1,159,373)          (1,159,373)
    Shares issued under employee stock purchase plan                        12,765                   -              122,709
    Exercise of employee stock options                                           -             803,505            1,175,670
    Issuance of preferred stock                                                  -                   -           32,868,028
    Repayment of subscription receivable                                         -                   -            5,000,000
    Proceeds from capital leases                                                 -             495,851              495,851
    Repayment of capital leases                                          (263,765)           (113,462)            (754,664)
    Proceeds from notes payable issued to investors                              -                   -            3,550,000
                                                              --------------------------------------------------------------

        Net cash provided (used) by financing activities                 (251,000)              26,521           90,639,758

Increase (decrease) in cash and cash equivalents                      (12,840,769)        (21,598,080)           21,760,816

Cash and cash equivalents, beginning of period                          34,601,585          62,497,102                    -
                                                              --------------------------------------------------------------

Cash and cash equivalents, end of period                             $  21,760,816       $  40,899,022       $   21,760,816
                                                              ==============================================================
                                          See notes to consolidated financial statements.
</table>
<page>

                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements


Note 1.  Nature of Business and Operations

Nature of Business. Beacon Power Corporation is a development stage company that
was  incorporated  on May 8, 1997.  Beacon Power  Corporation and its subsidiary
("Beacon" or "the Company") designs,  develops,  configures, and offers for sale
power  systems  that  provide  highly  reliable,  high-quality,  uninterruptible
electric power, employing both proprietary and third party solutions. It is best
known for its  environmentally  friendly,  flywheel-based  products (employing a
flywheel made from proprietary composite materials), which can store and deliver
energy in a variety of  configurations.  Such products have longer life, reduced
maintenance,  quicker  recharging,  remote  monitoring and other advantages over
competing  solutions.  Because the Company has not yet  generated a  significant
amount of revenue from its  principal  operations,  it continues to be accounted
for as a  development  stage  company  under  Statement of Financial  Accounting
Standards  No. 7. The  Company  has a single  operating  segment,  manufacturing
alternative power sources.  The Company has no segmented  structure  dictated by
product lines, geography or customer type.

Operations.  The Company has  experienced net losses since its inception and, as
of September  30,  2002,  had an  accumulated  deficit of  approximately  $112.9
million. The Company is facing the challenge of ongoing development,  as well as
refinement and marketing of its commercial products. Meeting these challenges is
expected to require significant outlays of capital.  The Company expects to have
sufficient  cash on hand to fund its reduced  operations  for  approximately  24
months.

Note 2.  Basis of Presentation and Summary of Significant Accounting Policies

The accompanying  unaudited consolidated financial statements have been prepared
using accounting  principles  generally accepted in the United States of America
for interim financial information and with Regulation S-X. Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments,  consisting of normal recurring accruals considered
necessary  for a fair  presentation,  have  been  included  in the  accompanying
unaudited financial statements.  Operating results for the three months and nine
months ended  September 30, 2002 are not  necessarily  indicative of the results
that may be  expected  for the full  year  ending  December  31,  2002.  Certain
information and footnote disclosure normally included in consolidated  financial
statements prepared in accordance with generally accepted accounting  principles
have  been  condensed  or  omitted.  It is  suggested  that  these  consolidated
financial  statements presented herein be read in conjunction with the Company's
consolidated  financial  statements and notes thereto  included in the Company's
annual report on Form 10-K, for the year ended December 31, 2001.

Restructuring and asset impairment charges.  The company's initial products were
focused on the telecom  industry.  As a result of the overall economic  downturn
and in particular the significant decline in capital and maintenance spending in
telecom as well as the low price of  lead-acid  batteries,  the  Company has not
been successful in selling products into this market.  Therefore,  in July 2002,
in an effort to reduce its monthly cash-spending rate, the Company implemented a
number  of  cost-cutting  measures  to  ensure  the  availability  of  resources
necessary  to pursue its  business  strategy  for a  reasonable  period but at a
significantly lower cash burn rate, and thus on a less ambitious timetable. As a
result, a substantial portion of our long-term assets have been idled, including
machinery and equipment,  tooling,  office furniture and fixtures, and equipment
and leasehold improvements.  We have evaluated all of our property and equipment
as required by Statement of Financial  Accounting  Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived  Assets".  We have taken a non-cash
accounting  charge of $6.5  million of which $4.3  million  represents  impaired
capital equipment and leasehold  improvements,  $.3 million relates to severance
costs and $1.9 million  relates to a reserve  against  future lease payments and
related  facility costs. The assets held for sale have been grouped together and
classified  as  "Assets  held for sale" in the  current  assets  section  of the
balance  sheet.  Assets held for sale have been written down to their fair value
based on quotes  from  vendors and other  market  factors.  The reserve  against
future lease  payments is classified as  "Restructuring  reserve" in the current
liabilities section of the balance sheet.

In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of  Long-Lived  Assets,  which  supercedes  SFAS No. 121.  SFAS No. 144
further refines the requirements of SFAS No. 121 that companies (1) recognize an
impairment  loss  only if the  carrying  amount  of a  long-lived  asset  is not
recoverable  based on its  undiscounted  future  cash  flows and (2)  measure an
impairment loss as the difference  between the carrying amount and fair value of
the asset.  In  addition,  SFAS No. 144  provides  guidance  on  accounting  and
disclosure  issues  surrounding  long-lived assets to be disposed of by sale. We
adopted SFAS No. 144 effective 1/1/2002, and applied its principles as described
above in "Restructuring and asset impairment charges".

For a complete description of the Company's  accounting policies,  see Note 2 to
Consolidated  Financial  Statements in the Company's  2001 Annual Report on Form
10-K.

Reclassifications.  Certain amounts in prior year financial statements have been
reclassified to conform to their 2002 presentation.

Note 3.  Property and Equipment

A  substantial  portion  of our  long-term  assets  have been  idled,  including
machinery and equipment,  tooling,  office  furniture and fixtures and equipment
and leasehold improvements.  We have evaluated all of our property and equipment
to  determine  its future  use. As a result of this  effort,  and as required by
Statement  of  Financial  Accounting  Standards  No.  144  "Accounting  for  the
Impairment or Disposal of Long-Lived Assets" we have taken a non-cash impairment
charge of approximately $6.5 million of which $4.3 million  represents  impaired
capital  equipment.  The assets  held for sale have been  grouped  together  and
classified  as  "Assets  held for sale" in the  current  assets  section  of the
balance  sheet.  Assets held for sale have been written down to their  estimated
realizable values based on quotes from vendors and other market factors.

Property and equipment consist of the following:
<table>

                                                     <c>             <c>             <c>
                                                     Estimated
                                                       Useful    September 30,      December 31,
                                                       Lives          2002              2001
                                                    -------------------------------------------------
Machinery and equipment                               5 years         $2,316,196          $1,996,711
Service vehicles                                      5 years             63,792              63,792
Furniture and fixtures                                7 years            733,018             733,018
Office equipment                                      3 years          2,075,530           2,030,653
Leasehold improvements                               Lease term        2,072,577           2,072,577
Equipment under capital lease obligations            Lease term        1,081,726           1,081,726
                                                                -------------------------------------
     Total                                                            $8,342,839          $7,978,477
Less accumulated depreciation and amortization                       (3,255,184)         (1,789,970)
                                                                -------------------------------------
     Property and equipment, before impairment                        $5,087,655          $6,188,507
                                                                -------------------------------------
Less impairment reserve                                              (4,297,128)                   -
Less assets available for sale                                          (53,715)                   -
                                                                -------------------------------------
     Property and equipment, net                                        $736,812          $6,188,507
                                                                =====================================
</table>

Note 4.  Commitments

The Company leases office and light manufacturing space under an operating lease
through  September 30, 2007 and has various  operating leases for certain office
and manufacturing  equipment  expiring through December 2003. Under the terms of
the facility lease, the Company  provided the lessor with an irrevocable  letter
of credit.  At  September  30, 2002 the balance of the letter of credit  totaled
$400,454.  A cash deposit with the Company's commercial bank secures this letter
of credit.

Note 5.  Common Stock

Treasury  Stock.  As a part of the  repayment  of a loan  from the  Company,  an
officer  surrendered 132,000 shares of Beacon Power Corporation common stock, in
the first quarter of this year, that were held as collateral  against that loan.
These  shares were  acquired at the then market  price of $0.755 per share.  The
Company is holding  these  132,000  shares in treasury at their cost of $99,660.
The remainder of that loan was repaid in cash.

Reserved  Shares.  At September 30, 2002 and December 31, 2001,  14,603,445  and
13,839,129 shares of common stock were reserved for issuance under the Company's
stock option plan and outstanding warrants, respectively.

Stock Warrants.  Deferred  compensation  relating to stock warrants at September
30,  2002  and  December  31,  2001  is  approximately   $15,000  and  $212,000,
respectively. The warrants were issued to an investor under an agreement that an
affiliate of that  investor will provide the Company with  technical  expertise.
One  half of the  warrants  vested  immediately  upon  their  issuance  with the
remaining  warrants to vest ratably as the services  are  provided.  No services
have been provided through September 30, 2002. The agreement  terminates and any
unvested warrants are forfeited on November 1, 2003.

Note 6.  Related Party Transactions

Advance to Officers - During 2001, the Company advanced  approximately  $785,000
to three  officers of the  Company.  These  advances  are  interest  bearing and
secured by the officers'  holdings of Beacon Power Corporation  common stock and
were provided to the officers to allow them to exercise stock options and in one
case, to pay the related  taxes.  Through  September  30, 2002,  the Company has
collected  approximately  $293,000 in payments on these advances.  In June 2002,
due to the current market value of the pledged securities and the uncertainty of
collection  of the advance,  the Company took a charge in the amount of $426,148
to reserve the  remaining  balance of the advance to Mr.  William  Stanton,  its
former CEO and president.  This loan,  however,  has not been cancelled,  and is
partially  secured  by  308,318  shares  of the  Company's  stock.  Mr.  Stanton
continues  to be a director  of the  Company.  This  charge is included in other
expenses in the accompanying consolidated statement of operations. The remaining
advance  balance of  approximately  $70,000 at September 30, 2002 is included in
prepaid and other assets in the accompanying consolidated balance sheet.

Note 7.  Summary of Non-cash Investing and Financing Activities:

During the nine months ended September 30, 2002 and 2001, cash paid for interest
was approximately $43,000 and $20,000, respectively.

During the nine months ended  September  30, 2002 and 2001,  cash paid for taxes
was approximately $17,000 and $1,500, respectively.

During March 2002,  as a part of the  repayment  of a loan from the Company,  an
officer surrendered 132,000 shares of common stock of the Company that were held
as  collateral  against  that loan.  These shares were  surrendered  at the then
market price of $0.755.  The Company is holding these 132,000 shares in treasury
at their cost of $99,660. The remainder of the loan was paid in cash.

During the nine months ended  September 30, 2002 and 2001, the Company  recorded
decreases  in deferred  compensation  from the issuance of  non-qualified  stock
options to third parties of $196,130 and  $1,530,697,  respectively.  These were
offset by charges to additional paid in capital.

<page>

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

Note Regarding Forward Looking Statements:

This  Quarterly  Report  on  Form  10-Q  contains   forward-looking   statements
concerning,   among  other  things,  the  Company's  expected  future  revenues,
operations  and  expenditures  and  estimates of the  potential  markets for the
Company's services.  Such statements made by the Company fall within the meaning
of the Private  Securities  Litigation Reform act of 1995, as amended.  All such
forward-looking  statements are necessarily only estimates of future results and
the actual  results  achieved by the Company  may differ  materially  from these
projections  due to a number of factors as  discussed  in the  section  entitled
"Certain Factors Affecting Future Operating Results" of this Form 10-Q.

Overview

Beacon Power Corporation is a development-stage company which designs, develops,
configures,  and offers for sale power  systems  that provide  highly  reliable,
high-quality,  uninterruptible  electric  power for use as a stand alone back-up
power solution in telecom applications and as a transition unit to generators in
high  power  applications.   It  is  known  for  its  environmentally  friendly,
flywheel-based  products  (employing a flywheel made from proprietary  composite
materials)  that can store and  deliver  energy in a variety of  configurations.
Such products have longer life, reduced maintenance,  quicker recharging, remote
monitoring and other advantages over competing solutions.

Our  initial  products  were  2kWh and 6kWh  long-duration  back up power  units
focused on the telecom  industry.  As a result of the overall economic  downturn
and in particular the significant decline in capital and maintenance spending in
telecom as well as the low price of  lead-acid  batteries,  the  Company has not
been successful in selling products into this market.  The Company  continues to
offer  these  products  but  may  not be  able to  attract  customer  orders  in
sufficient  volumes or prices to develop an economically  viable  business.  The
Company has expanded its marketing  activities to include UPS  applications  and
stored energy for utilities.  The utility  application  would be for an array of
high-energy  composite  flywheels that can be connected together to provide high
power  (megawatt-level)  energy  storage for  minutes or longer in  applications
requiring  rapid,  deep  discharge,   and/or  frequent   cycling.   Examples  of
applications  are  transition to turbine or natural gas engine start  (requiring
minutes, not seconds), reducing generator starting frequency and backup time for
wind and other renewable power,  stiffening of substation and micro-grid  power,
and load following high power fuel cells and generators. Lead acid batteries are
usually not  effective in these  applications  because  rapid,  frequent or deep
discharging of a battery  substantially  reduces life and increases  maintenance
requirements.  There are no other practical  alternatives in use today,  and low
power flywheels like those used to start a diesel generator in 12 seconds do not
have sufficient energy to be practical elements of a flywheel array.

The company has  evaluated  all of its  property  and  equipment  as required by
Statement  of  Financial  Accounting  Standards  No.  144  "Accounting  for  the
Impairment  or Disposal of  Long-Lived  Assets" as a result of its  inability to
generate  demand for its products.  This  evaluation  has resulted in a non-cash
charge of $6.5 million.

From our  inception  through  September  30,  2002 we have  incurred  losses  of
approximately  $112.8 million. We expect to continue to incur losses as a result
of the  difficulty we face in marketing  our existing and emerging  products and
potential costs for product development and  commercialization  programs.  These
losses could fluctuate  significantly from quarter to quarter.  Fluctuations may
be substantial  as a result of, among other  factors,  the amount of development
materials  purchased,  nonrecurring  engineering  expenses and subcontract  work
related  to  product   testing  and  ramp-up  costs  related  to   manufacturing
capacities.

Results of operations:

Comparison of three and nine months ended September 30, 2002 and 2001

Revenues.  We did not  record any  revenue  for the three or nine  months  ended
September 30, 2002 and 2001. We have placed several development  prototypes with
potential  customers  and shipped  pre-production  units.  These  products  were
provided  to  potential   customers  to  demonstrate   the  application  of  our
technologies.

Selling,  General and Administrative  Expenses. Our sales and marketing expenses
consist  primarily of  compensation  and  benefits  for our sales and  marketing
personnel  and  related   business   development   expenses.   Our  general  and
administrative  expenses consist  primarily of compensation and benefits related
to our corporate staff,  professional fees, and related travel. Selling, general
and administrative expenses totaled approximately  $1,055,000 and $2,337,000 for
the three months ended September 30, 2002 and 2001,  respectively.  The decrease
of  approximately  $1,282,000 is primarily the result of decreased  compensation
and benefit  costs due to staffing  reductions,  reduced  professional  fees and
travel  partially  offset by higher costs for directors and officers  insurance.
Selling,  general and administrative  expenses totaled approximately  $4,561,000
and  $6,188,000  for  the  nine  months  ended  September  30,  2002  and  2001,
respectively.  The decrease of approximately  $1,627,000 is primarily the result
of decreased compensation and benefit costs due to staffing reductions partially
offset by higher  costs  for  directors  and  officers  insurance  and sales and
marketing efforts.

Research  and  Development.  Our  cost  of  research  and  development  consists
primarily of the cost of compensation and benefits for research and development,
manufacturing  and support staff,  as well as materials and supplies used in the
engineering  design  process.  Our cost of  research  and  development  has been
reduced  sharply  while  we  focus  on  defining  market  opportunities  for our
capabilities.  In the event  that  markets  are  defined  that  require  product
development we may have  significant  increases for additional  product designs,
refining  existing  products or expand our analytic  capabilities.  Research and
development  expenses  totaled  approximately  $1,285,000 and $5,380,000 for the
three months ended  September 30, 2002 and 2001,  respectively.  The decrease of
$4,095,000 is primarily the result of decreased  compensation  and benefit costs
related to staffing reductions in engineering and manufacturing and decreases in
the amount of materials used for product  development.  Research and development
expenses  totaled  approximately  $6,195,000 and $14,137,000 for the nine months
ended September 30, 2002 and 2001,  respectively.  The decrease of approximately
$7,942,000 is primarily the result of decreased  compensation  and benefit costs
related to staff  reductions  and  decreased  spending on  materials  related to
product development.

Depreciation  and  Amortization.  Our depreciation and amortization is primarily
related to depreciation on capital  expenditures  and the  amortization of lease
and leasehold costs related to our  facilities.  Depreciation  and  amortization
totaled approximately $463,000 and $347,000 for the three months ended September
30, 2002 and 2001,  respectively.  The increase of $116,000 is  attributable  to
increases  in  leasehold   improvements  and  capital  equipment   expenditures.
Depreciation and amortization totaled approximately  $1,475,000 and $904,000 for
the nine months ended September 30, 2002 and 2001, respectively. The increase of
$571,000  is  attributable  to  increases  in  leasehold  improvements,  capital
equipment expenditures and reductions in the useful life of computer equipment.

Restructuring and Asset Impairment Charges. During the third quarter of 2002, in
an effort to reduce its monthly  cash-spending  rate, the Company  implemented a
number  of  cost-cutting  measures  to  ensure  the  availability  of  resources
necessary  to pursue its  business  strategy  for a  reasonable  period but at a
significantly lower cash burn rate, and thus on a less ambitious timetable. As a
result, a substantial portion of our long-term assets have been idled, including
machinery and equipment,  tooling,  office furniture and fixtures, and equipment
and leasehold improvements.  We have evaluated all of our property and equipment
to determine its future use and as required by Statement of Financial Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets"  we have  taken a  non-cash  impairment  charge of  $6,456,000  of which
$4,297,000  represents  impaired capital  equipment and leasehold  improvements,
$323,000 relates to severance costs and $1,836,000  relates to a reserve against
future lease payments and related  facility costs. The assets held for sale have
been grouped  together and  classified  as "Assets held for sale" in the current
assets section of the balance sheet. Assets held for sale have been written down
to their fair value based on quotes from vendors and other market  factors.  The
reserve  against  future lease  payments for idled  facilities  is classified as
"Restructuring reserve" in the current liabilities section of the balance sheet.

Interest and OtherIncome/Expense, net. Our non-operating income and expenses are
primarily  attributable to interest income resulting from cash on hand partially
offset by interest  expense  associated  with our capital  leases.  Our interest
income for the three months ended September 30, 2002 was approximately $116,000,
compared to $462,000  for the same period in 2001.  The  decrease in 2002 is the
result of higher cash balances in 2001 from our initial  public  offering in the
fourth quarter of 2000. Our interest  income for the nine months ended September
30, 2002 was approximately $418,000,  compared to $1,917,000 for the same period
in 2001. The decrease in 2002 is the result of higher cash balances in 2001 from
our initial public offering in the fourth quarter of 2000.

Interest expense  increased to  approximately  $9,000 for the three months ended
September  30,  2002  from  approximately  $3,000  for the same  period in 2001.
Interest expense  increased to  approximately  $37,000 for the nine months ended
September  30,  2002 from  approximately  $18,000  for the same  period in 2001.
Interest expense relates to assets leased under capital leases.

Other  expense was  approximately  $2,000 and $16,000 for the three months ended
September  30, 2002 and 2001,  respectively.  Other  expense for the nine months
ending September 30, 2002 and 2001,  respectively was approximately $433,000 and
$360,000. The 2002 balance represents a reserve of $426,000, a non-cash expense,
for an advance to an officer.  During 2001, the Company  advanced  approximately
$785,000 to three officers of the Company,  including an advance of $ 564,822 to
Mr.  William  Stanton,  former CEO and  president.  These  advances are interest
bearing and secured by the officers' holdings of Beacon Power Corporation common
stock and were  provided for the exercise of employee  stock  options and in the
case of Mr. Stanton  income taxes related to the exercise of those options.  The
officers  repaid  approximately  $152,000 of these  advances  during 2001 and an
additional $150,000 through September 30, 2002. In June 2002, the Company took a
reserve in the amount of $426,148 for the full remaining  amount of the advances
(including interest thereon) to Mr. Stanton. The Company has fully reserved this
balance due to the  current  market  valuation  of the  pledged  securities  and
uncertainty  that the obligation will be collected from Mr. Stanton.  This loan,
however,  has not been cancelled,  and is partially secured by 308,318 shares of
the Company's stock. Mr. Stanton continues to be a director of the Company.  The
Company  expects  the  remaining  advance to be repaid in full by the officer to
whom it was  made and who is still  employed  by the  Company.  The  balance  of
$70,093 and $634,110 at September  30, 2002 and December 31, 2001,  respectively
are  included  in  prepaid  and other  assets in the  accompanying  consolidated
balance sheet. The 2001 balance relates  primarily to a write-off of $52,000 for
certain  tooling costs  associated  with an earlier version of our product and a
non-cash  charge  related  to the  settlement  of a lawsuit  brought by a former
employee  of  approximately  $303,000.  Under  the terms of the  settlement,  we
permitted the former  employee to exercise  options to purchase 53,000 shares of
our common stock at a price of $1.78 when the current market price was $7.50. We
incurred a charge of $5.72,  the  difference  between  the market  price and the
exercise price, for each share exercised.

Liquidity and Capital Resources

Net cash  used in  operating  activities  was  approximately  ($12,167,000)  and
($18,145,000)   for  the  nine  months  ended   September  30,  2002  and  2001,
respectively. The primary component to the negative cash flow from operations is
from the net  losses.  For the first nine  months of 2002,  we had a net loss of
approximately  ($18,738,000).  This included  non-cash  charges of approximately
$8,060,000  including  a loss on  impairment  of  assets  and  restructuring  of
$6,133,000;  a reserve taken against a note  receivable from a former officer of
$426,000; a loss on sale of fixed assets of approximately $7,000;  approximately
$19,000 related to stock options issued for consulting services and depreciation
and  amortization of approximately  $1,475,000.  Changes in operating assets and
liabilities used approximately ($1,488,000) of cash during the first nine months
of  2002.  The  primary  components  were a  decrease  in  accounts  payable  of
approximately  ($697,000),  a decrease in accrued  compensation  and benefits of
approximately  ($544,000),  a  decrease  in  amounts  due to a related  party of
approximately ($36,000) and a decrease in other accruals and current liabilities
of  ($489,000),  these were  offset by a decrease  in prepaid  expense and other
current assets of approximately  $278,000. For the first nine months of 2001, we
had a net loss of approximately ($19,690,000). This included non-cash charges of
approximately  $1,628,000  including  a charge  related to the  settlement  of a
lawsuit  of  approximately  $303,000;  approximately  $334,000  related to stock
options  issued for  consulting  services;  $87,000 for the write-off of tooling
related to older versions of our flywheel;  and depreciation and amortization of
approximately  $904,000.  Changes  in  operating  assets  and  liabilities  used
approximately  ($83,000)  of cash  during  the first  nine  months of 2001.  The
primary  components  were  a  decrease  in  accounts  payable  of  approximately
($408,000)  offset by an  increase  in  accrued  compensation  and  benefits  of
approximately  $946,000  and an  increase in prepaid  expense and other  current
assets of  approximately  ($957,000).  Changes in other working capital accounts
used cash of approximately $336,000.

Net  cash  used  in  investing  activities  was  approximately   ($423,000)  and
($3,479,000)   for  the  nine  months  ended   September   30,  2002  and  2001,
respectively.  The  principal  uses of cash during the first nine months of 2002
were  related to purchases of machinery  and  equipment  totaling  approximately
($423,000). The principal uses of cash during the first nine months of 2001 were
related to purchases  totaling  approximately  ($4,086,000)  for  machinery  and
equipment,  furniture  and  fixtures  and  leasehold  improvements  to  the  new
operating facility. Other assets decreased by approximately $607,000 as deposits
made in prior  quarters  relating  to  long-term  assets  were  reclassified  to
property and equipment.

Net cash used in financing and investing activities during the nine months ended
September  30, 2002 was  approximately  ($251,000).  The cash used for financing
activities  related to repayment of capital leases of  approximately  ($264,000)
offset by cash proceeds from the employee stock  purchase plan of  approximately
$13,000.  Net cash used by  financing  activities  during the nine months  ended
September 30, 2001 was  approximately  $27,000.  The primary use of cash was for
the  payment  of  dividends  on  our  various  classes  of  preferred  stock  of
approximately  ($1,159,000,)  which  were  accrued  during  2000,  prior  to the
Company's  initial  public  offering of its common stock.  In addition,  we made
principal payments against our capital leases of approximately ($113,000). These
uses were offset by  proceeds  from stock  options  exercised  of  approximately
$803,000 and proceeds from sale-leaseback transactions of $496,000.

During 2001, the Company  advanced  approximately  $785,000 to three officers of
the Company, including an advance of $564,822 to Mr. William Stanton, former CEO
and president.  These advances are interest bearing and secured by the officers'
holdings of Beacon  Power  Corporation  common  stock and were  provided for the
exercise of employee  stock options and in the case of Mr.  Stanton income taxes
related to the exercise of those  options.  In  aggregate,  the officers  repaid
approximately  $152,000 of these advances during 2001 and an additional $150,000
through  September 30, 2002. One of the officers has repaid her advance in full.
In June  2002,  we took a reserve  in the amount of  $426,148  against  the full
remaining amount of the advances  (including  interest  thereon) to Mr. Stanton.
The Company has fully reserved this balance due to the current market  valuation
of the pledged  securities and uncertainty that the obligation will be collected
from Mr. Stanton.  This loan, however, has not been cancelled,  and is partially
secured by 308,318 shares of the Company's stock. Mr. Stanton  continues to be a
director of the Company. We expect the remaining advance to be repaid in full by
the officer to whom it was made and who is still  employed by the  Company.  The
balance of $70,093 and  $634,110 at  September  30, 2002 and  December 31, 2001,
respectively  are  included  in  prepaid  and other  assets in the  accompanying
consolidated balance sheet.

A  substantial  portion  of our  long-term  assets  have been  idled,  including
machinery and equipment,  tooling,  office  furniture and fixtures and equipment
and leasehold improvements.  We have evaluated all of our property and equipment
to  determine  its future  use. As a result of this  effort,  and as required by
Statement  of  Financial  Accounting  Standards  No.  144  "Accounting  for  the
Impairment or Disposal of Long-Lived Assets" we have taken a non-cash impairment
charge of  approximately  $6,500,000 of which $4.3 million  represents  impaired
capital  equipment  and  leasehold  improvements,  $.3  million  related  to our
headcount  reduction  in July,  2002 and $1.9  million  relates  primarily  to a
reserve  against future lease payments and facility  costs.  The assets held for
sale have been grouped  together and classified as "Assets held for sale" in the
current  assets  section of the  balance  sheet.  Assets held for sale have been
written down to their estimated  realizable  values based on quotes from vendors
and  other  market  factors.  The  reserve  against  future  lease  payments  is
classified as "Restructuring  reserve" in the current liabilities section of the
balance sheet.

Based upon our  operating  plan,  and cash on hand, we believe that our cash and
cash equivalents and future cash flow from operations will satisfy the Company's
working capital needs for the foreseeable future.


Impact of Recently Issued Accounting Standards Not Yet Implemented

In June 2002, the FASB issued SFAS No. 146, "Accounting for Cost Associated with
Exit or Disposal  Activities."  SFAS  No. 146 addresses financial accounting and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force (EITF) Issue  No. 94-3,  "Liability  Recognition for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized  when the liability is incurred.  The  provisions of SFAS No. 146 are
effective for exit or disposal  activities that are initiated after December 31,
2002.  We  believe  that the  adoption  of SFAS No. 146 will not have a material
impact on our financial statements.

Certain Factors Affecting Future Operating Results

The  following  factors,  as well as others  mentioned in the  Company's  Annual
Report on Form 10-K for the year ended December 31, 2001 (filed March 31, 2002),
could  cause  actual  results  to differ  materially  from  those  indicated  by
forward-looking statements made in this Quarterly Report on Form 10-Q:

The Value Proposition of our High-Energy Products May Not Be Recognized.

There can be no assurance that we will be able to compete  successfully  against
batteries.  To compete  successfully we must establish the value  proposition of
our products based upon their dependability,  environmental  benefits,  and long
maintenance-free life, or we must develop other strategic alternatives.

We May Not Be Able to Reduce Our Product Cost Enough to Make Our Prices
Competitive.

There can be no assurance  that we will be successful in lowering our production
costs through lower cost designs or volume  discounts,  which may prevent market
acceptance of our products.

We Have Very Limited Experience Manufacturing Flywheel Energy Storage Systems on
a Commercial Basis. In the Event of Significant Sales We Will Need to Develop or
Obtain Manufacturing  Capacity for Our Products.  There Can be No Assurance That
We Will be Able to Accomplish  These Tasks,  and if We do not We Will Not Become
Profitable.

Should we experience  customer demand for our products,  we will need to develop
or obtain  manufacturing  capacity to meet quality,  profitability  and delivery
schedules. We may need to establish manufacturing facilities, expand our current
facilities  or expand  third-party  manufacturing.  We have no experience in the
volume  manufacture  of flywheel  systems and there can be no assurance  that we
will be able to accomplish these tasks, if necessary,  on a timely basis to meet
customer demand or at all. In fact, we have idled our manufacturing capabilities
in order to conserve cash,  which will make  manufacturing  capability even more
difficult to achieve  should we need to do so. We may not achieve  profitability
if we cannot develop or obtain  efficient,  low-cost  manufacturing  capability,
processes  and  suppliers  that  will  enable  us to meet  the  quality,  price,
engineering,  design and production  standards or production volumes required to
meet  our  product  commercialization  schedule,  if  any,  or  to  satisfy  the
requirements of our customers or the market generally.

We  Will  Need  Additional  Financing,  Which  May  not  Be  Available  to Us on
Acceptable Terms or At All.

We will  need to  secure  additional  financing  in the  future to carry out our
business  plan. We believe our cash balances  will fund our  operations  for the
foreseeable  future.  We may also need  additional  financing  for a variety  of
reasons including:

o        expanding research and development;

o        achieving  manufacturing capability;

o        funding additional working capital; or

o        acquiring complementary products, businesses or technologies.

We cannot be  certain  that we will be able to raise  additional  funds on terms
acceptable  to us or at all.  If future  financing  is not  available  or is not
available on acceptable terms, our business, results of operations and financial
condition would be materially adversely affected.

We May Need to Issue A Substantial Number of Shares to Obtain Financing.

If we raise additional  funds by issuing  additional  equity  securities and our
stock  continues  to  trade  at low  values  it will  result  in our  issuing  a
substantial  number of shares.  Furthermore,  the newly issued  securities could
have rights superior to the rights of the common stock outstanding.

Our Stock May be Disqualified from Nasdaq.

Because of its low price,  our stock has been removed  from the Nasdaq  National
Market System and placed on the Nasdaq  SmallCap  Market.  If we do not meet the
requirements  for  continued  listing on that  market or the  criteria  for such
listing is not modified or extended,  our stock will be removed from it and will
then be quoted on the OTCBB.

We Face Intensified Competition from Batteries Due to Their Declining Prices and
Improved  Life.  As a  Consequence  Our  Customers are Less Likely to Accept the
Value Proposition of Our Products.

The performance of batteries has improved while battery prices have declined due
to lower volume demand from the communications  markets and others and increased
competition  resulting from an increase in the number of battery  manufacturers.
Also a number of Asian  and low cost  battery  manufacturers  have  entered  the
market, which is intensifying competition.  These changes in battery pricing and
performance  make  it  more  difficult  for  the  market  to  accept  the  value
proposition of our high-energy products.

Our Initial Target Market, the Communications  Industry, Has Experienced a Sharp
Decline, Which Has Adversely Affected Our Financial Performance and Stock Price.

We initially targeted the communications markets for the sale of our high-energy
products.  However, this industry,  which had previously sustained high rates of
infrastructure  build-out,  has experienced a sharp decline in build-out as well
as maintenance spending.  Significant reductions in both maintenance budgets and
capital build-out budgets at  telecommunications  companies made these potential
customers more conservative with their spending and expenditure  analysis.  They
have  become  less  willing to  consider  life-cycle  costs in their  purchasing
decisions  or try new more  expensive  solutions  that  offer  environmental  or
technical performance advantages, such as our products.

It Is Difficult to Evaluate Us and to Predict Our Future Performance, Because We
Have a Short Operating History and Are a Development  Stage Company.  Therefore,
Our  Future  Financial  Performance  May  Disappoint  Investors  and Result in a
Decline in Our Stock Price.

We have a limited operating history. We were formed in May 1997 to commercialize
electrical power systems based on flywheel energy storage.  We are a development
stage company  making the transition to the  manufacturing  of new products in a
new and developing sector.  Unless we can achieve  significant market acceptance
of our current or future  products at volumes and with  margins that allow us to
cover our costs of operations,  we may never advance beyond our start-up  phase.
In light of the foregoing,  it is difficult or impossible for us to predict when
and if the Company will have future revenue growth.

We Have  Incurred  Losses Since Our Inception and  Anticipate  Continued  Losses
Through at Least 2003.

We have incurred net losses to common shareholders and negative cash flows since
our  inception  in May  1997.  We had  net  losses  to  common  shareholders  of
approximately  ($26,146,000) in 2001,  ($53,279,000) in 2000 and ($6,630,000) in
1999.  Since  our  inception  in May  1997,  we have had net  losses  to  common
shareholders totaling ($112,817,000).  We expect to continue to incur net losses
through at least 2003.  Although we are looking for ways to economize and reduce
costs, our efforts may prove even more expensive than we anticipate. Our revenue
must grow  substantially  if we are to offset these  higher  expenses and become
profitable. Even if we do achieve profitability,  we may be unable to sustain or
increase our profitability in the future.

We Might Fail to Develop a Successful High-Power UPS Product.

The  successful   development  of  our  high-power  UPS  products  will  involve
significant  technological  and  cost  challenges  and will  require  additional
financing to complete. Major risks include:

o        maintaining the development schedule may not be possible and such
         development could take substantially longer than anticipated;

o        the cost of developing key components of our systems that have
         significant technical risk  may not be economically feasible for
         a competitive product in the high-power market;

o        reducing manufacturing costs for the flywheel's shaft, hub and rim,
         bearings and related electronics to increase our chances of achieving
         profitability;

o        ensuring minimal warranty expenses through design and quality control;

o        ensuring quality and cost control from our suppliers;

o        raising the necessary financing to provide sufficient funding for
         completion  of development;

o        extending the product to new applications.


Because We Depend on Third-Party Suppliers for the Development and Supply of Key
Components  for Our Products,  and Because We Do Not Have  Contracts  with These
Suppliers,  We Could  Experience  Disruptions  in  Supply  that  Could  Delay or
Decrease Our Revenues.

Our business,  prospects, results of operations, or financial condition could be
harmed if we are unable to maintain  satisfactory  relationships with suppliers.
To  accelerate  development  time  and  reduce  capital  investment,  we rely on
third-party  suppliers for several key components of our systems. We do not have
any contracts with these  suppliers.  If these  suppliers  should fail to timely
deliver components that meet our quality,  quantity, or cost standards,  then we
could  experience   production  delays  or  cost  increases  and  our  financial
performance  could be adversely  affected.  Because the components  with limited
sources are key  components  that are  complex,  difficult  to  manufacture  and
require long lead times, we may have difficulty finding alternative suppliers on
a timely or cost effective basis. As a result, we could experience  shortages in
supply or be unable to be cost  competitive in the markets we are pursuing.

We Face Intense Competition and We May Be Unable to Compete Successfully.

The markets for highly  reliable,  uninterruptible  electric power are intensely
competitive.  There are a number of  companies  located  in the  United  States,
Canada, and abroad that are offering flywheel energy storage technology. We also
compete with  companies that are  developing  applications  using other types of
alternative energy storage. In addition, if large,  established companies decide
to  focus  on the  development  of  flywheel  energy  storage  systems  or other
alternative  energy  products for sale to our potential  customers they may have
the  manufacturing,  marketing,  and sales  capabilities  to complete  research,
development and  commercialization  of commercially  viable  alternative  energy
storage  systems  that could be more  competitive  than our systems and could be
brought to market more quickly  than ours.  To the extent they already have name
recognition,  their products may enjoy greater initial market  acceptance  among
our potential  customers.  These competitors may also be better able than we are
to adapt quickly to customers' changing demands and to changes in technology.

Technological  advances in  alternative  energy  products  or other  alternative
energy technologies may render our systems obsolete. We do not have any products
or technologies  other than flywheel systems under  development.  Our system is,
however,  only one of a number of alternative energy products being developed by
potential  competitors that have potential  commercial  applications,  including
super capacitors,  fuel cells, advanced batteries,  and other alternative energy
technologies.

Government Regulation May Impair Our Ability to Market Our Product.

Government  regulation  of our product,  whether at the federal,  state or local
level,  including any regulations  relating to installation and servicing of our
products,  may increase  our costs and the price of our systems,  and may have a
negative impact on our revenue and  profitability.  We cannot provide  assurance
that our  products  will not be subject to existing or future  federal and state
regulations   governing  traditional  electric  utilities  and  other  regulated
entities.  We expect that our products and their installation will be subject to
oversight and  regulation at the local level in accordance  with state and local
ordinances relating to building codes, safety,  pipeline connections and related
matters.  We do not know the extent to which any existing or new regulations may
impact our ability to  distribute,  install and service our  products.  Once our
products reach the commercialization stage and we begin distributing our systems
to our early target  markets,  federal,  state or local  government  entities or
competitors may seek to impose regulations.

Product  Liability  Claims Against Us Could Result in  Substantial  Expenses and
Negative Publicity Which Could Impair Successful Marketing of Our Products.

Our business exposes us to potential  product liability claims that are inherent
in the manufacturing,  marketing and sale of electro-mechanical products, and as
such, we may face  substantial  liability for damages  resulting from the faulty
design or manufacture  of products or improper use of products by end users.  We
cannot  provide  assurance  that our product  liability  insurance  will provide
sufficient  coverage in the event of a claim. Also, we cannot predict whether we
will be able to maintain such coverage on acceptable terms, if at all, or that a
product  liability  claim would not  materially  adversely  affect our business,
financial  condition or the price of our common  stock.  In  addition,  negative
publicity in connection  with the faulty design or  manufacture  of our products
would adversely affect our ability to market and sell our products.

Safety Failures by Our Products or Those of Our Competitors  Could Reduce Market
Demand or Acceptance for Flywheels in General.

A serious accident involving either our flywheels or our competitors'  flywheels
could be a significant deterrent to customer acceptance and adversely affect our
financial  performance.  With any form of energy storage,  including  machinery,
chemicals,  fuel or other means of energy  storage,  there is the possibility of
accident.  If a metal  flywheel  fails and the energy  stored is  released,  the
flywheel  could  break  apart and the pieces  could be ejected at a high rate of
speed.  However, our flywheels are based on a composite we have designed so that
in  the  event  of  a  failure,   our  flywheel  would  shut  down  rather  than
disintegrate.  To date, our testing validates this design  conclusion.  Also, we
believe that one of the advantages of composite  flywheels over metal  flywheels
is that in the event of a flywheel  failure,  the flywheel  tends to  delaminate
rather  than (as in the case of  metal)  to break  into a small  number of large
fragments that have a greater  possibility of bursting a containment  vessel and
causing   injury.   A  consortium   of   government,   academic,   and  industry
representatives  has been formed to address  containment  flywheel safety in the
event   of  this   kind  of   flywheel   failure.   At  this   early   stage  of
commercialization,  there are differing  approaches to  containment  safety with
disagreement in the community on the most effective means.

Our Financial  Performance  Could Be Adversely  Affected by Our Need to Hire and
Retain Key Executive Officers and Skilled Technical Personnel.

Because  our  future  success  depends to a large  degree on the  success of our
technology,  our  competitiveness  will depend  significantly  on whether we can
attract and retain skilled technical personnel,  especially  engineers,  and can
retain members of our executive team. We have employment agreements that include
non-compete  clauses with Messrs.  Capp,  CEO and  President;  Spiezio,  CFO and
Treasurer;  Driscoll,  Vice  President of  Engineering;  and  Lazarewicz,  Chief
Technical Officer.

In the fourth  quarter of 2001,  the first  quarter of 2002 and in July 2002, we
substantially  reduced  our  workforce.  Competition  for skilled  personnel  is
intense,  and as we seek to determine the right size for our  workforce,  we may
not be successful in attracting and retaining the personnel or executive  talent
necessary to develop our products and operate profitably.

There May Be Only a Modest Number of Potential  Customers for Our High-Power UPS
Products.  To the Extent We Obtain  Customers,  We May Have To Rely On A Limited
Number Of Such Customers, And Our Business May Be Adversely Affected By The Loss
Of, Or Reduced Purchases By, Any One Of Those Customers.

There may only be a limited number of potential customers for our high-power UPS
product,  in  which  case we will be  subject  to the  risk  that the loss of or
reduced purchases by any single customer could adversely affect our business.

If We Are Unable to  Successfully  Market,  Distribute  and Service Our Products
Internationally   We  May  Experience  a  Shortfall  in  Expected  Revenues  and
Profitability Which Could Lead to a Reduction in Our Stock Price.

In  addition  to the risks we face when  operating  within the U.S.,  additional
risks are present if we operate internationally. A part of our business strategy
may be to expand our customer base by marketing,  distributing and servicing our
products  internationally  through  distributors.  We  have  limited  experience
developing  and  manufacturing  our products to comply with the  commercial  and
legal requirements of international markets. Our ability to properly service our
products  internationally will depend on third-party distributors to install and
provide  service.  There is no assurance  that we will be able to locate service
providers in every region or that these providers will  effectively  service our
products.  Also,  our success in those  markets  will  depend,  in part,  on our
ability to secure foreign customers and our ability to manufacture products that
meet foreign regulatory and commercial  requirements.  In addition,  our planned
international   operations  are  subject  to  other  inherent  risks,  including
potential    difficulties   in   establishing    satisfactory    distributorship
relationships and enforcing  contractual  obligations and intellectual  property
rights in foreign countries,  fluctuations in currency exchange rates. If we are
unable  to   successfully   market,   distribute   or   service   our   products
internationally,  we may never experience  profitability and our stock price may
decline.

Any Failure to Protect Our  Intellectual  Property  Could  Seriously  Impair Our
Competitive Position.

We  cannot  provide  assurance  that we have  or  will  be  able to  maintain  a
significant  proprietary position on the basic technologies used in our flywheel
systems.  Our ability to compete effectively  against  alternative  technologies
will be affected by our ability to protect our proprietary  technology,  systems
designs and manufacturing  processes.  We do not know whether any of our pending
or future patent  applications  under which we have rights will issue or, in the
case of patents  issued or to be issued,  that the claims allowed are or will be
sufficiently  broad to protect our  technology or processes,  or will protect us
from  competitors.  Even if all  our  patent  applications  are  issued  and are
sufficiently  broad,  they may be  challenged  or  invalidated.  We could  incur
substantial  costs in prosecuting or defending  patent  infringement  suits, and
such suits would divert funds and resources  that could be used in our business.
We do not  know  whether  we  have  been or will  be  completely  successful  in
safeguarding and maintaining our proprietary rights.

Further,  our  competitors  or  others  may  independently   develop  or  patent
technologies or processes that are substantially equivalent or superior to ours.
If we are found to be infringing on third-party  patents, we do not know whether
we will be able to obtain  licenses to use such patents on acceptable  terms, if
at  all.   Failure  to  obtain  needed  licenses  could  delay  or  prevent  the
development, manufacture or sale of our systems.

We rely,  in part,  on  contractual  provisions to protect our trade secrets and
proprietary  knowledge.  These  agreements may be breached,  and we may not have
adequate  remedies for any breach.  Our trade  secrets may also be known without
breach of such  agreements or may be  independently  developed by competitors or
others.  Our inability to maintain the proprietary  nature of our technology and
processes  could  allow our  competitors  or others  to limit or  eliminate  any
competitive advantages we may have, thereby harming our business prospects.

Our Majority Stockholders Will Control All Matters Requiring a Stockholder Vote,
Which will Limit Other  Investors'  Ability to Influence  the Outcome of Matters
Requiring Stockholder Approval.

Stockholders  who owned our company  prior to our initial  public  offering  own
approximately  64% of our  outstanding  stock  as of  December  31,  2001.  If a
sufficient  number of these  stockholders were to vote together as a group, they
would have the ability to control our board of directors and its  policies.  For
instance,  these  stockholders  would  be able to  control  the  outcome  of all
stockholder votes,  including votes concerning director  elections,  charter and
by-law  amendments and possible  mergers,  corporate  control contests and other
significant corporate  transactions.  These stockholders may use their influence
to approve  actions that are adverse to the interest of other  investors,  which
could depress our stock price.

The Share Prices of  Companies  in Our Sector have been Highly  Volatile and Our
Share Price Could Be Subject to Extreme Price Fluctuations.

The  markets  for equity  securities  of high  technology  companies,  including
companies in the power  reliability and power quality markets,  have been highly
volatile  recently  and the market  price of our  common  stock has been and may
continue to be subject to significant fluctuations. This could be in response to
operating results, announcements of technological innovations or new products by
us, or our  competitors,  patent or proprietary  rights  developments and market
conditions for high technology stocks in general. In addition,  stock markets in
recent years have experienced  extreme price and volume  fluctuations that often
have  been  unrelated  or  disproportionate  to  the  operating  performance  of
individual  companies.  These market  fluctuations,  as well as general economic
conditions,  may adversely  affect the market price of our common  stock,  which
could affect our ability to attract additional capital to fund our operations.

Provisions of Delaware Law and of Our Charter and By-laws May Inhibit a Takeover
that Stockholders Consider Favorable.

Provisions in our certificate of  incorporation  and by-laws and in the Delaware
corporate law, and the shareholder rights plan we adopted in September 2002, may
make it  difficult  and  expensive  for a third party to pursue a tender  offer,
change in control or  takeover  attempt  that is opposed by our  management  and
board of directors.  Public stockholders who might desire to participate in such
a transaction  may not have an opportunity  to do so.  Beginning with our annual
stockholder  meeting in 2001, we implemented a staggered board of directors that
will make it difficult for  stockholders  to change the composition of the board
of directors in any one-year.  Pursuant to a shareholder  rights plan adopted in
September 2002, we issued rights as a dividend on our common stock on October 7,
2002 each of which  entitles  the holder to  purchase  1/100th of a share of our
newly  issued  preferred  stock  for  $22.50 in the event  that any  person  not
approved by the board of  directors  acquires  more than 15% (30% in the case of
one large  shareholder  that  already  owned  more than 15%) of our  outstanding
common stock,  or in the event that we are acquired by another  company,  $22.50
worth of the common stock of the other company at half its market value (in each
case the rights  held by the  acquiring  person are not  exercisable  and become
void).  Additionally,  our board of directors may authorize  issuances of "blank
check"  preferred stock that could be used to increase the number of outstanding
shares and discourage a takeover attempt.  These anti-takeover  provisions could
substantially impede the ability of public stockholders to benefit from a change
in control or change our management and board of directors.


<page>
Item 3.  Quantitative and Qualitative Disclosure about Market Risk

Our cash equivalents and investments,  all of which have maturities of less than
one year,  may expose us to interest  rate risk.  At September  30, 2002, we had
approximately  $60,000  of cash  equivalents  that were  held in a  non-interest
bearing  checking  account.  Also at September  30, 2002,  we had  approximately
$1,183,000  of cash  equivalents  that were held in  interest  bearing  checking
accounts,  $2,121,000  invested in  interest-bearing  money market  accounts and
approximately $18,397,000 in high-grade corporate bonds. The fair value of these
investments approximates their cost. A 10% change in interest rates would change
the  investment  income  realized on an annual basis by  approximately  $35,000,
which we do not believe is material.

Item 4.  Controls and Procedures

Mr. F. William Capp, the Company's  Chief  Executive  Officer,  and Mr. James M.
Spiezio, the Company's Chief Financial Officer, have evaluated the effectiveness
of the Company's  disclosure controls and procedures as of a date within 90 days
before the filing date of this  quarterly  report.  Based upon that  evaluation,
they have concluded that the Company has in place controls and other  procedures
that are  designed to ensure that  information  required to be  disclosed by the
Company in the reports that it files or submits  under the  Securities  Exchange
Act of 1934 is recorded,  processed,  summarized  and  reported  within the time
periods  specified  in  the  SEC's  rules  and  forms.  Since  the  date  of the
evaluation,  there have been no  significant  changes in the Company's  internal
controls or in other factors that could significantly affect these controls.

<page>

                                     PART II

Item 1.  Legal Proceedings

We are not involved in any legal proceedings.  However, we may from time to time
be involved in legal proceedings in the ordinary course of our business.

Item 2.  Changes in Securities

On November 16,  2000,  the  Securities  and  Exchange  Commission  declared our
Registration  Statement  on Form S-1  (File  No.  333-43386)  effective.  In our
initial  public  offering  during the fourth  quarter of 2000, we sold 9,200,000
shares of our common stock, inclusive of the underwriters' over allotment, at an
initial public  offering price of $6.00 per share. We received net proceeds from
our initial public offering of  approximately  $49.3 million,  reflecting  gross
proceeds of $55.2 million net of underwriter  commissions of approximately  $3.9
million and other  offering  costs payable to persons,  other than  directors or
officers, of approximately $2.0 million.

From  November  16, 2000 to  September  30, 2002,  we spent  approximately  $9.8
million for inventory and materials  used in research and  development  and $7.4
million for property and  equipment,  including the build-out of our facility at
234 Ballardvale Street in Wilmington,  MA. In addition,  we spent  approximately
$1.2 million to pay  dividends on our preferred  stock that accrued  through the
date of our initial public offering.  We have spent  approximately $20.8 million
for other working  capital  needs.  In addition to the above,  we advanced funds
totaling approximately $785,000 to three officers of the Company and the current
outstanding  balance  on  these  loans is  $496,000.  The  remainder  of the net
offering  proceeds  has been  invested  in  short-term,  income  producing  bank
deposits  pending  their use for the  purchase of  property  and  equipment  and
working capital needs. Other than as disclosed above, none of these amounts were
direct or  indirect  payments  to  directors  or officers of the issuer or their
associates or to persons owning 10% or more of our common stock or to any of our
affiliates.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other Information

         None.

Item 6.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

        (a)  Reports on Form 8-K

          99.1 Form 8-K filed on October 4, 2002 with  respect to a  Shareholder
          Rights Plan.


<page>

                                   SIGNATURES

Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

                                     BEACON POWER CORPORATION

    Date:  November 13, 2002    By:  /s/ F. William Capp
                                     F. William Capp
                                     President and Chief Executive Officer


            November 13, 2002        /s/ James M. Spiezio
                                     James M. Spiezio
                                     Vice President of Finance and Chief
                                     Financial Officer (Principal Financial
                                     Officer and Chief Accounting Officer)



<page>


                                  CERTIFICATION


I, F. William Capp, certify that:


1.  I have  reviewed  this  quarterly  report  on  Form  10-Q  of  Beacon  Power
Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002                     by: /s/ F. William Capp
                                                -------------------------
                                                F. William Capp
                                                Chief Executive Officer


<page>

                                  CERTIFICATION


I, James M. Spiezio, certify that:

1. I have  reviewed  this  quarterly  report  on  Form  10-Q  of  Beacon  Power
Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3. Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002             by:  /s/ James M. Spiezio
                                          James M. Spiezio
                                          Chief Financial Officer


<page>
                                                                    Exhibit 99.1

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                              --------------------

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

      Date of Report (Date of earliest event reported) September 25, 2002

                            Beacon Power Corporation
               [Exact name of registrant as specified in charter]

         Delaware               001-16171                      43-372365
(State of incorporation    (Commission File Number)          (IRS Employer
       or organization)                                   Identification No.)

234 Ballardvale St., Wilmington MA                                01887-1032
(Address of principal executive offices)                          (Zip code)

Registrant's telephone number, including area code (978) 695-9121

                                      None
        (Former name or former address, if changed since last report)





         Item 5.  Other Events.

     On September 25, 2002,  the Board of Directors of Beacon Power  Corporation
(the  "Company")  declared  a dividend  payable on October 7, 2002 (the  "Record
Date") of one preferred  share purchase  right (a "Right") for each  outstanding
share of common  stock,  par value $0.01 per share,  of the Company (the "Common
Shares").  The dividend is payable to the  stockholders  of record on the Record
Date. Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior  Participating  Preferred Stock, par
value $1.00 per share,  of the Company  (the  "Preferred  Shares") at a price of
$22.50  per one  one-hundredth  of a  Preferred  Share (the  "Purchase  Price"),
subject to adjustment.  The description and terms of the Rights are set forth in
a Rights  Agreement (the "Rights  Agreement")  between the Company and Equiserve
Trust Company N.A., as Rights Agent (the "Rights Agent").

     Until the earlier to occur of (i) 10 days  following a public  announcement
that a  person  or group of  affiliated  or  associated  persons  (with  certain
exceptions,  an "Acquiring  Person") have acquired  beneficial  ownership of 15%
(or, in the case of the Perseus Capital,  LLC and persons that own Common Shares
through it, 30%) or more of the outstanding  Common Shares or (ii) such date, if
any, as may be designated by the Board of Directors of the Company following the
commencement  of, or first public  disclosure  of an  intention  to commence,  a
tender or exchange  offer for  outstanding  Common  Shares which could result in
such  person  or group  becoming  the  beneficial  owner of more than 15% of the
outstanding  Common  Shares (the  earlier of such dates being the  "Distribution
Date"), the Rights will not be represented by a separate  certificate,  and will
not be transferable  apart from the Common Stock, but will instead be evidenced,
(i) with  respect  to any of the shares of Common  Stock held in  uncertificated
book-entry  form (a  "Book-Entry")  outstanding  as of the Record Date,  by such
Book-Entry  and (ii) with  respect to the shares of Common  Stock  evidenced  by
Common Stock  certificates  outstanding  as of the Record  Date,  by such Common
Stock certificates, together with a copy of this Summary of Rights.

     The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares.  Until the Distribution Date (or earlier redemption
or expiration  of the Rights),  new Common Share  certificates  issued after the
Record Date upon  transfer  or new  issuance  of Common  Shares  will  contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier  redemption  or  expiration  of the Rights),  the surrender for
transfer of any  certificates  for Common  Shares  outstanding  as of the Record
Date,  even  without  such  notation or a copy of this  Summary of Rights  being
attached  thereto,  will also  constitute the transfer of the Rights  associated
with the Common Shares  represented by such certificate.  Until the Distribution
Date (or  earlier  redemption  or  expiration  of the  Rights),  transfer on the
Company's stock ownership records of Common Stock represented by a Book-Entry or
a certificate outstanding as the Record Date, and, in each case, with or without
a copy of this Summary of Rights  attached  thereto,  will also  constitute  the
transfer of the Rights  associated  with the Common  Stock  represented  by such
Book-Entry or  certificate.  As soon as practicable  following the  Distribution
Date, separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common  Shares as of the close of business on
the Distribution Date and such separate Right  Certificates  alone will evidence
the Rights.

     The Rights are not exercisable until the Distribution Date. The Rights will
expire on September  30, 2012 (the "Final  Expiration  Date"),  unless the Final
Expiration  Date is  advanced  or  extended  or unless the  Rights  are  earlier
redeemed or exchanged by the Company, in each case, as described below.

     The Purchase  Price  payable,  and the number of Preferred  Shares or other
securities  or  property  issuable,  upon  exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares; (ii) upon the grant to holders of the Preferred Shares of certain rights
or  warrants  to  subscribe  for or  purchase  Preferred  Shares at a price,  or
securities  convertible into Preferred Shares with a conversion price; less than
the  then-current  market  price  of the  Preferred  Shares  or  (iii)  upon the
distribution to holders of the Preferred  Shares of evidences of indebtedness or
assets  (excluding  regular  periodic  cash  dividends  paid out of  earnings or
retained  earnings or dividends  payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).

     The number of outstanding  Rights and the number of one one-hundredths of a
Preferred  Share  issuable  upon  exercise  of each  Right are also  subject  to
adjustment  in the  event  of a stock  split  of the  Common  Shares  or a stock
dividend  on the  Common  Shares  payable  in  Common  Shares  or  subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

     Preferred  Shares  purchasable  upon  exercise  of the  Rights  will not be
redeemable.  Each  Preferred  Share will be entitled  to a minimum  preferential
quarterly  dividend  payment  of $1.00  per  share  but will be  entitled  to an
aggregate dividend of 100 times the dividend declared per Common Share.

     In the event of  liquidation,  the holders of the Preferred  Shares will be
entitled to a minimum  preferential  liquidation payment of $22.50 per share but
will be  entitled  to an  aggregate  payment of 100 times the  payment  made per
Common Share. Each Preferred Share will have 100 votes, voting together with the
Common  Shares.  Finally,  in the event of any  merger,  consolidation  or other
transaction in which Common Shares are exchanged,  each Preferred  Share will be
entitled to receive 100 times the amount received per Common Share. These rights
are protected by customary antidilution provisions.

     Because of the nature of the Preferred  Shares'  dividend,  liquidation and
voting rights, the value of the one one-hundredth  interest in a Preferred Share
purchasable  upon exercise of each Right is intended to approximate the value of
one Common Share.

     In the event that the  Company is  acquired  in a merger or other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power are sold after a person or group has become an  Acquiring  Person,  proper
provision will be made so that each holder of a Right will  thereafter  have the
right to receive,  upon the exercise  thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company (or
its parent)  which at the time of such  transaction  will have a market value of
two times the exercise price of the Right. In the event that any person or group
of affiliated or associated persons becomes an Acquiring Person,  each holder of
a Right,  other than Rights  beneficially  owned by the Acquiring  Person (which
will thereafter be void), will thereupon have the right to receive upon exercise
that number of Common  Shares  having a market  value of two times the  exercise
price of the Right.

     At any time after any person or group becomes an Acquiring Person and prior
to the  acquisition  by such  person or group of 50% or more of the  outstanding
Common  Shares,  the Board of  Directors  of the Company may exchange the Rights
(other than Rights  owned by such person or group which will have become  void),
in whole or in part,  for shares of Common  Shares at an  exchange  ratio of one
Common Share per Right.

     With  certain  exceptions,  no  adjustment  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price. No fractional  Preferred  Shares will be issued (other than
fractions  which are  integral  multiples  of one  one-hundredth  of a Preferred
Share,  which may, at the  election of the Company,  be evidenced by  depositary
receipts) and, in lieu thereof,  an adjustment in cash will be made based on the
market price of the  Preferred  Shares on the last trading day prior to the date
of exercise.

     At any time prior to the time an Acquiring  Person  becomes such, the Board
of Directors of the Company may redeem the Rights in whole,  but not in part, at
a price of $.01 per Right (the "Redemption Price") payable, at the option of the
Company, in cash, Common Shares or such other form of consideration as the Board
of Directors of the Company shall determine. The redemption of the Rights may be
made  effective at such time on such basis with such  conditions as the Board of
Directors in its sole discretion may establish.  Immediately upon any redemption
of the Rights,  the right to exercise  the Rights  will  terminate  and the only
right of the holders of Rights will be to receive the Redemption Price.

     At any time prior to such time as there shall be an Acquiring  Person,  the
Company  may,  without the approval of any holder of the Rights,  supplement  or
amend any  provision of the Rights  Agreement  (including  the date on which the
Expiration Date or the Distribution Date shall occur, the amount of the Purchase
Price or the  definition  of "Acquiring  Person"),  except that no supplement or
amendment  shall be made that reduces the Redemption  Price of the Rights.  From
and after such time as any person or group of affiliated  or associated  persons
becomes and Acquiring  Person,  and subject to applicable  law, the Company may,
and the Rights Agent shall if the Company so directs, amend the Rights Agreement
without the  approval of any holders of Rights (a) to cure any  ambiguity  or to
correct or supplement any provision  contained  herein which may be defective or
inconsistent  with  any  other  provision  of this  Rights  Agreement  or (b) to
otherwise  change or supplement  any other  provisions in this  Agreement in any
matter which the Company may deem  necessary or desirable and which in each such
case shall not (i)  adversely  affect the  interests of the holders of Rights as
such  (other  than an  Acquiring  Person  or an  Affiliate  or  Associate  of an
Acquiring  Person)  (ii) cause the Rights  Agreement  again to become  otherwise
amendable or (iii) cause the Rights again to become redeemable.

     Until a Right is exercised or exchanged,  the holder thereof, as such, will
have no rights as a stockholder of the Company,  including,  without limitation,
the right to vote or to receive dividends.

     A copy of the  Rights  Agreement  is  available  free of  charge  from  the
Company.  This summary description of the Rights does not purport to be complete
and is qualified in its  entirety by reference to the Rights  Agreement,  as the
same may be amended form time to time,  which is hereby  incorporated  herein by
reference.


    Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

    (c)  Exhibits

        99.1  Rights Agreement Between Beacon Power Corporation and Equiserve
              Trust Company, N.A. dated as of September 25, 2002



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                            BEACON POWER CORPORATION

Dated: September 26, 2002                   By: /s/ James Spiezio
                                                -------------------------
                                                Chief Financial Officer





<page>


===============================================================================
Exhibit 99.1

                                RIGHTS AGREEMENT

                                     Between

                            BEACON POWER CORPORATION

                                       and

                          Equiserve Trust COMPANY, N.A.



                         Dated as of September 25, 2002


================================================================================


<PAGE>





                                TABLE OF CONTENTS


SECTION 1   Certain Definitions...............................................1

SECTION 2   Appointment of Rights Agent.......................................5

SECTION 3   Issue of Right Certificates.......................................5

SECTION 4   Form of Right Certificates........................................7

SECTION 5   Countersignature and Registration.................................7

SECTION 6   Transfer, Split Up, Combination and Exchange of Right
            Certificates; Mutilated, Destroyed, Lost or Stolen Right
            Certificates......................................................8

SECTION 7   Exercise of Rights; Purchase Price; Expiration Date of Rights.....8

SECTION 8   Cancellation and Destruction of Right Certificates................10

SECTION 9   Availability of Preferred Shares..................................10

SECTION 10  Preferred Shares Record Date......................................11

SECTION 11  Adjustment of Purchase Price, Number and Kind of Shares or
            Number of Rights..................................................11

SECTION 12  Certificate of Adjusted Purchase Price or Number of Shares........19

SECTION 13  Consolidation, Merger or Sale or Transfer of Assets or Earning
            Power.............................................................19

SECTION 14  Fractional Rights and Fractional Shares...........................22

SECTION 15  Rights of Action..................................................23

SECTION 16  Agreement of Right Holders........................................24

SECTION 17  Right Certificate Holder Not Deemed a Stockholder.................24

SECTION 18  Concerning the Rights Agent.......................................25

SECTION 19  Merger or Consolidation or Change of Name of Rights Agent.........25

SECTION 20  Duties of Rights Agent............................................26

SECTION 21  Change of Rights Agent............................................27

SECTION 22  Issuance of New Right Certificates................................28

SECTION 23  Redemption........................................................29

SECTION 24  Exchange..........................................................29

SECTION 25  Notice of Certain Events..........................................30

SECTION 26  Notices...........................................................31

SECTION 27  Supplements and Amendments........................................32

SECTION 28  Successors........................................................33

SECTION 29  Benefits of this Agreement........................................33

SECTION 30  Severability......................................................33

SECTION 31  Governing Law.....................................................33

SECTION 32  Counterparts......................................................33

SECTION 33  Descriptive Headings..............................................33

         Exhibit A - Form of Certificate of Designations
         Exhibit B - Form of Right Certificate
         Exhibit C - Summary of Rights to Purchase Preferred Shares
<PAGE>

     RIGHTS AGREEMENT (the "Agreement"), dated as of September 25, 2002, between
Beacon Power Corporation,  a Delaware corporation (the "Company"), and EquiServe
Trust Company, N.A., as Rights Agent (the "Rights Agent").

     The board of  directors  of the  Company  (the  "Board of  Directors")  has
authorized  and declared a dividend of one  preferred  share  purchase  right (a
"Right")  for  each  Common  Share  (as  hereinafter  defined)  of  the  Company
outstanding on October 7, 2002 (the "Record Date"),  each Right representing the
right to  purchase  one  one-hundredth  of a  Preferred  Share  (as  hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right (subject to adjustment
as  provided  herein)  with  respect to each  Common  Share  that  shall  become
outstanding between the Record Date and the earlier of the Distribution Date and
the Expiration Date (as such terms are hereinafter defined);  provided, however,
that  Rights may be issued  with  respect  to Common  Shares  that shall  become
outstanding  after the  Distribution  Date and prior to the  Expiration  Date in
accordance with Section 22.

     Accordingly,  in  consideration  of the premises and the mutual  agreements
herein set forth, the parties hereby agree as follows:

SECTION 1. Certain Definitions.

For purposes of this Agreement, the following terms have the meanings indicated:

     (a)  "Acquiring  Person" shall mean any Person who or which,  together with
all Affiliates and Associates of such Person,  shall be the Beneficial  Owner of
15% (except that such percentage  shall be 30% for Perseus  Capital,  L.L.C. and
Persons  who are  Beneficial  Owners  through  it  (Perseus  together  with such
Persons, the "Perseus Owners")) or more of the Common Shares of the Company, but
shall not include (i) the Company,  any Subsidiary of the Company,  any employee
benefit or compensation plan of the Company or of any Subsidiary of the Company,
or any Person  holding  Common  Shares for or  pursuant to the terms of any such
plan (each, an "Exempt Person"),  (ii) any such Person who has become and is the
Beneficial Owner of 15% (or, in the case of the Perseus Owners,  30%) or more of
the Common Shares of the Company  solely as a result of (A) the  acquisition  by
such  Person  or one or more  of its  Affiliates  or  Associates  of  Beneficial
Ownership of additional  Common Shares if such  acquisition was made in the good
faith belief that such acquisition would not (x) cause the Beneficial  Ownership
by such Person,  together with its Affiliates and Associates,  to be 15% (or, in
the case of the Perseus Owners, 30%) or more of the Common Shares of the Company
outstanding at the time of such acquisition and such good faith belief was based
on the good faith reliance on information contained in publicly filed reports or
documents of the Company that are  inaccurate  or  out-of-date  or (y) otherwise
cause a  Distribution  Date or the  adjustment  provided for in Section 11(a) to
occur or (B) the  acquisition by such Person or one or more of its Affiliates or
Associates of Beneficial Ownership of additional Common Shares of the Company if
the Board of Directors  determines that such  acquisition was made in good faith
without the  knowledge  by such Person or  Affiliates  or  Associates  that such
Person would thereby  become an Acquiring  Person,  which  determination  of the
Board of Directors  shall be conclusive  and binding on such Person,  the Rights
Agent,  the holders of the Rights and all other Persons or (iii) any such Person
who has  become  and is the  Beneficial  Owner  of 15%  (or,  in the case of the
Perseus  Owners,  30%) or more of the Common  Shares of the Company  solely as a
result of the operation of part (iii) of the definition of Beneficial  Ownership
if,  in the  sole  opinion  of the  Directors,  the  agreement,  arrangement  or
understanding that gives rise to the Beneficial  Ownership was already extant on
the date hereof,  provided that  Beneficial  Ownership of no more than 5% of the
Common Shares of the Company has been acquired by the parties to such agreement,
arrangement  or   understanding   in  the  aggregate   after  the  date  hereof.
Notwithstanding the foregoing, if any Person that is not an Acquiring Person due
to (ii)(A) or (ii)(B) of the prior  sentence  does not reduce its  percentage of
Beneficial  Ownership  of Common  Shares of the Company to less than 15% (or, in
the case of the  Perseus  Owners,  30%) by the  Close of  Business  on the tenth
calendar  day after  notice from the Company (the date of notice being the first
day) that such Person's  Beneficial  Ownership of Common Shares would make it an
Acquiring Person, such Person shall, at the end of such ten calendar day period,
become an Acquiring  Person (and such clause  (ii)(A) or (ii)(B) shall no longer
apply to such  Person).  For  purposes  of this  definition,  the  determination
whether any Person acted in "good faith" shall be conclusively determined by the
Board of  Directors.  Notwithstanding  anything in this  definition of Acquiring
Person to the  contrary,  no Person  shall become an  "Acquiring  Person" as the
result of an acquisition of Common Shares by the Company which,  by reducing the
number of  shares  outstanding,  increases  the  proportionate  number of shares
beneficially owned by such Person to 15% (or, in the case of the Perseus Owners,
30%) or more of the Common Shares of the Company;  provided,  however, that if a
Person shall become the Beneficial  Owner of 15% (or, in the case of the Perseus
Owners,  30%) or more of the  Common  Shares of the  Company  by reason of share
acquisitions  by the Company  and shall,  after such share  acquisitions  by the
Company,  become the  Beneficial  owner of any  additional  Common Shares of the
Company (other than pursuant to a dividend or  distribution  paid or made by the
Company on the  outstanding  Common Shares or pursuant to a split or subdivision
of the  outstanding  Common  Shares),  then such Person shall be deemed to be an
"Acquiring  Person" unless upon becoming the Beneficial Owner of such additional
Common Shares such Person does not  beneficially own 15% (or, in the case of the
Perseus Owners, 30%) or more of the Common Shares.

     (b) "Affiliate"  shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations  under the Exchange Act as in effect on the
date of this Agreement.

     (c) "Associate"  shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations  under the Exchange Act as in effect on the
date of this Agreement.

     (d) A  Person  shall be  deemed  the  "Beneficial  Owner"  of,  a  Person's
"Beneficial   Ownership"   shall  include  and  a  Person  shall  be  deemed  to
"beneficially own" any securities:

     (i) which such  Person or any of such  Person's  Affiliates  or  Associates
beneficially owns, directly or indirectly;

     (ii) which such Person or any of such Person's Affiliates or Associates has
(1) the right to acquire (whether such right is exercisable  immediately or only
after  the  passage  of  time)  pursuant  to  any   agreement,   arrangement  or
understanding (other than customary agreements with and between underwriters and
selling  group  members  with  respect  to  a  bona  fide  public   offering  of
securities),  or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the  Beneficial  Owner of, or to  beneficially
own,  securities  tendered  pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's  Affiliates  or  Associates  until
such tendered securities are accepted for purchase or exchange; or (2) the right
to vote, or the right to direct the vote, pursuant to any agreement, arrangement
or  understanding;  provided,  however,  that a Person  shall not be deemed  the
Beneficial  Owner of, or to  beneficially  own, any security,  if the agreement,
arrangement or  understanding  to vote, or direct the vote of, such security (x)
arises solely from a revocable proxy or consent given to such Person in response
to a public proxy or consent  solicitation  made  pursuant to, and in accordance
with, the applicable  rules and regulations  promulgated  under the Exchange Act
and (y) is not also then  reportable  on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

     (iii) which are beneficially  owned,  directly or indirectly,  by any other
Person with which such Person or any of such  Person's  Affiliates or Associates
has any agreement, arrangement or understanding (other than customary agreements
with and between  underwriters  and selling group members with respect to a bona
fide public  offering of  securities)  for the  purpose of  acquiring,  holding,
voting or disposing of such securities of the Company provided, however, that no
Person who is an officer,  director or  employee  of an Exempt  Person  shall be
deemed, solely by reason of such Person's status or authority as such, to be the
"Beneficial  Owner" of, to have  "Beneficial  Ownership" of or to  "beneficially
own" any securities  that are  "beneficially  owned" (as defined in this Section
1(d)),  including,  without limitation,  in a fiduciary  capacity,  by an Exempt
Person or by any other such officer, director or employee of an Exempt Person.

     In computing the  percentage  of Common  Shares a Person is the  Beneficial
Owner of for any purpose hereunder, such percentage shall be of the total Common
Shares then  outstanding  plus the Common Shares not then outstanding but deemed
to be Beneficially Owned by such Person (and only such Person).

     (e) "Board of  Directors"  shall have the meaning set forth in the preamble
hereof.

     (f) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in New York are authorized or obligated by law
or executive order to close.

     (g)  "Book-Entry"  shall mean an  uncertified  book-entry for the Company's
Common Stock.

     (h) "Close of  Business"  on any given date shall mean 5:00 P.M.,  New York
time, on such date; provided, however, that, if such date is not a Business Day,
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

     (i) "Common  Shares" when used with reference to the Company shall mean the
shares of common  stock,  par value  $0.01 per share,  of the  Company.  "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity  interest)  with the greatest  voting power of such
other  Person or, if such other Person is a Subsidiary  of another  Person,  the
Person or Persons which ultimately control such first-mentioned Person.

     (j) "Company" shall have the meaning set forth in the preamble hereof.

     (k) "Current  Per Share  Market  Price" shall have the meaning set forth in
Section 11(d)(i) hereof.

     (l)  "Distribution  Date"  shall  have the  meaning  set forth in Section 3
hereof.

     (m)  "equivalent  preferred  shares"  shall have the  meaning  set forth in
Section 11(b) hereof.

     (n)  "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
amended.

     (o)  "Exchange  Ratio"  shall have the meaning  set forth in Section  24(a)
hereof.

     (p)  "Exempt  Person"  shall have the  meaning  set forth in  Section  1(a)
hereof.

     (q) "Final  Expiration  Date"  shall have the  meaning set forth in Section
7(a) hereof.

     (r) "Person" shall mean any  individual,  firm,  corporation,  partnership,
limited  liability  company,  trust or  other  entity,  and  shall  include  any
successor (by merger or otherwise) of such entity.

     (s) "Preferred  Shares" shall mean shares of Series A Junior  Participating
Preferred Stock, par value $1.00 per share, of the Company having the rights and
preferences  set forth in the Form of  Certificate of  Designations  attached to
this Agreement as Exhibit A.

     (t)  "Purchase  Price"  shall have the  meaning  set forth in Section  7(b)
hereof.

     (u) "Record Date" shall have the meaning set forth in the preamble hereof.

     (v)  "Redemption  Date" shall have the  meaning  set forth in Section  7(a)
hereof.

     (w)  "Redemption  Price" shall have the meaning set forth in Section  23(a)
hereof.

     (x) "Right" shall have the meaning set forth in the preamble hereof.

     (y) "Right  Certificate"  shall have the meaning set forth in Section  3(a)
hereof.

     (z) "Rights Agent" shall have the meaning set forth in the preamble hereof.

     (aa) "Security" shall have the meaning set forth in Section 11(d) hereof.

     (bb)  "Shares  Acquisition  Date"  shall  mean  the  first  date of  public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such, or such
earlier date as a majority of the Board of  Directors  shall become aware of the
existence of an Acquiring Person.

     (cc)  "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority  of the  voting  power of the voting  equity  securities  or
equity interest is owned, directly or indirectly, by such Person.

     (dd)  "Summary of Rights"  shall have the meaning set forth in Section 3(b)
hereof.

     (ee)  "Trading  Day" shall  have the  meaning  set forth in  Section  11(d)
hereof.

SECTION 2. Appointment of Rights Agent.

     The  Company  hereby  appoints  the  Rights  Agent to act as agent  for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall,  prior to the Distribution Date also be the holders of the Common Shares)
in accordance with the terms and conditions  hereof, and the Rights Agent hereby
accepts  such  appointment.  The  Company  may from  time to time  appoint  such
co-Rights  Agents as it may deem  necessary  or  desirable,  upon ten (10) days'
prior written notice to the Rights Agent. The Rights Agent shall have no duty to
supervise,  and in no event be liable  for,  the acts or  omissions  of any such
co-Rights Agent.

SECTION 3. Issue of Right Certificates.

     (a) Until the Close of  Business  on the earlier of (i) the tenth day after
the Shares  Acquisition  Date or (ii) such date, if any, as may be designated by
the Board of Directors following the commencement of, or first public disclosure
of an intent to commence,  a tender or exchange  offer by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit or compensation
plan of the Company or of any  Subsidiary  of the Company or any Person  holding
Common  Shares for or  pursuant  to the terms of any such plan) for  outstanding
Common Shares, if upon consummation of such tender or exchange offer such Person
would be the Beneficial  Owner of 15% or more of the  outstanding  Common Shares
(the earlier of such dates being herein referred to as the "Distribution Date"),
(x) the Rights will be  evidenced  by the  Book-Entries,  or  certificates  for,
Common Stock  registered  in the name of the holders of Common  Stock  (together
with, in the case of Book-Entries representing,  or the certificates for, Common
Stock  outstanding  as of the Record  Date,  the  Summary of Rights)  and not by
separate  Book-Entries  or Rights  Certificates  and the  record  holders of the
Common Stock  represented  by such  Book-Entries  or  certificates  shall be the
record  holders of the Rights  represented  thereby,  and (y) the Rights will be
transferable  only in connection  with the transfer of Common Shares.  Until the
Distribution  Date (or,  if  earlier,  the  Expiration  Date),  transfer  on the
Company's  stock  ownership  records  of  any  Common  Stock  represented  by  a
Book-Entry  or the surrender  for transfer of any  certificate  for Common Stock
shall  constitute  the surrender for transfer of the Right or Rights  associated
with the Company Stock evidenced  thereby,  whether or not accompanied by a copy
of the Summary of Rights.

     (b) On the Record Date, or as soon as practicable  thereafter,  the Company
will  send a copy of a  Summary  of  Rights to  Purchase  Preferred  Shares,  in
substantially  the form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by
first-class,  postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Company.

     (c)  Rights  shall be issued in  respect  of all  Common  Shares  issued or
disposed of (including,  without  limitation,  upon disposition of Common Shares
out of  treasury  stock or  issuance  or  reissuance  of  Common  Shares  out of
authorized  but unissued  shares) after the Record Date but prior to the earlier
of the Distribution  Date and the Expiration  Date, or in certain  circumstances
provided in Section 22 hereof,  after the  Distribution  Date.  Certificates for
Common Shares and confirmations evidencing Book-Entries which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this  paragraph (c)) after the Record Date but prior to the earliest
of the  Distribution  Date, the Redemption  Date or the Final  Expiration  Date,
shall have impressed on, printed on, written on or otherwise affixed to them the
following legend:

     This  certificate  also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement  between Beacon Power  Corporation and
Equiserve  Trust Company  N.A.,  dated as of September 25, 2002, as amended from
time  to  time  (the  "Rights  Agreement"),   the  terms  of  which  are  hereby
incorporated herein by reference and a copy of which is on file at the principal
executive offices of Beacon Power Corporation.  Under certain circumstances,  as
set forth in the Rights  Agreement,  such Rights will be  evidenced  by separate
certificates and will no longer be evidenced by this  certificate.  Beacon Power
Corporation  will mail to the  holder of this  certificate  a copy of the Rights
Agreement  without  charge after receipt of a written  request  therefor.  Under
certain circumstances,  as set forth in the Rights Agreement, Rights owned by or
transferred  to any Person who is or becomes an Acquiring  Person (as defined in
the Rights Agreement) and certain  transferees thereof will become null and void
and will no longer be transferable.

     With respect to such certificates  containing the foregoing  legend,  until
the Distribution  Date, the Rights associated with the Common Shares represented
by such  certificates  shall be evidenced by such  certificates  alone,  and the
surrender  for transfer of any such  certificate,  except as otherwise  provided
herein,  shall also  constitute the transfer of the Rights  associated  with the
Common Shares  represented  thereby.  In the event that the Company purchases or
otherwise  acquires  any Common  Shares  after the Record  Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled  and retired so that the Company  shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.

     Notwithstanding  this  paragraph  (c),  the  omission of a legend shall not
affect the  enforceability  of any part of this  Agreement  or the rights of any
holder of the  Rights  (other  than any  Acquiring  Person or any  Associate  or
Affiliate of an Acquiring Person).

     (d) As soon as practicable  after the  Distribution  Date, the Company will
prepare and  execute,  the Rights Agent will  countersign,  and the Company will
send or cause to be sent (and the Rights  Agent  will,  if  requested,  send) by
first-class,  postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Distribution  Date (other than any Acquiring Person
or any  Associate or Affiliate of an Acquiring  Person),  at the address of such
holder  shown  on  the  records  of  the  Company,  a  Right   Certificate,   in
substantially the form of Exhibit B hereto (a "Right  Certificate"),  evidencing
one Right  (subject to adjustment  as provided  herein) for each Common Share so
held. From and after the Distribution  Date, the Rights will be evidenced solely
by such Right Certificates.

SECTION 4. Form of Right Certificates.

     The Right Certificates (and the forms of election to purchase shares and of
assignment to be printed on the reverse thereof) shall be substantially the same
as Exhibit B hereto and may have such marks of identification or designation and
such legends,  summaries or endorsements printed thereon as the Company may deem
appropriate and as are not  inconsistent  with the provisions of this Agreement,
or as may be  required  to comply  with any  applicable  law or with any rule or
regulation  made  pursuant  thereto or with any rule or  regulation of any stock
exchange or automated quotation system on which the Rights may from time to time
be listed, or to conform to usage.  Subject to the provisions of this Agreement,
the Right Certificates shall entitle the holders thereof to purchase such number
of one  one-hundredths of a Preferred Share as shall be set forth therein at the
Purchase Price, but the number of such one  one-hundredths  of a Preferred Share
and the Purchase Price shall be subject to adjustment as provided herein.

SECTION 5. Countersignature and Registration.

     The Right  Certificates  shall be  executed on behalf of the Company by its
Chairman of the Board, its Chief Executive  Officer,  its President,  any of its
Vice Presidents,  or its Treasurer,  either manually or by facsimile  signature,
shall have affixed thereto the Company's seal or a facsimile thereof,  and shall
be attested by the  Secretary or an Assistant  Secretary of the Company,  either
manually or by facsimile  signature.  The Right  Certificates  shall be manually
countersigned  by the Rights Agent and shall not be valid for any purpose unless
countersigned.  In case any  officer of the Company who shall have signed any of
the Right  Certificates  shall cease to be such  officer of the  Company  before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Right Certificates,  nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the  individual  who signed  such Right  Certificates  had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf of the
Company by any individual who, at the actual date of the execution of such Right
Certificate,  shall  be a proper  officer  of the  Company  to sign  such  Right
Certificate  although at the date of the  execution of this  Agreement  any such
individual was not such an officer.

     Following the Distribution  Date, the Rights Agent will keep or cause to be
kept, at its principal office,  books for registration and transfer of the Right
Certificates issued hereunder.  Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right  Certificates and the date of each of the Right
Certificates.

SECTION 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

     Subject  to the  provisions  of  this  Agreement,  at any  time  after  the
Distribution  Date,  and at or prior to the Close of Business on the  Expiration
Date, any Right Certificate or Right Certificates (other than Right Certificates
representing  Rights that have become void pursuant to Section  11(a)(ii) hereof
may  be  transferred,  split  up,  combined,  or  exchanged  for  another  Right
Certificate  or other Right  Certificates  entitling  the  registered  holder to
purchase a like number of one  one-hundredths  of a Preferred Share as the Right
Certificate  or Right  Certificates  surrendered  then  entitled  such holder to
purchase.  Any  registered  holder  desiring to transfer,  split up,  combine or
exchange any Right Certificate or Right  Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred,  split up, combined or exchanged at the
principal  office  of  the  Rights  Agent.  Thereupon  the  Rights  Agent  shall
countersign  and deliver to the Person entitled  thereto a Right  Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental  charge that may be
imposed in connection  with any transfer,  split up,  combination or exchange of
Right Certificates.

     Subject  to the  provisions  of  this  Agreement,  at any  time  after  the
Distribution  Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence  reasonably  satisfactory  to them of the loss,
theft,  destruction or mutilation of a Right Certificate,  and, in case of loss,
theft or destruction,  of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto,  and upon surrender to the Rights
Agent and cancellation of the Right  Certificate if mutilated,  the Company will
make and deliver a new Right  Certificate  of like tenor to the Rights Agent for
delivery  to the  registered  holder in lieu of the Right  Certificate  so lost,
stolen, destroyed or mutilated.

SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

     (a)  Except  as  otherwise   provided  herein,   the  Rights  shall  become
exercisable on the  Distribution  Date, and thereafter the registered  holder of
any Right  Certificate  may exercise  the Rights  evidenced  thereby  (except as
otherwise  provided  herein),  in  whole  or in  part,  at any  time  after  the
Distribution  Date,  upon surrender of the Right  Certificate,  with the form of
election to purchase on the reverse side thereof  duly  executed,  to the Rights
Agent at the principal office of the Rights Agent,  together with payment of the
Purchase  Price  for each one  one-hundredth  of a  Preferred  Share  (or  other
securities, cash or other assets, as the case may be) as to which the Rights are
exercised,  at any time which is both after the  Distribution  Date and prior to
the time  (the  "Expiration  Date")  that is the  earliest  of (i) the  Close of
Business on September 30, 2012 (the "Final Expiration  Date"),  (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the  "Redemption
Date"),  or (iii) the time at which such  Rights are  exchanged  as  provided in
Section 24 hereof.

     (b) The  Purchase  Price for each one  one-hundredth  of a Preferred  Share
purchasable  pursuant to the exercise of a Right shall initially be $22.50,  and
the Purchase Price and the number of one  one-hundredth  of a share of Preferred
Share or other  securities  or property to be acquired  upon exercise of a Right
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful  money of the United  States of America in
accordance with paragraph (c) below.

     (c)  Except  as  otherwise  provided  herein,   upon  receipt  of  a  Right
Certificate  representing  exercisable  Rights,  with  the form of  election  to
purchase duly  executed,  accompanied  by payment of the Purchase  Price for the
shares  to be  purchased  and an amount  equal to any  applicable  transfer  tax
required to be paid by the holder of such Right  Certificate in accordance  with
Section 9 hereof by certified  check,  cashier's check or money order payable to
the order of the  Company,  the Rights  Agent shall  thereupon  promptly  (i)(A)
requisition from any transfer agent of the Preferred  Shares,  or make available
if the Rights Agent is the transfer agent for the Preferred Shares, certificates
for the  number of  Preferred  Shares to be  purchased  and the  Company  hereby
irrevocably authorizes any such transfer agent to comply with all such requests,
or (B) requisition from the depositary agent appointed by the Company depositary
receipts  representing  interests  in such  number  of one  one-hundredths  of a
Preferred  Share as are to be  purchased  (in which  case  certificates  for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent of the Preferred Shares with such depositary agent) and the Company hereby
directs  such  depositary   agent  to  comply  with  such  request;   (ii)  when
appropriate,  requisition from the Company the amount of cash to be paid in lieu
of issuance of  fractional  shares in accordance  with Section 14 hereof;  (iii)
promptly after receipt of such  certificates or depositary  receipts,  cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate,  registered  in such  name or  names as may be  designated  by such
holder; and (iv) when appropriate,  after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate.

     (d) Except as otherwise  provided herein,  in case the registered holder of
any Right Certificate shall exercise less than all the Rights evidenced thereby,
a new Right Certificate  evidencing Rights equivalent to the exercisable  Rights
remaining  unexercised  shall be issued by the  Rights  Agent to the  registered
holder of such Right Certificate or to his duly authorized  assigns,  subject to
the provisions of Section 14 hereof.

     (e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company  shall be  obligated  to undertake  any action with
respect to a registered  holder of Rights upon the  occurrence  of any purported
transfer or exercise  of Rights  pursuant to Section 6 hereof or this  Section 7
unless  such  registered   holder  shall  have  (i)  completed  and  signed  the
certificate  contained in the form of assignment or form of election to purchase
set forth on the reverse  side of the Rights  Certificate  surrendered  for such
transfer or exercise and (ii) provided such additional  evidence of the identity
of the  Beneficial  Owner (or former  Beneficial  Owner)  thereof as the Company
shall reasonably request.

SECTION 8. Cancellation and Destruction of Right Certificates.

     All Right Certificates  surrendered for the purpose of exercise,  transfer,
split up, combination or exchange shall, if surrendered to the Company or to any
of its agents,  be delivered to the Rights Agent for cancellation or in canceled
form, or, if  surrendered  to the Rights Agent,  shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the  provisions  of this  Agreement.  The Company shall deliver to the
Rights  Agent for  cancellation  and  retirement,  and the Rights Agent shall so
cancel and retire,  any other  Right  Certificate  purchased  or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company,  destroy such canceled  Right  Certificates,  and, in such case,
shall deliver a certificate of destruction thereof to the Company.

SECTION 9. Availability of Preferred Shares.

     (a) The Company  covenants and agrees that it will cause to be reserved and
kept  available  out of its  authorized  and  unissued  Preferred  Shares or any
Preferred Shares held in its treasury,  the number of Preferred Shares that will
be  sufficient  to permit  the  exercise  in full of all  outstanding  Rights in
accordance with Section 7.

     (b) So long as the  Preferred  Shares  issuable upon the exercise of Rights
may be listed or admitted to trading on any  national  securities  exchange,  or
quoted on NASDAQ,  the  Company  shall use its best  efforts to cause,  from and
after such time as the Rights become  exercisable,  all shares reserved for such
issuance  to be listed or  admitted  to trading on such  exchange,  or quoted on
NASDAQ, upon official notice of issuance upon such exercise.

     (c) From and after such time as the Rights become exercisable,  the Company
shall  use its best  efforts,  if then  necessary  to  permit  the  issuance  of
Preferred  Shares upon the  exercise of Rights,  to  register  and qualify  such
Preferred Shares under the Securities Act and any applicable state securities or
"Blue Sky" laws (to the extent  exemptions  therefrom are not available),  cause
such  registration  statement and  qualifications to become effective as soon as
possible  after  such  filing  and keep  such  registration  and  qualifications
effective  (with a  prospectus  at all times  meeting  the  requirements  of the
Securities  Act)  until the  earlier  of the date as of which the  Rights are no
longer  exercisable for such securities and the Expiration Date. The Company may
temporarily  suspend,  for a  period  of  time  not  to  exceed  120  days,  the
exercisability  of the  Rights  in order  to  prepare  and  file a  registration
statement under the Securities Act and permit it to become  effective.  Upon any
such suspension,  the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement   at  such  time  as  the   suspension  is  no  longer  in  effect.
Notwithstanding  any  provision of this  Agreement to the  contrary,  the Rights
shall not be exercisable in any jurisdiction unless the requisite  qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act shall have been declared effective, unless an exemption
therefrom is available.

     (d) The Company  covenants  and agrees that it will take all such action as
may be necessary to ensure that all Preferred  Shares delivered upon exercise of
Rights shall,  at the time of delivery of the  certificates  for such  Preferred
Shares  (subject  to  payment  of the  Purchase  Price),  be  duly  and  validly
authorized and issued and fully paid and nonassessable shares.

     The  Company  further  covenants  and agrees  that it will pay when due and
payable any and all federal and state  transfer  taxes and charges  which may be
payable in respect of the issuance or delivery of the Right  Certificates  or of
any  Preferred  Shares  upon the  exercise  of Rights.  The  Company  shall not,
however,  be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right  Certificates  to a Person other than,  or the
issuance or delivery of  certificates  or depositary  receipts for the Preferred
Shares  in a name  other  than  that of,  the  registered  holder  of the  Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any  certificates or depositary  receipts for Preferred Shares upon the exercise
of any  Rights  until  any such tax  shall  have  been  paid (any such tax being
payable by the holder of such Right  Certificate  at the time of  surrender)  or
until it has been established to the Company's  reasonable  satisfaction that no
such tax is due.

SECTION 10. Preferred Shares Record Date.

     Each Person in whose name any  certificate  for Preferred  Shares is issued
upon the  exercise of Rights shall for all purposes be deemed to have become the
holder  of record of the  Preferred  Shares  represented  thereby  on,  and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such  Rights was duly  surrendered  and payment of the  Purchase  Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred  Shares  transfer books
of the Company are closed, such Person shall be deemed to have become the record
holder  of such  shares  on,  and  such  certificate  shall be  dated,  the next
succeeding  Business Day on which the  Preferred  Shares  transfer  books of the
Company are open.  Prior to the exercise of the Rights  evidenced  thereby,  the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable,  including,  without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive  rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.

SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.

     The Purchase Price,  the number of Preferred  Shares or other securities or
property  purchasable  upon  exercise  of each  Right  and the  number of Rights
outstanding  are  subject to  adjustment  from time to time as  provided in this
Section 11.

     (a) (i) In the event the  Company  shall at any time after the date of this
Agreement  (A)  declare and pay a dividend on the  Preferred  Shares  payable in
Preferred Shares,  (B) subdivide the outstanding  Preferred Shares,  (C) combine
the outstanding  Preferred  Shares into a smaller number of Preferred  Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such  reclassification  in connection with a consolidation
or merger in which the  Company is the  continuing  or  surviving  corporation),
except as  otherwise  provided  in this  Section  11(a),  the number and kind of
shares of capital  stock  issuable  upon  exercise of a Right at the time of the
record date for such  dividend  or of the  effective  date of such  subdivision,
combination or reclassification,  shall be proportionately  adjusted so that the
holder of any Right  exercised  after such time shall be entitled to receive the
aggregate  number and kind of shares of capital  stock which,  if such Right had
been exercised  immediately  prior to such date and at a time when the Preferred
Shares  transfer  books of the Company were open,  he would have owned upon such
exercise and been entitled to receive by virtue of such  dividend,  subdivision,
combination or reclassification;  provided,  however, that in no event shall the
consideration  to be paid  upon  the  exercise  of one  Right  be less  than the
aggregate par value of the shares of capital stock of the Company  issuable upon
exercise of one Right.

     (ii)  Subject  to  Section  24 of this  Agreement,  in the event any Person
becomes  an  Acquiring  Person,  each  holder of a Right,  except  as  otherwise
provided in this  Agreement,  shall  thereafter  have a right to  receive,  upon
exercise  thereof at a price equal to the then current Purchase Price multiplied
by the number of one  one-hundredths  of a Preferred  Share for which a Right is
then exercisable,  in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of the Company as shall equal the
result obtained by (A) multiplying the then current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right is then exercisable
and dividing  that product by (B) 50% of the then Current Per Share Market Price
of the Company's Common Shares (determined  pursuant to Section 11(d)(i) hereof)
on the date of the occurrence of such event provided, however, that the Purchase
Price and the number of Common  Shares so  receivable  upon  exercise of a Right
shall,  following the time a Person becomes an Acquiring  Person,  be subject to
further  adjustment as appropriate in accordance with Section 11(f) hereof.  The
Company agrees that,  after the earlier of the  Distribution  Date or the Shares
Acquisition  Date,  it will not,  except as  permitted  by Sections 23, 24 or 27
hereof,  take (or permit any  Subsidiary to take) any action if at the time such
action is taken it is  reasonably  foreseeable  that such action  will  diminish
substantially or eliminate the benefits intended to be afforded by the Rights.

     Notwithstanding  anything in this Agreement to the contrary, from and after
the  occurrence  of  such  event,  any  Rights  that  are or  were  acquired  or
beneficially owned by (x) any Acquiring Person (or any Associate or Affiliate of
such  Acquiring  Person),  a  transferee  of any  Acquiring  Person (or any such
Affiliate  or  Associate)  who becomes a  transferee  after a Person  becomes an
Acquiring  Person  or (z) a  transferee  of any  Acquiring  Person  (or any such
Affiliate or Associate) who became a transferee prior to or concurrently  with a
Person  becoming an Acquiring  Person pursuant to either (I) a transfer from the
Acquiring Person to holders of its equity  securities or to any Person with whom
it has any  continuing  agreement,  arrangement or  understanding  regarding the
transferred  Rights  or  (II) a  transfer  which  the  Board  of  Directors  has
determined is part of a plan, arrangement or understanding which has the purpose
or  effect  of  avoiding  the  provisions  of  this  paragraph,  and  subsequent
transferees  of such Persons,  shall be void and any holder of such Rights shall
thereafter  have no right to exercise  such Rights  under any  provision of this
Agreement.  The  Company  shall use all  reasonable  efforts to ensure  that the
provisions  of this  Section  11(a)(ii)  are  complied  with,  but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any  determinations  with respect to an Acquiring  Person or its
Affiliates,  Associates  or  transferees  hereunder.  From and  after the time a
Person  becomes  an  Acquiring  Person,  no Right  Certificate  shall be  issued
pursuant  to Section 3 or Section 6 hereof  that  represents  Rights that are or
have become void  pursuant to the  provisions of this  paragraph,  and any Right
Certificate  delivered  to the Rights Agent that  represents  Rights that are or
have become void pursuant to the provisions of this paragraph shall be canceled.
From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights  that  theretofore  have  not been  exercised  pursuant  to this  Section
11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11(a)(ii).

     (iii) In the  event  that  there  shall  not be  sufficient  Common  Shares
authorized  but  unissued  to  permit  the  exercise  in full of the  Rights  in
accordance with the foregoing  subparagraph  (ii), the Board of Directors shall,
with respect to such  deficiency,  to the extent permitted by applicable law and
any  material  agreements  then in effect to which the  Company is a party,  (A)
determine  the excess  (such  excess,  the  "Spread") of (1) the value of Common
Shares  issuable upon the exercise of a Right in  accordance  with the foregoing
subparagraph (ii) (the "Current Value") over (2) the Purchase Price (as adjusted
in accordance  with the foregoing  subparagraph  (ii)),  and (B) with respect to
each Right (other than Rights which have become void  pursuant to the  foregoing
subparagraph  (ii)), make adequate provision to substitute for the Common Shares
issuable in accordance with the foregoing subparagraph (ii) upon exercise of the
Right and payment of the Purchase  Price (as adjusted in accordance  therewith),
(1) cash, (2) a reduction in such Purchase Price,  (3) Preferred Shares or other
equity  securities  of the Company  (including,  without  limitation,  shares or
fractions of shares of  preferred  stock  which,  by virtue of having  dividend,
voting and liquidation  rights  substantially  comparable to those of the Common
Shares, are deemed in good faith by the Board of Directors to have substantially
the same  value as the  Common  Shares  (such  Preferred  Shares  and  shares or
fractions of shares of preferred  stock are  hereinafter  referred to as "Common
Stock  Equivalents")),  (4) debt securities of the Company, (5) other assets, or
(6) any  combination of the foregoing,  having a value which,  when added to the
value of the Common  Shares  issued upon  exercise of such Right,  shall have an
aggregate  value equal to the Current Value (less the amount of any reduction in
such Purchase  Price),  where such  aggregate  value has been  determined by the
Board of Directors upon the advice of a nationally recognized investment banking
firm selected in good faith by the Board of Directors;  provided,  however, that
if the Company  shall not make adequate  provision to deliver value  pursuant to
clause (B) above within thirty (30) days  following the time a Person becomes an
Acquiring  Person  (the time a Person  becomes  an  Acquiring  Person  being the
"Section  11(a)(ii)  Trigger  Date"),  then the Company  shall be  obligated  to
deliver,  to the extent permitted by applicable law and any material  agreements
then in effect to which the Company is a party,  upon the surrender for exercise
of a Right and without requiring payment of such Purchase Price of Common Shares
(to the extent available),  and then, if necessary,  such number or fractions of
Preferred Shares (to the extent  available) and then, if necessary,  cash, which
shares  and/or cash have an  aggregate  value equal to the Spread.  If, upon the
occurrence  of a Person  becoming an  Acquiring  Person,  the Board of Directors
shall  determine  in good faith  that it is likely  that  sufficient  additional
Common  Shares could be  authorized  for issuance  upon  exercise in full of the
Rights,  then,  if the Board of Directors so elects,  the thirty (30) day period
set forth  above may be  extended  to the  extent  necessary,  but not more than
ninety (90) days after the Section  11(a)(ii)  Trigger  Date,  in order that the
Company may seek stockholder  approval for the  authorization of such additional
shares (such thirty (30) day period, as it may be extended, is herein called the
"Substitution  Period").  To the extent  that the Company  determines  that some
action  need be taken  pursuant  to the second  and/or  third  sentence  of this
Section 11(a)(iii),  the Company (x) shall provide, subject to Section 11(a)(ii)
hereof and the last sentence of this Section 11(a)(iii) hereof, that such action
shall  apply  uniformly  to all  outstanding  Rights  and  (y) may  suspend  the
exercisability of the Rights until the expiration of the Substitution  Period in
order to seek any  authorization  of  additional  shares  and/or to  decide  the
appropriate form of distribution to be made pursuant to such second sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement  stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section  11(a)(iii),
the value of Common  Shares  shall be the  Current  Per Share  Market  Price (as
determined  pursuant to Section  11(d)(i)) on the Section 11(a)(ii) Trigger Date
and the per share or fractional value of any "Common Stock  Equivalent" shall be
deemed to equal the current per share  market  price of the Common  Shares.  The
Board of Directors  of the Company may, but shall not be required to,  establish
procedures  to allocate the right to receive  Common Shares upon the exercise of
the Rights among holders of Rights pursuant to this Section 11(a)(iii).

     (b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of  Preferred  Shares  entitling  them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase  Preferred Shares (or shares having the same rights,  privileges and
preferences  as  the  Preferred  Shares  ("equivalent   preferred  shares"))  or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent  preferred share (or having a conversion
price per share, if a security  convertible  into Preferred Shares or equivalent
preferred  shares)  less than the then  Current  Per Share  Market  Price of the
Preferred  Shares) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall  be the  number  of  Preferred  Shares  and  equivalent  preferred  shares
outstanding  on such  record  date  plus the  number  of  Preferred  Shares  and
equivalent  preferred  shares which the  aggregate  offering  price of the total
number of Preferred Shares and/or  equivalent  preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible  securities so
to be offered) would  purchase at such current market price and the  denominator
of which shall be the number of Preferred Shares and equivalent preferred shares
outstanding on such record date plus the number of additional  Preferred  Shares
and/or  equivalent  preferred  shares to be offered for subscription or purchase
(or into  which  the  convertible  securities  so to be  offered  are  initially
convertible);  provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the  aggregate par value of the
shares of capital stock of the Company  issuable upon exercise of one Right.  In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration  shall be as
determined in good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights  Agent  and  holders  of the  Rights.  Preferred  Shares  and  equivalent
preferred  shares  owned by or held for the account of the Company  shall not be
deemed  outstanding  for the purpose of any such  computation.  Such  adjustment
shall be made  successively  whenever  such a record  date is fixed;  and in the
event that such  rights,  options or warrants  are not so issued,  the  Purchase
Price shall be adjusted to be the  Purchase  Price which would then be in effect
if such record date had not been fixed.

     (c) In case the  Company  shall  fix a  record  date  for the  making  of a
distribution  to all  holders  of  the  Preferred  Shares  (including  any  such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription  rights or warrants  (excluding those referred
to in Section  11(b)  hereof),  the  Purchase  Price to be in effect  after such
record date shall be  determined  by  multiplying  the Purchase  Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the then Current Per Share Market Price of the Preferred Shares on such
record  date,  less the fair market  value (as  determined  in good faith by the
Board of Directors,  whose determination shall be described in a statement filed
with the Rights  Agent and shall be binding on the Rights  Agent and  holders of
the Rights) of the portion of the assets or evidences of  indebtedness  so to be
distributed  or of  such  subscription  rights  or  warrants  applicable  to one
Preferred  Share and the  denominator  of which shall be such  Current Per Share
Market Price of the Preferred Shares; provided,  however, that in no event shall
the  consideration  to be paid upon the  exercise  of one Right be less than the
aggregate  par value of the shares of capital  stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed;  and in the event that such  distribution is not so
made,  the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

     (d) (i) For the purpose of any  computation  hereunder,  the  "Current  Per
Share  Market  Price" of any  security  (a  "Security"  for the  purpose of this
Section  11(d)(i))  on any date  shall be deemed to be the  average of the daily
closing  prices per share of such Security for the 30  consecutive  Trading Days
immediately prior to such date;  provided,  however,  that in the event that the
Current Per Share  Market Price of the  Security is  determined  during a period
following the  announcement  by the issuer of such Security of (A) a dividend or
distribution  on such Security  payable in shares of such Security or securities
convertible  into  such  shares,   or  (B)  any   subdivision,   combination  or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision,  combination or  reclassification,  then, and in each such
case,  the Current Per Share  Market  Price shall be  appropriately  adjusted to
reflect the current  market price per share  equivalent  of such  Security.  The
closing  price for each day shall be the last sale price,  regular  way,  or, in
case no such sale takes  place on such day,  the  average of the closing bid and
asked  prices,  regular  way,  in either  case,  as  reported  in the  principal
consolidated  transaction  reporting system with respect to securities listed or
admitted to trading on the New York Stock  Exchange  or, if the  Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal  consolidated  transaction reporting system with respect to securities
listed on the principal  national  securities  exchange on which the Security is
listed or admitted  to trading or, if the  Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the counter
market,  as reported on the Nasdaq  National Market or such other system then in
use,  or,  if on  any  such  date  the  Security  is  not  quoted  by  any  such
organization,  the average of the closing bid and asked prices as furnished by a
professional  market maker making a market in the Security selected by the Board
of  Directors.  The term  "Trading  Day" shall mean a day on which the principal
national  securities  exchange  on which the  Security  is listed or admitted to
trading is open for the  transaction  of  business  or, if the  Security  is not
listed or admitted to trading on any national  securities  exchange,  a Business
Day.

     (ii) For the purpose of any computation  hereunder,  the "Current Per Share
Market Price" of the Preferred Shares shall be determined in accordance with the
method set forth in Section  11(d)(i).  If the Preferred Shares are not publicly
traded,  the "Current Per Share Market Price" of the  Preferred  Shares shall be
conclusively  deemed to be the  Current  Per Share  Market  Price of the  Common
Shares as determined  pursuant to Section  11(d)(i)  (appropriately  adjusted to
reflect any stock split, stock dividend or similar  transaction  occurring after
the date hereof),  multiplied by one thousand.  If neither the Common Shares nor
the  Preferred  Shares are  publicly  held or so listed or traded,  "Current Per
Share Market  Price" shall mean the fair value per share as  determined  in good
faith by the Board of  Directors,  whose  determination  shall be described in a
statement  filed with the Rights  Agent and shall be binding on the Rights Agent
and the holders of the Rights.

     (e) No  adjustment  in the  Purchase  Price shall be  required  unless such
adjustment  would require an increase or decrease of at least 1% in the Purchase
Price;  provided,  however, that any adjustments which by reason of this Section
11(e) are not  required  to be made  shall be  carried  forward  and taken  into
account in any subsequent  adjustment.  All  calculations  under this Section 11
shall be made to the  nearest  cent or to the  nearest  one  one-millionth  of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the  transaction  which requires such  adjustment or (ii)
the Expiration Date.

     (f) If as a result of an adjustment  made pursuant to Section 11(a) hereof,
the holder of any Right  thereafter  exercised  shall become entitled to receive
any  shares  of  capital  stock of the  Company  other  than  Preferred  Shares,
thereafter  the Purchase Price and the number of such other shares so receivable
upon exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly  equivalent as practicable to the provisions  with
respect  to the  Preferred  Shares  contained  in  Section  11(a)  through  (c),
inclusive,  11(h),  11(i) and 11(m) and the  provisions of Sections 7, 9, 10, 13
and 14 with  respect to the  Preferred  Shares  shall apply on like terms to any
such other shares.

     (g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred  Share  purchasable  from time to time  hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

     (h) Unless the Company  shall have  exercised  its  election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding  immediately
prior to the making of such adjustment  shall  thereafter  evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred  Share  (calculated  to the nearest one  one-millionth  of a Preferred
Share)  obtained by (A) multiplying  (x) the number of one  one-hundredths  of a
share  covered  by a  Right  immediately  prior  to this  adjustment  by (y) the
Purchase Price in effect  immediately  prior to such  adjustment of the Purchase
Price and (B) dividing  the product so obtained by the Purchase  Price in effect
immediately after such adjustment of the Purchase Price.

     (i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase  Price  pursuant to Sections 11(b) or 11(c) hereof to adjust the number
of Rights in substitution for any adjustment in the number of one one-hundredths
of a Preferred  Share  purchasable  upon the  exercise  of a Right.  Each of the
Rights  outstanding  after  such  adjustment  of the  number of Rights  shall be
exercisable for the number of one  one-hundredths of a Preferred Share for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights  (calculated to the nearest one  ten-thousandth)  obtained by dividing
the Purchase  Price in effect  immediately  prior to  adjustment of the Purchase
Price by the  Purchase  Price in  effect  immediately  after  adjustment  of the
Purchase Price. The Company shall make a public  announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made.  This record date
may be the date on which the Purchase  Price is adjusted or any day  thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days later
than the  date of the  public  announcement.  If Right  Certificates  have  been
issued,  upon each  adjustment of the number of Rights  pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right  Certificates on such record date Right  Certificates
evidencing,  subject to Section 14 hereof,  the additional  Rights to which such
holders shall be entitled as a result of such  adjustment,  or, at the option of
the  Company,  shall  cause to be  distributed  to such  holders  of  record  in
substitution  and  replacement for the Right  Certificates  held by such holders
prior to the date of adjustment,  and upon surrender thereof, if required by the
Company, new Right Certificates  evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued,  executed and  countersigned  in the manner provided for herein
and  shall  be  registered  in the  names  of the  holders  of  record  of Right
Certificates on the record date specified in the public announcement.

     (j)  Irrespective  of any adjustment or change in the Purchase Price or the
number of one  one-hundredths of a Preferred Share issuable upon the exercise of
the  Rights,  the Right  Certificates  theretofore  and  thereafter  issued  may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred  Share which were expressed in the initial Right  Certificates  issued
hereunder.

     (k) Before  taking any action that would cause an  adjustment  reducing the
Purchase  Price below the then par value,  if any, of the  fractional  Preferred
Share or other shares of capital stock issuable upon exercise of the Rights, the
Company  shall  take any  corporate  action  which  may,  in the  opinion of its
counsel,  be necessary  in order that the Company may validly and legally  issue
fully  paid and  nonassessable  Preferred  Shares or such  other  shares at such
adjusted Purchase Price.

     (l) In any case in which this Section 11 shall  require that an  adjustment
in the  Purchase  Price be made  effective  as of a record  date for a specified
event,  the Company may elect to defer  until the  occurrence  of such event the
issuing  to the holder of any Right  exercised  after  such  record  date of the
Preferred  Shares and other capital stock or securities of the Company,  if any,
issuable  upon  such  exercise  over and above the  Preferred  Shares  and other
capital stock or securities of the Company,  if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however,  that the  Company  shall  deliver  to such  holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

     (m)  Anything  in this  Section  11 to the  contrary  notwithstanding,  the
Company shall be entitled to make such  adjustments  in the Purchase  Price,  in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent that it, in its sole  discretion,  shall determine to be advisable in
order that any  consolidation or subdivision of the Preferred  Shares,  issuance
wholly for cash of any Preferred  Shares at less than the current  market price,
issuance wholly for cash of Preferred  Shares or securities which by their terms
are  convertible  into  or  exchangeable  for  Preferred  Shares,  dividends  on
Preferred Shares payable in Preferred  Shares or issuance of rights,  options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.

     (n)  Anything in this  Agreement to the  contrary  notwithstanding,  in the
event  that at any  time  after  the  date of this  Agreement  and  prior to the
Distribution  Date,  the Company  shall (i)  declare or pay any  dividend on the
Common  Shares  payable  in  Common  Shares,   or  (ii)  effect  a  subdivision,
combination  or  consolidation  of the  Common  Shares (by  reclassification  or
otherwise  than by  payment of  dividends  in Common  Shares)  into a greater or
lesser  number of Common  Shares,  then in each such case (A) the  number of one
one-hundredths  of a Preferred  Share  purchasable  after such event upon proper
exercise  of each Right shall be  determined  by  multiplying  the number of one
one-hundredths  of a Preferred  Share so purchasable  immediately  prior to such
event by a  fraction,  the  numerator  of which is the  number of Common  Shares
outstanding  immediately  before such event and the  denominator of which is the
number of Common Shares  outstanding  immediately after such event, and (B) each
Common  Share  outstanding  immediately  after such event shall have issued with
respect  to it that  number  of  Rights  which  each  Common  Share  outstanding
immediately  prior to such event had issued with respect to it. The  adjustments
provided for in this Section  11(n) shall be made  successively  whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.

SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares.

     Whenever an adjustment is made as provided in Section 11 or 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the  Rights  Agent and with each  transfer  agent for the  Common  Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right  Certificate in accordance  with Section 25 hereof (if
so required under Section 25 hereof).

SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.

     (a) In the event,  directly or  indirectly,  at any time after a Person has
become an Acquiring  Person,  (i) the Company shall  consolidate  with, or merge
with and into,  any other  Person,  (ii) any Person shall  consolidate  with the
Company,  or  merge  with  and into the  Company  and the  Company  shall be the
continuing or surviving  corporation of such merger and, in connection with such
merger,  all or part of the Common Shares shall be changed into or exchanged for
stock or other  securities  of any other  Person (or the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or
more of its  Subsidiaries  shall  sell or  otherwise  transfer),  in one or more
transactions,  assets or earning power  aggregating 50% or more of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other  Person  other  than  the  Company  or one or  more  of its  wholly  owned
Subsidiaries,  then,  and  upon  the  first  occurrence  of such  event,  proper
provision  shall be made so that (A) each holder of a Right (except as otherwise
provided herein) shall  thereafter have the right to receive,  upon the exercise
thereof at a price equal to the then current  Purchase  Price  multiplied by the
number  of one  one-hundredths  of a  Preferred  Share for which a Right is then
exercisable,  in  accordance  with the  terms of this  Agreement  and in lieu of
Preferred  Shares or Common Shares of the Company,  such number of Common Shares
of such other  Person  (including  the  Company as  successor  thereto or as the
surviving corporation) as shall equal the result obtained by (1) multiplying the
then current Purchase Price by the number of one  one-hundredths  of a Preferred
Share for which a Right is then exercisable and dividing that product by (2) 50%
of the then Current Per Share  Market  Price of the Common  Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation,  merger, sale or transfer,  provided,  however,  that the
Purchase Price (as theretofore adjusted) and the number of Common Shares of such
other Person so receivable  upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof to reflect any
events  occurring in respect of the Common Shares of such other Person after the
occurrence of such consolidation,  merger,  sale or transfer;  (B) the issuer of
such Common Shares shall  thereafter be liable for, and shall assume,  by virtue
of such consolidation,  merger, sale or transfer, all the obligations and duties
of the  Company  pursuant  to this  Agreement;  (C)  the  term  "Company"  shall
thereafter  be deemed to refer to such  issuer;  and (D) such issuer  shall take
such steps  (including,  but not limited  to, the  reservation  of a  sufficient
number of its Common Shares in  accordance  with Section 9 hereof) in connection
with such  consummation as may be necessary to assure that the provisions hereof
shall  thereafter be applicable,  as nearly as reasonably may be, in relation to
the Common  Shares  thereafter  deliverable  upon the  exercise  of the  Rights;
provided that, upon the subsequent occurrence of any consolidation, merger, sale
or  transfer  of assets or other  extraordinary  transaction  in respect of such
other  Person,  each holder of a Right shall  thereupon  be entitled to receive,
upon  exercise of a Right and payment of the Purchase  Price as provided in this
Section 13(a), such cash, shares, rights, warrants and other property which such
holder would have been entitled to receive had such holder,  at the time of such
transaction,  owned the Common  Shares of the other Person  receivable  upon the
exercise of a Right pursuant to this Section 13(a),  and such other Person shall
take such steps (including,  but not limited to, reservation of shares of stock)
as may be  necessary  to  permit  the  subsequent  exercise  of  the  Rights  in
accordance  with the terms hereof for such cash,  shares,  rights,  warrants and
other property.

     (b) The other Person referred to in Section 13(a) (the  "Principal  Party")
shall mean:

     (i) in the case of any  transaction  described  in (i) or (ii) of the first
sentence  of Section  13(a)  hereof:  (A) the  Person  that is the issuer of the
securities  into  which  the  Common  Shares  are  converted  in such  merger or
consolidation,  or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares  outstanding,
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger,  if such Person survives said merger,  or, if there is more than one
such Person,  the Person the Common Shares of which have the greatest  aggregate
market value of shares  outstanding or (y) if the Person that is the other party
to the merger  does not survive  the  merger,  the Person that does  survive the
merger  (including the Company if it survives) or (z) the Person  resulting from
the consolidation; and

     (ii)  in the  case of any  transaction  described  in  (iii)  of the  first
sentence of Section  13(a)  hereof,  the Person that is the party  receiving the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction  or  transactions,  or,  if each  Person  that  is a  party  to such
transaction or  transactions  receives the same portion of the assets or earning
power so  transferred  or if the Person  receiving  the greatest  portion of the
assets or earning power cannot be  determined,  whichever of such Persons is the
issuer of Common  Shares  having the greatest  aggregate  market value of shares
outstanding; provided, however, that in any such case described in the foregoing
clause  (b)(i) or (b)(ii),  if the Common  Shares of such Person are not at such
time or has not been continuously over the preceding  12-month period registered
under  Section 12 of the  Exchange  Act,  then (1) if such Person is a direct or
indirect  Subsidiary  of another  Person the Common Shares of which are and have
been so registered, the term "Principal Party" shall refer to such other Person,
or (2) if such Person is a Subsidiary,  directly or indirectly, of more than one
Person,  the Common Shares of all of which are and have been so registered,  the
term "Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares  outstanding,
or (3) if such  Person is owned,  directly  or  indirectly,  by a joint  venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same  Person,  the rules set forth in clauses  (1) and (2) above  shall apply to
each of the owners  having an interest in the venture as if the Person  owned by
the joint venture was a Subsidiary of both or all of such joint  venturers,  and
the Principal  Party in each such case shall bear the  obligations  set forth in
this  Section 13 in the same ratio as its  interest in such Person  bears to the
total of such interests.

     (c) The Company shall not consummate any such  consolidation,  merger, sale
or transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent an agreement  confirming that the requirements
of Sections 13(a) and (b) hereof shall promptly be performed in accordance  with
their  terms and that such  consolidation,  merger,  sale or  transfer of assets
shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal  Party  pursuant to Sections 13(a)
and (b) hereof and providing  that, as soon as practicable  after executing such
agreement pursuant to this Section 13, the Principal Party will:

     (i) prepare and file a registration  statement under the Securities Act, if
necessary,  with  respect  to the  Rights and the  securities  purchasable  upon
exercise of the Rights on an  appropriate  form,  use its best  efforts to cause
such  registration  statement to become  effective as soon as practicable  after
such filing and use its best  efforts to cause such  registration  statement  to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration  Date and similarly  comply with applicable
state securities laws;

     (ii) use its best  efforts,  if the Common  Shares of the  Principal  Party
shall be listed or  admitted  to trading on the New York  Stock  Exchange  or on
another national securities  exchange,  to list or admit to trading (or continue
the listing of) the Rights and the securities  purchasable  upon exercise of the
Rights on the New York Stock Exchange or such  securities  exchange,  or, if the
Common Shares of the Principal  Party shall not be listed or admitted to trading
on the New York Stock Exchange or a national securities  exchange,  to cause the
Rights  and  the  securities  receivable  upon  exercise  of  the  Rights  to be
authorized for quotation on NASDAQ or on such other system then in use;

     (iii) deliver to holders of the Rights historical  financial statements for
the  Principal  Party which comply in all  respects  with the  requirements  for
registration on Form 10 (or any successor form) under the Exchange Act; and

     (iv) obtain waivers of any rights of first refusal or preemptive  rights in
respect of the Common  Shares of the  Principal  Party  subject to purchase upon
exercise of outstanding Rights.

     (d) In case the  Principal  Party has a provision in any of its  authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its affairs, which provision would have the effect of (i) causing such
Principal  Party to issue  (other  than to  holders of Rights  pursuant  to this
Section 13), in connection  with, or as a consequence of, the  consummation of a
transaction  referred  to in this  Section  13,  Common  Shares or Common  Stock
Equivalents of such  Principal  Party at less than the then current market price
per share  thereof  (determined  pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible  into, Common Shares or Common Stock Equivalents
of such  Principal  Party at less than such then current  market price,  or (ii)
providing for any special payment,  tax or similar  provision in connection with
the  issuance  of the Common  Shares of such  Principal  Party  pursuant  to the
provisions  of Section 13, then, in such event,  the Company  hereby agrees with
each holder of Rights that it shall not consummate any such  transaction  unless
prior  thereto the  Company and such  Principal  Party shall have  executed  and
delivered  to the  Rights  Agent a  supplemental  agreement  providing  that the
provision in question of such Principal  Party shall have been canceled,  waived
or amended,  or that the authorized  securities  shall be redeemed,  so that the
applicable provision will have no effect in connection with, or as a consequence
of, the  consummation of the proposed  transaction.  The Company shall not enter
into any  transaction  of the kind  referred to in this Section  13(i) if at the
time of or immediately  after such transaction  there are any rights,  warrants,
instruments or other instruments or securities  outstanding or any agreements or
arrangements  which would  eliminate  or  substantially  diminish  the  benefits
intended to be afforded by the  Rights,  (ii) prior to,  simultaneously  with or
immediately  after  such   consolidation,   merger,   sale,  transfer  or  other
transaction,   the  stockholders  of  the  Person  who  constitutes,   or  would
constitute,  the Principal Party for purposes of Section 13(b) hereof shall have
received a distribution of Rights  previously owned by such Person or any of its
Affiliates  or  Associates  or (iii) the form or nature of  organization  of the
Principal Party would preclude or limit the  exercisability  of the Rights.  The
provisions of this Section 13 shall  similarly  apply to  successive  mergers or
consolidations or sales or other transfers.

SECTION 14. Fractional Rights and Fractional Shares.

     (a) The Company  shall not be required to issue  fractions  of Rights or to
distribute Right Certificates which evidence  fractional Rights. In lieu of such
fractional  Rights,  there shall be paid to the registered  holders of the Right
Certificates  with regard to which such  fractional  Rights  would  otherwise be
issuable,  an amount in cash equal to the same  fraction of the  current  market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  prior to the date on which such fractional Rights would
have been  otherwise  issuable.  The closing price for any day shall be the last
sale price,  regular  way, or, in case no such sale takes place on such day, the
average of the closing bid and asked  prices,  regular way, in either  case,  as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Rights  are not  listed or  admitted  to  trading  on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national  securities exchange
on which the Rights are listed or  admitted to trading or, if the Rights are not
listed or  admitted to trading on any  national  securities  exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the over-the-counter market, as reported on the Nasdaq National Market
or such  other  system  then in use or, if on any such date the  Rights  are not
quoted by any such organization, the average of the closing bid and asked prices
as  furnished  by a  professional  market  maker  making a market in the  Rights
selected by the Board of Directors.  If on any such date no such market maker is
making a market  in the  Rights,  the fair  value of the  Rights on such date as
determined in good faith by the Board of Directors shall be used.

     (b) The  Company  shall not be  required to issue  fractions  of  Preferred
Shares (other than fractions which are integral  multiples of one  one-hundredth
of a Preferred  Share) upon  exercise or exchange of the Rights or to distribute
certificates  which evidence  fractional  Preferred Shares (other than fractions
which  are  integral  multiples  of one  one-hundredth  of a  Preferred  Share).
Interests  on  fractions  of  Preferred  Shares  in  integral  multiples  of one
one-hundredth  of a Preferred  Share may, at the  election  of the  Company,  be
evidenced by depositary receipts,  pursuant to an appropriate  agreement between
the Company and a depositary  selected by it; provided that such agreement shall
provide that the holders of such depositary  receipts shall have all the rights,
privileges and  preferences  to which they are entitled as beneficial  owners of
the  Preferred  Shares  represented  by  such  depositary  receipts.  In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share,  the Company shall pay to the registered  holders of Right
Certificates  at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current  market value of one Preferred
Share.  For the purposes of this Section  14(b),  the current  market value of a
Preferred  Share shall be the closing price of a Preferred  Share (as determined
pursuant to the second sentence of Section  11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise or exchange.

     (c) The Company shall not be required to issue fractional  Common Shares or
to distribute  certificates  which  evidence  fractional  Common Shares upon the
exercise or exchange of Rights.  In lieu of such fractional  Common Shares,  the
Company  shall pay to the  registered  holders  of the Right  Certificates  with
regard to which such  fractional  Common  Shares would  otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
Common Share (as  determined  in  accordance  with Section 14(a) hereof) for the
Trading Day immediately prior to the date of such exercise or exchange.

     (d) The holder of a Right by the acceptance of the Right  expressly  waives
his right to  receive  any  fractional  Rights  or any  fractional  shares  upon
exercise or exchange of a Right (except as provided above).

SECTION 15. Rights of Action.

     All rights of action in respect of this Agreement,  excepting the rights of
action  given to the Rights  Agent  under  Section 18 hereof,  are vested in the
respective  registered  holders  of the Right  Certificates  (and,  prior to the
Distribution  Date,  the  registered  holders  of the  Common  Shares);  and any
registered holder of any Right Certificate (or, prior to the Distribution  Date,
of the Common Shares),  without the consent of the Rights Agent or of the holder
of any other Right  Certificate  (or,  prior to the  Distribution  Date,  of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute  and maintain any suit,  action or  proceeding  against the Company to
enforce,  or  otherwise  act in  respect  of, his right to  exercise  the Rights
evidenced by such Right  Certificate (or, prior to the  Distribution  Date, such
Common Shares) in the manner provided in therein and in this Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically  acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this  Agreement and will be entitled to specific
performance of the obligations  under,  and injunctive  relief against actual or
threatened  violations  of  the  obligations  of any  Person  subject  to,  this
Agreement.

SECTION 16. Agreement of Right Holders.

     Every holder of a Right,  by accepting  the same,  consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;

     (b) after the  Distribution  Date, the Right  Certificates are transferable
only on the registry  books of the Rights Agent if  surrendered at the principal
office of the Rights Agent,  duly endorsed or accompanied by a proper instrument
of transfer; and

     (c) the Company and the Rights Agent may deem and treat the person in whose
name the Right  Certificate (or, prior to the Distribution  Date, the associated
Common Shares  certificate)  is registered as the absolute  owner thereof and of
the Rights  evidenced  thereby  (notwithstanding  any  notations of ownership or
writing on the Right  Certificate  or the associated  Common Shares  certificate
made by anyone  other than the  Company or the  Rights  Agent) for all  purposes
whatsoever,  and neither the  Company nor the Rights  Agent,  subject to Section
7(e) hereof, shall be affected by any notice to the contrary.

SECTION 17. Right Certificate Holder Not Deemed a Stockholder.

     No holder,  as such,  of any Right  Certificate  shall be entitled to vote,
receive  dividends  or be deemed for any  purpose  the  holder of the  Preferred
Shares or any other  securities of the Company which may at any time be issuable
on the  exercise  or  exchange  of the  Rights  represented  thereby,  nor shall
anything  contained  herein or in any Right  Certificate  be construed to confer
upon the  holder  of any  Right  Certificate,  as such,  any of the  rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,  or to give or
withhold  consent to any corporate  action,  or to receive notice of meetings or
other actions affecting stockholders (except as provided in this Agreement),  or
to receive dividends or subscription  rights,  or otherwise,  until the Right or
Rights  evidenced  by such  Right  Certificate  shall  have  been  exercised  or
exchanged in accordance with the provisions hereof.

SECTION 18. Concerning the Rights Agent.

     The Company agrees to pay to the Rights Agent  reasonable  compensation for
all services  rendered by it hereunder  and, from time to time, on demand of the
Rights Agent, its reasonable  expenses and counsel fees and other  disbursements
incurred in the  administration and execution of this Agreement and the exercise
and  performance of its duties  hereunder.  The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss,  liability,  or
expense incurred without gross  negligence,  bad faith or willful  misconduct on
the part of the Rights  Agent,  for anything done or omitted by the Rights Agent
in  connection  with  the  acceptance  and  administration  of  this  Agreement,
including the costs and expenses of defending  against any claim of liability in
the premises.

     The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken,  suffered or omitted by it in connection  with, its
administration  of this  Agreement  in reliance  upon any Right  Certificate  or
certificate for the Preferred Shares or Common Shares or for other securities of
the  Company,   instrument  of  assignment  or  transfer,   power  of  attorney,
endorsement,   affidavit,  letter,  notice,  direction,   consent,  certificate,
statement,  or other  paper or  document  believed by it to be genuine and to be
signed, executed and, where necessary,  verified or acknowledged,  by the proper
Person or  Persons,  or  otherwise  upon the  advice of  counsel as set forth in
Section 20 hereof.

SECTION 19. Merger or Consolidation or Change of Name of Rights Agent.

     Any corporation  into which the Rights Agent or any successor  Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any  merger or  consolidation  to which the Rights  Agent or any  successor
Rights  Agent  shall be a party,  or any  corporation  succeeding  to the  stock
transfer or corporate  trust powers of the Rights Agent or any successor  Rights
Agent,  shall be the successor to the Rights Agent under this Agreement  without
the  execution  or filing of any paper or any  further act on the part of any of
the  parties  hereto;  provided  that such  corporation  would be  eligible  for
appointment  as a  successor  Rights  Agent under the  provisions  of Section 21
hereof.  In case at the time such  successor  Rights Agent shall  succeed to the
agency created by this Agreement,  any of the Right Certificates shall have been
countersigned  but not delivered,  any such successor Rights Agent may adopt the
countersignature  of  the  predecessor  Rights  Agent  and  deliver  such  Right
Certificates  so  countersigned;  and,  in case at that  time  any of the  Right
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor  Rights Agent;  and in all such cases such
Right  Certificates shall have the full force provided in the Right Certificates
and in this Agreement.

     In case at any time the name of the Rights  Agent  shall be changed  and at
such time any of the Right  Certificates  shall have been  countersigned but not
delivered,  the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been  countersigned,  the Rights Agent may
countersign such Right  Certificates  either in its prior name or in its changed
name;  and in all such cases such Right  Certificates  shall have the full force
provided in the Right Certificates and in this Agreement.

SECTION 20. Duties of Rights Agent.

     The Rights  Agent  undertakes  the duties and  obligations  imposed by this
Agreement upon the following terms and  conditions,  by all of which the Company
and the holders of Right  Certificates,  by their acceptance  thereof,  shall be
bound:

     (a) The  Rights  Agent may  consult  with legal  counsel  (who may be legal
counsel  for the  Company),  and the opinion of such  counsel  shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.

     (b)  Whenever in the  performance  of its duties under this  Agreement  the
Rights Agent shall deem it  necessary  or  desirable  that any fact or matter be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact or matter  (unless  other  evidence in respect  thereof be
herein  specifically  prescribed)  may be deemed to be  conclusively  proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.

     (c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.

     (d) The  Rights  Agent  shall not be liable  for or by reason of any of the
statements  of fact or  recitals  contained  in this  Agreement  or in the Right
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

     (e) The Rights  Agent shall not be under any  responsibility  in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Right Certificate (except its  countersignature  thereof);  nor
shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Right Certificate;  nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section  11(a)(ii) hereof) or any adjustment in
the terms of the  Rights  (including  the  manner,  method  or  amount  thereof)
provided  for in  Section  3,  11,  13,  23 or 24,  or the  ascertaining  of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right  Certificates  after actual
notice  that such change or  adjustment  is  required);  nor shall it by any act
hereunder  be  deemed  to  make  any   representation  or  warranty  as  to  the
authorization  or reservation of any Preferred  Shares to be issued  pursuant to
this Agreement or any Right  Certificate  or as to whether any Preferred  Shares
will,  when  issued,   be  validly   authorized  and  issued,   fully  paid  and
nonassessable.

     (f) The  Company  agrees that it will  perform,  execute,  acknowledge  and
deliver or cause to be performed, executed,  acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying  out or  performing  by the Rights Agent of
the provisions of this Agreement.

     (g)  The  Rights  Agent  is  hereby   authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the Chairman of the Board,  the Chief Executive  Officer,  the President,
any Vice President,  the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions  in connection with its duties,  and
it shall not be liable for any action  taken or  suffered by it in good faith in
accordance  with  instructions  of any such  officer  or for any delay in acting
while waiting for those instructions.

     (h) The Rights Agent and any stockholder,  director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other  securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise  act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing  herein  shall  preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

     (i) The Rights  Agent may execute and  exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its  attorneys  or  agents,  and the Rights  Agent  shall not be  answerable  or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct,  provided  reasonable care was exercised in the selection
and continued employment thereof.

     (j) If, with respect to any Rights  Certificate  surrendered  to the Rights
Agent  for  exercise  or  transfer,  the  certificate  contained  in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be,  has not been  completed  to  certify  the  holder is not an
Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof,
the  Rights  Agent  shall  not take any  further  action  with  respect  to such
requested exercise or transfer without first consulting with the Company.

SECTION 21. Change of Rights Agent.

     The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this  Agreement  upon 30 days' notice in writing mailed to
the Company and to each transfer agent of the Common Shares or Preferred  Shares
by registered or certified mail, and,  following the  Distribution  Date, to the
holders of the Right  Certificates  by first-class  mail. The Company may remove
the Rights Agent or any successor  Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer  agent of the Common  Shares or Preferred  Shares by registered or
certified  mail,  and,  following the  Distribution  Date, to the holders of the
Right  Certificates  by  first-class  mail.  In the  event the  transfer  agency
relationship in effect between the Company and the Rights Agent terminates,  the
Rights Agent will be deemed to resign  automatically  on the  effective  date of
such  termination;  and any required notice will be sent by the Company.  If the
Rights Agent shall resign or be removed or shall otherwise  become  incapable of
acting,  the Company  shall  appoint a  successor  to the Rights  Agent.  If the
Company  shall  fail to make such  appointment  within a period of 30 days after
giving  notice of such removal or after it has been  notified in writing of such
resignation or incapacity by the resigning or  incapacitated  Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate  for inspection by the Company),  then the registered  holder of any
Right  Certificate  may apply to any  court of  competent  jurisdiction  for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be a  corporation  organized and doing
business  under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such  corporation  is authorized
to do  business  as a banking  institution  in the  State of New  York,  in good
standing,  having an office in the State of New York,  which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or  examination  by federal or state  authority and which has at the
time of its  appointment  as Rights  Agent a combined  capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same  powers,  rights,  duties and  responsibilities  as if it had been
originally  named  as  Rights  Agent  without  further  act  or  deed;  but  the
predecessor  Rights  Agent shall  deliver and transfer to the  successor  Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance,  conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such  appointment,  the Company shall file notice
thereof in writing with the predecessor  Rights Agent and each transfer agent of
the Common Shares or Preferred  Shares,  and,  following the Distribution  Date,
mail a  notice  thereof  in  writing  to the  registered  holders  of the  Right
Certificates.  Failure  to give any  notice  provided  for in this  Section  21,
however, or any defect therein, shall not affect the legality or validity of the
resignation  or removal of the Rights Agent or the  appointment of the successor
Rights Agent, as the case may be.

SECTION 22. Issuance of New Right Certificates.

     Notwithstanding any of the provisions of this Agreement or of the Rights to
the  contrary,  the Company  may, at its  option,  issue new Right  Certificates
evidencing  Rights in such form as may be approved by the Board of  Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other  securities  or  property  purchasable  under the Right
Certificates  made in  accordance  with the  provisions  of this  Agreement.  In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the Expiration Date, the Company may with respect
to  Common  Shares  so  issued or sold  pursuant  to (i) the  exercise  of stock
options,  (ii) under any employee plan or arrangement,  (iii) upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company,
or (iv) a contractual  obligation of the Company, in each case existing prior to
the Distribution  Date, issue Rights  Certificates  representing the appropriate
number of Rights in connection  with such issuance or sale;  provided,  however,
that (i) no such Right  Certificate  shall be issued if, and to the extent that,
the  Company  shall be advised  by counsel  that such  issuance  would  create a
significant  risk of  material  adverse tax  consequences  to the Company or the
Person  to whom such  Right  Certificate  would be  issued,  (ii) no such  Right
Certificate shall be issued if, and to the extent that,  appropriate  adjustment
shall otherwise have been made in lieu of the issuance thereof and (iii) no such
Right  Certificate  shall be issued in respect of Rights  that have  become void
pursuant to the terms hereof.

SECTION 23. Redemption.

     (a) The Board of  Directors  may, at its option,  at any time prior to such
time as any Person becomes an Acquiring Person, redeem all but not less than all
the  then  outstanding   Rights  at  a  redemption  price  of  $.01  per  Right,
appropriately  adjusted to reflect any stock  split,  stock  dividend or similar
transaction  occurring  in respect of the Common  Shares  after the date  hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The  redemption of the Rights may be made  effective at such time, on such basis
and with such conditions as the Board of Directors, in its sole discretion,  may
establish.  The Redemption Price shall be payable, at the option of the Company,
in cash,  Common  Shares,  or such other form of  consideration  as the Board of
Directors shall determine.

     (b)  Immediately  upon the action of the Board of  Directors  ordering  the
redemption  of the Rights  pursuant to  paragraph  (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such  redemption),  and without any further  action and without any notice,  the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price.

     The  Company  shall  promptly  give public  notice of any such  redemption;
provided,  however,  that the failure to give, or any defect in, any such notice
shall not  affect the  validity  of such  redemption.  Within 10 days after such
action of the Board of Directors  ordering the  redemption  of the Rights (or at
such later time as the Board of Directors may establish for the effectiveness of
such  redemption),  the  Company  shall mail a notice of  redemption  to all the
holders of the then  outstanding  Rights at their last  addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution  Date,
on the registry books of the transfer  agent for the Common  Shares.  Any notice
which is mailed in the manner herein provided shall be deemed given,  whether or
not the holder  receives the notice.  Each such notice of redemption  will state
the method by which the payment of the  Redemption  Price will be made.  Neither
the Company  nor any of its  Affiliates  or  Associates  may redeem,  acquire or
purchase  for  value  any  Rights  at any time in any  manner  other  than  that
specifically  set forth in this  Section 23 or in  Section 24 hereof,  and other
than  in  connection  with  the  acquisition  of  Common  Shares  prior  to  the
Distribution Date.

SECTION 24. Exchange.

     (a) The Board of Directors may, at its option, at any time after any Person
becomes an Acquiring  Person,  exchange all or part of the then  outstanding and
exercisable  Rights  (which  shall not  include  Rights  that have  become  void
pursuant to the provisions of Section  11(a)(ii) hereof) for Common Shares at an
exchange ratio of one Common Share per Right,  appropriately adjusted to reflect
any stock split, stock dividend or similar  transaction  occurring in respect of
the Common Shares after the date hereof (such exchange  ratio being  hereinafter
referred to as the "Exchange Ratio").  Notwithstanding the foregoing,  the Board
of Directors  shall not be  empowered to effect such  exchange at any time after
any Person (other than the Company,  any Subsidiary of the Company, any employee
benefit  plan of the Company or of any  Subsidiary  of the Company or any entity
holding  Common Shares for or pursuant to the terms of any such plan),  together
with all Affiliates and Associates of such Person,  becomes the Beneficial Owner
of 50% or more of the Common  Shares.  From and after the occurrence of an event
specified in Section 13(a)  hereof,  any Rights that  theretofore  have not been
exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in
accordance  with  Section 13 and may not be  exchanged  pursuant to this Section
24(a).  The  exchange  of the  Rights  by the  Board  of  Directors  may be made
effective at such time,  on such basis and with such  conditions as the Board of
Directors in its sole discretion may establish.

     (b)  Immediately  upon the  effectiveness  of the  action  of the  Board of
Directors  ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further  action and without any notice,  the right to
exercise such Rights shall  terminate and the only right  thereafter of a holder
of such Rights  shall be to receive  that number of Common  Shares  equal to the
number of such Rights held by such holder  multiplied by the Exchange Ratio. The
Company  shall  promptly  give  public  notice of any such  exchange;  provided,
however,  that the  failure to give,  or any defect in,  such  notice  shall not
affect the validity of such exchange.  The Company  promptly shall mail a notice
of any  such  exchange  to all of the  holders  of such  Rights  at  their  last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given,  whether or
not the holder receives the notice.  Each such notice of exchange will state the
method by which the  exchange  of the Common  Shares for Rights will be effected
and, in the event of any partial  exchange,  the number of Rights  which will be
exchanged.  Any partial  exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void  pursuant to the  provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.

     (c) The Company may at its option  substitute  and, in the event that there
shall not be sufficient  Common Shares issued but not  outstanding or authorized
but unissued to permit any exchange of Rights as contemplated in accordance with
this  Section  24,  the  Company   shall   substitute  to  the  extent  of  such
insufficiency,  for each Common  Share that would  otherwise  be  issuable  upon
exchange  of a Right,  a number of  Preferred  Shares or  fraction  thereof  (or
equivalent preferred shares) such that the Current Per Share Market Price of one
Preferred  Share (or equivalent  preferred  share)  multiplied by such number or
fraction is equal to the Current Per Share  Market  Price of one Common Share as
of the date of issuance of such Preferred Shares (or equivalent preferred share)
or fraction thereof.

     (d) The Company  shall not be required to issue  fractions of Common Shares
or to distribute  certificates which evidence  fractional Common Shares. In lieu
of such  fractional  Common  Shares,  the  Company  shall pay to the  registered
holders of the Right  Certificates  with regard to which such fractional  Common
Shares would  otherwise be issuable an amount in cash equal to the same fraction
of the current  market value of a whole Common  Share.  For the purposes of this
paragraph  (d),  the current  market  value of a whole Common Share shall be the
closing price of a Common Share (as determined  pursuant to the second  sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.

SECTION 25. Notice of Certain Events.

     (a) In case  the  Company  shall  at any  time  after  the  earlier  of the
Distribution Date or the Shares Acquisition Date propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred  Shares or to make
any other  distribution  to the holders of its  Preferred  Shares  (other than a
regular quarterly cash dividend),  (ii) to offer to the holders of its Preferred
Shares  rights or  warrants  to  subscribe  for or to  purchase  any  additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options,  (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification  involving only the subdivision of outstanding Preferred
Shares),  (iv) to effect any  consolidation or merger into or with, or to effect
any sale or other  transfer  (or to permit  one or more of its  Subsidiaries  to
effect any sale or other transfer), in one or more transactions,  of 50% or more
of the assets or earning power of the Company and its  Subsidiaries  (taken as a
whole)  to, any other  Person,  (v) to effect the  liquidation,  dissolution  or
winding up of the Company,  or (vi) to declare or pay any dividend on the Common
Shares  payable  in Common  Shares or to effect a  subdivision,  combination  or
consolidation  of the Common Shares (by  reclassification  or otherwise  than by
payment of dividends in Common  Shares),  then,  in each such case,  the Company
shall give to each holder of a Right Certificate,  in accordance with Section 26
hereof,  a notice of such proposed  action,  which shall specify the record date
for the purposes of such stock dividend,  or distribution of rights or warrants,
or the  date  on  which  such  reclassification,  consolidation,  merger,  sale,
transfer, liquidation,  dissolution,  subdivision or winding up is to take place
and the date of participation therein by the holders of the Common Shares and/or
Preferred  Shares,  if any such date is to be fixed, and such notice shall be so
given in the case of any action  covered by clause (i) or (ii) above at least 10
days prior to the record date for  determining  holders of the Preferred  Shares
for purposes of such action,  and in the case of any such other action, at least
10 days prior to the date of the taking of such  proposed  action or the date of
participation  therein  by the  holders of the Common  Shares  and/or  Preferred
Shares,   whichever  shall  be  the  earlier;   provided,  that,  prior  to  the
Distribution  Date,  any  notice in regard to a  declaration  or  payment of any
dividend  on  the  Common  Shares  payable  in  Common  Shares  or to  effect  a
subdivision,   combination   or   consolidation   of  the   Common   Shares  (by
reclassification  or otherwise  than by payment of  dividends in Common  Shares)
shall be adequately  given if given within a reasonable  time after the issuance
date for such stock dividend or effective date of such subdivision,  combination
or consolidation.

     (b) In case the event set forth in Section  11(a)(ii)  or Section 13 hereof
shall occur,  then the Company shall as soon as practicable  thereafter  give to
each holder of a Right  Certificate (or if occurring  prior to the  Distribution
Date, the holders of the Common Shares), in accordance with Section 26 hereof, a
notice of the  occurrence of such event,  which notice shall describe such event
and the consequences of such event to holders of Rights under Section  11(a)(ii)
and Section 13 hereof.

SECTION 26. Notices.

     Notices or demands  authorized by this Agreement to be given or made by the
Rights  Agent or by the  holder of any Right  Certificate  to or on the  Company
shall  be  sufficiently  given  or made if sent  by  first-class  mail,  postage
prepaid,  addressed  (until another  address is filed in writing with the Rights
Agent) as follows:

         Beacon Power Corporation
         234 Ballardvale Street
         Wilmington, MA 01887
         Attention: President

     Subject  to the  provisions  of  Section  21  hereof,  any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right  Certificate to or on the Rights Agent shall be sufficiently  given
or made if sent by first-class mail,  postage prepaid,  addressed (until another
address is filed in writing with the Company) as follows:

         EquiServe Trust Company, N.A.
         150 Royall Street
         Canton, Massachusetts 02021
         Attention: Client Administration

     Notices or demands  authorized by this Agreement to be given or made by the
Company or the  Rights  Agent to the  holder of any Right  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

SECTION 27. Supplements and Amendments.

     At any time prior to the time any person becomes an Acquiring  Person,  and
subject to the last sentence of this Section 27, the Company may, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Rights Agreement in any manner which the Company may deem necessary or desirable
(including the date on which the Expiration Date or the Distribution  Date shall
occur, the amount of the Purchase Price, the definition of "Acquiring Person" or
the time during which the Rights may be redeemed pursuant to Section 23) without
the approval of any holder of Rights. From and after the time any Person becomes
an Acquiring Person, and subject to applicable law and the last sentence of this
Section  27, the  Company  may,  and the Rights  Agent  shall if the  Company so
directs,  amend this Agreement without the approval of any holders of Rights (a)
to cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or  inconsistent  with any other provision of this Rights
Agreement or (b) to otherwise  change or supplement any other provisions in this
Agreement  in any matter which the Company may deem  necessary or desirable  and
which in each such case  shall not (i)  adversely  affect the  interests  of the
holders of Rights as such (other than an  Acquiring  Person or an  Affiliate  or
Associate of an  Acquiring  Person)  (ii) cause this  Agreement  again to become
amendable  other than in accordance with this sentence or (iii) cause the Rights
again to become  redeemable.  Any supplement or amendment to this Agreement duly
approved  by the  Company  that does not amend  Section 19, 20 or 21 in a manner
adverse to the Rights Agent shall become effective immediately upon execution by
the Company,  whether or not also executed by the Rights Agent.  Notwithstanding
anything to the contrary  contained in this Rights  Agreement,  no supplement or
amendment to this Rights  Agreement  shall be made which reduces the  Redemption
Price (except in the case of an event described in Section 11(a)(i)).

SECTION 28. Successors.

     All the covenants and provisions of this Agreement by or for the benefit of
the  Company or the Rights  Agent  shall bind and inure to the  benefit of their
respective successors and assigns hereunder.

SECTION 29. Benefits of this Agreement.

     Nothing in this  Agreement  shall be  construed to give to any Person other
than the  Company,  the  Rights  Agent and the  registered  holders of the Right
Certificates  (and, prior to the Distribution Date, the Common Shares) any legal
or equitable  right,  remedy or claim under this  Agreement;  but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).

SECTION 30. Severability.

     If any term,  provision,  covenant or restriction of this Agreement is held
by a court of competent  jurisdiction or other authority to be invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions  of this Agreement  shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

SECTION 31. Governing Law.

     This Agreement and each Right Certificate  issued hereunder shall be deemed
to be a  contract  made  under  the laws of the  State of  Delaware  and for all
purposes shall be governed by and construed in accordance  with the laws of such
State  applicable  to contracts to be made and  performed  entirely  within such
State.

SECTION 32. Counterparts.

     This  Agreement may be executed in any number of  counterparts  and each of
such  counterparts  shall for all purposes be deemed to be an original,  and all
such counterparts shall together constitute but one and the same instrument.

SECTION 33. Descriptive Headings.

     Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.



<PAGE>




         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.

                            Beacon Power Corporation

                                                   by: /s/ James M. Spiezio
                                                       -----------------------
                                                       Chief Financial Officer



                            EQUISERVE TRUST COMPANY, N.A.


                                                   by: /s/ Margaret Prentice
                                                       -----------------------
                                                       Managing Director



<PAGE>
                                    EXHIBIT A



                                      FORM
                                       of
                           CERTIFICATE OF DESIGNATIONS
                                       of
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                       of
                            Beacon Power Corporation
                         (Pursuant to Section 141 of the
                        Delaware General Corporation Law)

                          ----------------------------

     Beacon Power  Corporation,  a corporation  organized and existing under the
General  Corporation  Law of the  State  of  Delaware  (hereinafter  called  the
"Corporation"),  hereby  certifies that the following  resolution was adopted by
the Board of  Directors  of the  Corporation  as  required by Section 141 of the
General Corporation Law on September 25, 2002:

     RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance  with the  provisions of the Restated  Certificate of
Incorporation,  the Board of  Directors  hereby  creates  a series of  Preferred
Stock, par value $1.00 per share, of the Corporation (the "Preferred Stock") and
hereby states the  designation  and number of shares  thereof and the voting and
other powers, preferences and relative, participating,  optional or other rights
of  the  shares  of  such  series  and  the   qualifications,   limitations  and
restrictions thereof are as follows:

         Series A Junior Participating Preferred Stock:

     Section 1.  Designation  and  Amount.  The shares of such  series  shall be
designated  as "Series A Junior  Participating  Preferred  Stock" (the "Series A
Preferred  Stock") and the number of shares  constituting the Series A Preferred
Stock shall be 1,100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of  outstanding  options,  rights or warrants or upon the conversion of
any outstanding  securities issued by the Corporation  convertible into Series A
Preferred Stock.

         Section 2.  Dividends and Distributions.

     (A)  Subject  to the  rights of the  holders of any shares of any series of
Preferred  Stock (or any similar stock) ranking prior and superior to the Series
A Preferred  Stock with respect to dividends,  the holders of shares of Series A
Preferred  Stock,  in preference to the holders of Common Stock,  par value $.01
per share (the  "Common  Stock"),  of the  Corporation,  and of any other junior
stock,  shall be entitled to receive,  when,  as and if declared by the Board of
Directors out of funds legally  available for the purpose,  quarterly  dividends
payable in cash on the first day of March, June,  September and December in each
year (each such date being referred to herein as a "Quarterly  Dividend  Payment
Date"),  commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction  of a share of Series A Preferred  Stock,  in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate  per share amount of all cash  dividends,  and 100 times the aggregate
per  share  amount  (payable  in  kind)  of  all  non-cash  dividends  or  other
distributions,  other  than a dividend  payable  in shares of Common  Stock or a
subdivision of the outstanding  shares of Common Stock (by  reclassification  or
otherwise),  declared  on the  Common  Stock  since  the  immediately  preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment  Date,  since the first  issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time declare
and pay any dividend on the Common Stock payable in shares of Common  Stock,  or
effect a subdivision or combination or consolidation  of the outstanding  shares
of Common Stock (by  reclassification or otherwise than by payment of a dividend
in shares of Common  Stock) into a greater or lesser  number of shares of Common
Stock,  then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled  immediately  prior to such event under clause (b)
of the  preceding  sentence  shall be adjusted by  multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

     (B) The Corporation  shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) of this Section immediately after
it  declares a  dividend  or  distribution  on the Common  Stock  (other  than a
dividend  payable in shares of Common  Stock);  provided  that,  in the event no
dividend or distribution shall have been declared on the Common Stock during the
period  between any  Quarterly  Dividend  Payment  Date and the next  subsequent
Quarterly  Dividend  Payment  Date,  a dividend  of $1 per share on the Series A
Preferred  Stock  shall  nevertheless  be payable on such  subsequent  Quarterly
Dividend Payment Date.

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A  Preferred  Stock  from the  Quarterly  Dividend  Payment  Date next
preceding  the date of issue of such  shares,  unless  the date of issue of such
shares is prior to the  record  date for the first  Quarterly  Dividend  Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred  Stock entitled to receive a quarterly  dividend
and before such Quarterly  Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the shares of Series A Preferred  Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a  share-by-share  basis among all such shares at the time
outstanding.  The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred  Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.

     Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:

     (A) Subject to the provision for  adjustment  hereinafter  set forth,  each
share of Series A Preferred  Stock shall entitle the holder thereof to 100 votes
on all matters  submitted to a vote of the stockholders of the  Corporation.  In
the event the  Corporation  shall at any time declare or pay any dividend on the
Common  Stock  payable in shares of Common  Stock,  or effect a  subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the  number of votes per share to which  holders of shares of Series A
Preferred Stock were entitled  immediately prior to such event shall be adjusted
by multiplying  such number by a fraction,  the numerator of which is the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

     (B)  Except as  otherwise  provided  herein,  in any other  Certificate  of
Designations  creating a series of Preferred  Stock or any similar stock,  or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the  Corporation  having  general
voting  rights  shall vote  together as one class on all matters  submitted to a
vote of stockholders of the Corporation.

     (C) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred  Stock shall have no special  voting rights and their consent
shall not be  required  (except to the  extent  they are  entitled  to vote with
holders of Common Stock as set forth herein) for taking any corporate action.

     (D) If, at the time of any annual meeting of stockholders  for the election
of  directors,  the  equivalent  of  six  quarterly  dividends  (whether  or not
consecutive)  payable on any share or shares of Series A Preferred  Stock are in
default,  the number of  directors  constituting  the Board of  Directors of the
Corporation  shall be increased by two. In addition to voting  together with the
holders of Common Stock for the election of other directors of the  Corporation,
the holders of record of the Series A Preferred  Stock,  voting  separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of stockholders),
unless all  dividends in arrears on the Series A Preferred  Stock have been paid
or declared and set apart for payment prior thereto, to vote for the election of
two directors of the  Corporation,  the holders of any Series A Preferred  Stock
being  entitled to cast a number of votes per share of Series A Preferred  Stock
as is  specified  in  paragraph  (A) of this  Section  3. Each  such  additional
director shall not be classified,  but shall serve until the next annual meeting
of stockholders  for the election of directors,  or until his successor shall be
elected and shall  qualify,  or until his right to hold such  office  terminates
pursuant to the  provisions of this Section 3(D).  Until the default in payments
of all dividends  which  permitted the election of said directors shall cease to
exist, any director who shall have been so elected pursuant to the provisions of
this  Section  3(D) may be  removed  at any  time,  without  cause,  only by the
affirmative vote of the holders of the shares of Series A Preferred Stock at the
time  entitled  to cast a  majority  of the  votes  entitled  to be cast for the
election of any such  director at a special  meeting of such holders  called for
that purpose,  and any vacancy thereby created may be filled by the vote of such
holders.  If and when such  default  shall  cease to exist,  the  holders of the
Series A  Preferred  Stock shall be divested  of the  foregoing  special  voting
rights,  subject to  revesting  in the event of each and every  subsequent  like
default in payments of dividends.  Upon the termination of the foregoing special
voting  rights,  the terms of office of all  persons  who may have been  elected
directors pursuant to said special voting rights shall forthwith terminate,  and
the number of directors  constituting the Board of Directors shall be reduced by
two. The voting rights  granted by this Section 3(D) shall be in addition to any
other voting  rights  granted to the holders of the Series A Preferred  Stock in
this Section 3.

         Section 4.  Certain Restrictions.

     (A)  Whenever  quarterly  dividends  or other  dividends  or  distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared,  on shares of Series A Preferred Stock  outstanding  shall have
been paid in full, the Corporation shall not:

     (i)  declare  or pay  dividends,  or make any other  distributions,  on any
shares of stock  ranking  junior  (either as to dividends  or upon  liquidation,
dissolution or winding up) to the Series A Preferred Stock;

     (ii)  declare or pay  dividends,  or make any other  distributions,  on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred  Stock,  except dividends
paid ratably on the Series A Preferred  Stock and all such parity stock on which
dividends  are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

     (iii) redeem or purchase or otherwise acquire for  consideration  shares of
any  stock  ranking  junior  (either  as  to  dividends  or  upon   liquidation,
dissolution  or winding up) to the Series A Preferred  stock,  provided that the
Corporation may at any time redeem,  purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon  dissolution,  liquidation or winding up)
to the Series A Preferred Stock; or

     (iv) redeem or purchase or otherwise  acquire for  consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred  Stock,  except in accordance  with a purchase  offer made in
writing or by  publication  (as  determined  by the Board of  Directors)  to all
holders  of such  shares  upon  such  terms  as the  Board of  Directors,  after
consideration of the respective  annual dividend rates and other relative rights
and  preferences of the respective  series and classes,  shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

     (B) The  Corporation  shall not permit any subsidiary of the Corporation to
purchase  or  otherwise  acquire  for  consideration  any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

     Section  5.  Reacquired  Shares.  Any  shares of Series A  Preferred  Stock
purchased  or otherwise  acquired by the  Corporation  in any manner  whatsoever
shall be retired promptly after the acquisition  thereof.  All such shares shall
upon their retirement  become  authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of  Preferred  Stock  subject to the
conditions  and  restrictions  on issuance  set forth  herein,  in the  Restated
Certificate  of  Incorporation,  or in any  other  Certificate  of  Designations
creating  a series  of  Preferred  Stock or any  similar  stock or as  otherwise
required by law.

     Section 6.  Liquidation,  Dissolution or Winding Up. Upon any  liquidation,
dissolution or winding up of the Corporation,  no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation,  dissolution or winding up) to the Series A Preferred Stock unless,
prior  thereto,  the  holders of shares of Series A  Preferred  Stock shall have
received $22.50 per share,  plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided  that the  holders  of  shares  of Series A  Preferred  Stock  shall be
entitled to receive an aggregate amount per share,  subject to the provision for
adjustment  hereinafter set forth, equal to 100 times the aggregate amount to be
distributed  per share to  holders  of shares  of  Common  Stock,  or (2) to the
holders of shares of stock  ranking on a parity  (either as to dividends or upon
liquidation,  dissolution  or  winding  up) with the Series A  Preferred  Stock,
except  distributions  made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such  liquidation,  dissolution  or winding up. Neither
the merger or  consolidation  of the Corporation into or with another entity nor
the merger or  consolidation  of any other  entity into or with the  Corporation
shall  be  deemed  to  be a  liquidation,  dissolution  or  winding  up  of  the
Corporation  within the meaning of this Section 6. In the event the  Corporation
shall at any time  declare or pay any  dividend on the Common  Stock  payable in
shares of Common Stock, or effect a subdivision or combination or  consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by  payment of a dividend  in shares of Common  Stock)  into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred  Stock were  entitled  immediately
prior to such event  under the proviso in clause (1) of the  preceding  sentence
shall be adjusted by  multiplying  such amount by a fraction  the  numerator  of
which is the number of shares of Common Stock outstanding immediately after such
event and the  denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

     Section 7. Consolidation,  Merger, etc. In case the Corporation shall enter
into any  consolidation,  merger,  combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other stock
or securities,  cash and/or any other property, then in any such case each share
of Series A Preferred  Stock shall at the same time be  similarly  exchanged  or
changed  into an amount  per  share,  subject to the  provision  for  adjustment
hereinafter  set  forth,  equal to 100  times  the  aggregate  amount  of stock,
securities,  cash and/or any other property  (payable in kind),  as the case may
be, into which or for which each share of Common Stock is changed or  exchanged.
In the event the  Corporation  shall at any time  declare or pay any dividend on
the Common Stock payable in shares of Common Stock,  or effect a subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the amount set forth in the  preceding  sentence  with  respect to the
exchange  or change of shares of Series A  Preferred  Stock shall be adjusted by
multiplying  such amount by a fraction,  the numerator of which is the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

     Section 8. No Redemption.  The shares of Series A Preferred Stock shall not
be redeemable.

     Section 9. Ranking. The Series A Junior Participating Preferred Stock shall
rank  junior to all other  series of the  Preferred  Stock as to the  payment of
dividends and as to the distribution of assets upon liquidation,  dissolution or
winding up,  unless the terms of any such series shall  provide  otherwise,  and
shall rank senior to the Common Stock as to such matters. Section 10. Amendment.
At any time that any shares of Series A  Preferred  Stock are  outstanding,  the
Certificate  of  Incorporation  of the  Corporation  shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Preferred  Stock so as to affect them  adversely  without
the  affirmative  vote of the holders of at least  two-thirds of the outstanding
shares of Series A Preferred Stock, voting separately as a single class.

     IN WITNESS WHEREOF,  this Certificate of Designations is executed on behalf
of the  Corporation  by its  President  and  attested  by its  this  25th day of
September, 2002.




         Attest: /s/ F. William Capp
                 ---------------------
                 President



<PAGE>


                                    EXHIBIT B
                            Form of Right Certificate



    Certificate No.  R- Rights

               NOT EXERCISABLE AFTER SEPTEMBER 30, 2012 OR EARLIER IF REDEMPTION
               OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01
               PER RIGHT AND TO  EXCHANGE  ON THE TERMS SET FORTH IN THE  RIGHTS
               AGREEMENT.

               UNDER  CERTAIN   CIRCUMSTANCES,   AS  SET  FORTH  IN  THE  RIGHTS
               AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR
               BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS  AGREEMENT)
               AND  CERTAIN  TRANSFEREES  THEREOF  WILL BECOME NULL AND VOID AND
               WILL NO LONGER BE TRANSFERABLE.



<PAGE>


                                Right Certificate
                            Beacon Power Corporation

     This  certifies  that  ________________,  or  registered  assigns,  is  the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement,  dated as of September 25, 2002, as the same may be amended from time
to time (the "Rights Agreement"),  between Beacon Power Corporation,  a Delaware
corporation  (the  "Company"),  and Equiserve  Trust Company,  N.A. (the "Rights
Agent"),  to purchase from the Company at any time after the  Distribution  Date
(as such term is defined in the Rights  Agreement)  and prior to 5:00 P.M.,  New
York time, on September 30, 2012 at the principal office of the Rights Agent, or
at the office of its successor as Rights Agent, ____ one-hundredth[s] of a fully
paid non-assessable share of Series A Junior Participating  Preferred Stock, par
value $1.00 per share,  of the Company (the "Preferred  Shares"),  at a purchase
price of $_______  per one  one-hundredth  of a Preferred  Share (the  "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly  executed.  The number of Rights  evidenced by this
Right Certificate (and the number of  one-hundredth's of a Preferred Share which
may be purchased upon exercise  hereof) set forth above,  and the Purchase Price
set forth above, are the number and Purchase Price as of _________, based on the
Preferred  Shares  as  constituted  at such  date.  As  provided  in the  Rights
Agreement,  the  Purchase  Price  and  the  number  of one  one-hundredths  of a
Preferred Share or other  securities or property which may be purchased upon the
exercise  of the  Rights  and the  number  of  Rights  evidenced  by this  Right
Certificate  are subject to  modification  and adjustment  upon the happening of
certain events.

     This Right  Certificate  is subject  to all of the  terms,  provisions  and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights Agent, the Company and the holders of the Right  Certificates.  Copies of
the  Rights  Agreement  are on file at the  principal  executive  offices of the
Company and the offices of the Rights Agent. The Company will mail to the holder
of this Right  Certificate a copy of the Rights  Agreement  without charge after
receipt of a written request therefor.

     This Right  Certificate,  with or without  other Right  Certificates,  upon
surrender at the  principal  office of the Rights  Agent,  may be exchanged  for
another  Right  Certificate  or  Right  Certificates  of  like  tenor  and  date
evidencing  Rights  entitling the holder to purchase a like aggregate  number of
Preferred  Shares as the  Rights  evidenced  by the Right  Certificate  or Right
Certificates  surrendered  shall have entitled such holder to purchase.  If this
Right  Certificate  shall be exercised in part,  the holder shall be entitled to
receive upon surrender  hereof another Right  Certificate or Right  Certificates
for the number of whole Rights not exercised.

     Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this Right  Certificate (i) may be redeemed by the Company at a redemption price
of $0.01 per Right or (ii) may be  exchanged  in whole or in part for  shares of
the Company's Common Stock, par value $0.01 per share.

     No  fractional  Preferred  Shares will be issued  upon the  exercise of any
Right or Rights  evidenced  hereby  (other  than  fractions  which are  integral
multiples of one one-hundredth of a Preferred Share,  which may, at the election
of the Company,  be evidenced by depositary  receipts),  but, in lieu thereof, a
cash payment will be made, as provided in the Rights Agreement.

     No holder of this Right Certificate,  as such, shall be entitled to vote or
receive  dividends  or be deemed for any  purpose  the  holder of the  Preferred
Shares  or of any  other  securities  of the  Company  which  may at any time be
issuable on the exercise or exchange hereof, nor shall anything contained in the
Rights  Agreement or herein be construed  to confer upon the holder  hereof,  as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter  submitted to  stockholders  at any
meeting thereof,  or to give or withhold consent to any corporate  action, or to
receive notice of meetings or other actions  affecting  stockholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or  Rights  evidenced  by this  Right
Certificate  shall have been  exercised  or  exchanged as provided in the Rights
Agreement.

         This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

     WITNESS the facsimile  signature of the proper  officers of the Company and
its corporate seal. Dated as of ______________.

                            Beacon Power Corporation



                              By: /s/ James M. Spiezio
                                  -----------------------
                                  Chief Financial Officer




                                   Countersigned:



                            EquiServe Trust Company, N.A.



                              By: /s/ Margaret Prentice
                                  ------------------------
                                  Managing Director



<PAGE>


                    Form Of Reverse Side Of Right Certificate

                               FORM OF ASSIGNMENT

     (To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)

     FOR VALUE  RECEIVED  __________  hereby sells,  assigns and transfers  unto
________________________________________________________________________________
________________________________________________________________
(Please print name and address of transferee)


     ________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably  constitute and appoint  _________________  Attorney, to
transfer the within Right Certificate on the books of the within-named  Company,
with full power of substitution.

         Dated:  ______________, ___

         ------------------------------------
         Signature

         Signature Guaranteed:

     Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States or by another eligible  guarantor  institution,  as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934.

     The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate are not beneficially  owned by, were not acquired by the undersigned
from,  and are not being  assigned to an  Acquiring  Person or an  Affiliate  or
Associate thereof (as defined in the Rights Agreement).


                                   ------------------------------------
                                   Signature

<PAGE>


             Form Of Reverse Side Of Right Certificate -- Continued
                          FORM OF ELECTION TO PURCHASE
              (To be executed if holder desires to exercise Rights
                     represented by the Right Certificate.)



         To:  Beacon Power Corporation

     The undersigned hereby  irrevocably  elects to exercise  ___________ Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
securities  or property)  issuable upon the exercise of such Rights and requests
that certificates for such Preferred Shares (or other securities or property) be
issued in the name of:

         Please insert social security or other identifying number

------------------------------------------------------------------------

                         (Please print name and address)

------------------------------------------------------------------------

     If such  number of Rights  shall not be all the  Rights  evidenced  by this
Right  Certificate,  a new Right  Certificate for the balance  remaining of such
Rights shall be registered in the name of and delivered to:

         Please insert social security or other identifying number

------------------------------------------------------------------------

         (Please print name and address)

------------------------------------------------------------------------

         Dated:  ___________, ___

         -----------------------------------

         Signature

         Signature Guaranteed:

     Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States or by another eligible  guarantor  institution,  as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934.



<PAGE>


             Form of Reverse Side of Right Certificate -- Continued

                              --------------------

     The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate  are not  beneficially  owned  by,  and  were  not  acquired  by the
undersigned  from, an Acquiring Person or an Affiliate or Associate  thereof (as
defined in the Rights Agreement).

                                   ------------------------------------
                                   Signature


<PAGE>

                                     NOTICE

     The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.

     In the event the certification set forth above in the Form of Assignment or
the Form of  Election to  Purchase,  as the case may be, is not  completed,  the
Company  and the  Rights  Agent  will deem the  beneficial  owner of the  Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate  thereof (as defined in the Rights  Agreement) and such  Assignment or
Election to Purchase will not be honored.



<PAGE>


                                    EXHIBIT C

                    UNDER  CERTAIN  CIRCUMSTANCES,  AS SET  FORTH IN THE  RIGHTS
                    AGREEMENT,  RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO
                    IS OR BECOMES AN ACQUIRING  PERSON (AS DEFINED IN THE RIGHTS
                    AGREEMENT) AND CERTAIN  TRANSFEREES THEREOF WILL BECOME NULL
                    AND VOID AND WILL NO LONGER BE TRANSFERABLE.



                 SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES

     On October 7, 2002 (the  "Record  Date"),  Beacon  Power  Corporation  (the
"Company") paid a dividend of one preferred share purchase right (a "Right") for
each  outstanding  share of common  stock,  par value  $0.01 per  share,  of the
Company (the "Common  Shares").  The dividend is payable to the  stockholders of
record on the Record Date. Each Right entitles the registered holder to purchase
from the Company one  one-hundredth of a share of Series A Junior  Participating
Preferred  Stock,  par value  $1.00 per share,  of the Company  (the  "Preferred
Shares") at a price of $22.50 per one  one-hundredth  of a Preferred  Share (the
"Purchase  Price"),  subject to  adjustment.  The  description  and terms of the
Rights are set forth in a Rights Agreement (the "Rights  Agreement") between the
Company and Equiserve Trust Company N.A., as Rights Agent (the "Rights Agent").

     Until the earlier to occur of (i) 10 days  following a public  announcement
that a  person  or group of  affiliated  or  associated  persons  (with  certain
exceptions,  an "Acquiring  Person") have acquired  beneficial  ownership of 15%
(or, in the case of the  Perseus  Capital,  LLC and those who own Common  Shares
through it, 30%) or more of the outstanding  Common Shares or (ii) such date, if
any, as may be designated by the Board of Directors of the Company following the
commencement  of, or first public  disclosure  of an  intention  to commence,  a
tender or exchange  offer for  outstanding  Common  Shares which could result in
such  person  or group  becoming  the  beneficial  owner of more than 15% of the
outstanding  Common  Shares (the  earlier of such dates being the  "Distribution
Date"), the Rights will not be represented by a separate  certificate,  and will
not be transferable  apart from the Common Stock, but will instead be evidenced,
(i) with  respect  to any of the shares of Common  Stock held in  uncertificated
book-entry  form (a  "Book-Entry")  outstanding  as of the Record Date,  by such
Book-Entry  and (ii) with  respect to the shares of Common  Stock  evidenced  by
Common Stock  certificates  outstanding  as of the Record  Date,  by such Common
Stock certificates, together with a copy of this Summary of Rights.

     The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares.  Until the Distribution Date (or earlier redemption
or expiration  of the Rights),  new Common Share  certificates  issued after the
Record Date upon  transfer  or new  issuance  of Common  Shares  will  contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier  redemption  or  expiration  of the Rights),  the surrender for
transfer of any  certificates  for Common  Shares  outstanding  as of the Record
Date,  even  without  such  notation or a copy of this  Summary of Rights  being
attached  thereto,  will also  constitute the transfer of the Rights  associated
with the Common Shares  represented by such certificate.  Until the Distribution
Date (or  earlier  redemption  or  expiration  of the  Rights),  transfer on the
Company's stock ownership records of Common Stock represented by a Book-Entry or
a certificate outstanding as the Record Date, and, in each case, with or without
a copy of this Summary of Rights  attached  thereto,  will also  constitute  the
transfer of the Rights  associated  with the Common  Stock  represented  by such
Book-Entry or  certificate.  As soon as practicable  following the  Distribution
Date, separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common  Shares as of the close of business on
the Distribution Date and such separate Right  Certificates  alone will evidence
the Rights.

     The Rights are not exercisable until the Distribution Date. The Rights will
expire on September  30, 2012 (the "Final  Expiration  Date"),  unless the Final
Expiration  Date is  advanced  or  extended  or unless the  Rights  are  earlier
redeemed or exchanged by the Company, in each case, as described below.

     The Purchase  Price  payable,  and the number of Preferred  Shares or other
securities  or  property  issuable,  upon  exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares; (ii) upon the grant to holders of the Preferred Shares of certain rights
or  warrants  to  subscribe  for or  purchase  Preferred  Shares at a price,  or
securities  convertible into Preferred Shares with a conversion price; less than
the  then-current  market  price  of the  Preferred  Shares  or  (iii)  upon the
distribution to holders of the Preferred  Shares of evidences of indebtedness or
assets  (excluding  regular  periodic  cash  dividends  paid out of  earnings or
retained  earnings or dividends  payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).

     The number of outstanding  Rights and the number of one one-hundredths of a
Preferred  Share  issuable  upon  exercise  of each  Right are also  subject  to
adjustment  in the  event  of a stock  split  of the  Common  Shares  or a stock
dividend  on the  Common  Shares  payable  in  Common  Shares  or  subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

     Preferred  Shares  purchasable  upon  exercise  of the  Rights  will not be
redeemable.  Each  Preferred  Share will be entitled  to a minimum  preferential
quarterly  dividend  payment  of $1.00  per  share  but will be  entitled  to an
aggregate dividend of 100 times the dividend declared per Common Share.

     In the event of  liquidation,  the holders of the Preferred  Shares will be
entitled to a minimum  preferential  liquidation payment of $22.50 per share but
will be  entitled  to an  aggregate  payment of 100 times the  payment  made per
Common Share. Each Preferred Share will have 100 votes, voting together with the
Common  Shares.  Finally,  in the event of any  merger,  consolidation  or other
transaction in which Common Shares are exchanged,  each Preferred  Share will be
entitled to receive 100 times the amount received per Common Share. These rights
are protected by customary antidilution provisions.

     Because of the nature of the Preferred  Shares'  dividend,  liquidation and
voting rights, the value of the one one-hundredth  interest in a Preferred Share
purchasable  upon exercise of each Right is intended to approximate the value of
one Common Share.

     In the event that the  Company is  acquired  in a merger or other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power are sold after a person or group has become an  Acquiring  Person,  proper
provision will be made so that each holder of a Right will  thereafter  have the
right to receive,  upon the exercise  thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company (or
its parent)  which at the time of such  transaction  will have a market value of
two times the exercise price of the Right. In the event that any person or group
of affiliated or associated persons becomes an Acquiring Person,  each holder of
a Right,  other than Rights  beneficially  owned by the Acquiring  Person (which
will thereafter be void), will thereupon have the right to receive upon exercise
that number of Common  Shares  having a market  value of two times the  exercise
price of the Right.

     At any time after any person or group becomes an Acquiring Person and prior
to the  acquisition  by such  person or group of 50% or more of the  outstanding
Common  Shares,  the Board of  Directors  of the Company may exchange the Rights
(other than Rights  owned by such person or group which will have become  void),
in whole or in part,  for shares of Common  Shares at an  exchange  ratio of one
Common Share per Right.

     With  certain  exceptions,  no  adjustment  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price. No fractional  Preferred  Shares will be issued (other than
fractions  which are  integral  multiples  of one  one-hundredth  of a Preferred
Share,  which may, at the  election of the Company,  be evidenced by  depositary
receipts) and, in lieu thereof,  an adjustment in cash will be made based on the
market price of the  Preferred  Shares on the last trading day prior to the date
of exercise.

     At any time prior to the time an Acquiring  Person  becomes such, the Board
of Directors of the Company may redeem the Rights in whole,  but not in part, at
a price of $.01 per Right (the "Redemption Price") payable, at the option of the
Company, in cash, Common Shares or such other form of consideration as the Board
of Directors of the Company shall determine. The redemption of the Rights may be
made  effective at such time on such basis with such  conditions as the Board of
Directors in its sole discretion may establish.  Immediately upon any redemption
of the Rights,  the right to exercise  the Rights  will  terminate  and the only
right of the holders of Rights will be to receive the Redemption Price.

     At any time prior to such time as there shall be an Acquiring  Person,  the
Company  may,  without the approval of any holder of the Rights,  supplement  or
amend any  provision of the Rights  Agreement  (including  the date on which the
Expiration Date or the Distribution Date shall occur, the amount of the Purchase
Price or the  definition  of "Acquiring  Person"),  except that no supplement or
amendment  shall be made that reduces the Redemption  Price of the Rights.  From
and after such time as any person or group of affiliated  or associated  persons
becomes and Acquiring  Person,  and subject to applicable  law, the Company may,
and the Rights Agent shall if the Company so directs, amend the Rights Agreement
without the  approval of any holders of Rights (a) to cure any  ambiguity  or to
correct or supplement any provision  contained  herein which may be defective or
inconsistent  with  any  other  provision  of this  Rights  Agreement  or (b) to
otherwise  change or supplement  any other  provisions in this  Agreement in any
matter which the Company may deem  necessary or desirable and which in each such
case shall not (i)  adversely  affect the  interests of the holders of Rights as
such  (other  than an  Acquiring  Person  or an  Affiliate  or  Associate  of an
Acquiring  Person)  (ii) cause the Rights  Agreement  again to become  otherwise
amendable or (iii) cause the Rights again to become redeemable.

     Until a Right is exercised or exchanged,  the holder thereof, as such, will
have no rights as a stockholder of the Company,  including,  without limitation,
the right to vote or to receive dividends.

     A copy of the  Rights  Agreement  is  available  free of  charge  from  the
Company.  This summary description of the Rights does not purport to be complete
and is qualified in its  entirety by reference to the Rights  Agreement,  as the
same may be amended form time to time,  which is hereby  incorporated  herein by
reference.