<PAGE>

                              FORBEARANCE AGREEMENT

         THIS FORBEARANCE AGREEMENT (this "AGREEMENT") is made this 19th day of
December, 2002 by and among:

         SILICON VALLEY BANK (the "LENDER"), a bank organized under the laws of
         the State of California with its principal place of business at 3003
         Tasman Drive, Santa Clara, California and with a loan production office
         located at 2221 Washington Street, Suite 200, Newton, Massachusetts
         doing business under the name "Silicon Valley East";

         SATCON TECHNOLOGY CORPORATION, SATCON POWER SYSTEMS, INC., SATCON
         APPLIED TECHNOLOGY, INC., SATCON ELECTRONICS, INC., AND SATCON POWER
         SYSTEMS CANADA LTD. (individually and collectively, jointly and
         severally, the "BORROWER"), Delaware corporations (other than Satcon
         Power Systems Canada Ltd. which is organized under the laws of the
         Province of Ontario, Canada) with offices located at 161 First Street,
         Cambridge, Massachusetts;

                                   BACKGROUND

         Reference is made to the loan arrangement maintained between the Lender
and the Borrower, evidenced by, among other things, a certain Loan and Security
Agreement dated as of September 13, 2002 (the "LOAN AGREEMENT"). Hereinafter,
the Loan Agreement, and all documents, instruments, and agreements incidental
thereto shall be referred to collectively as the "LOAN DOCUMENTS". Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
meanings as defined in the Loan Agreement.

         The Borrower has defaulted under the Loan Agreement as a result of its
failure to comply with the Capitalization Event covenant set forth in Section
5c. of the Schedule by failing to cause a Capitalization Event to occur on or
before December 1, 2002, and has requested that the Lender forbear from
exercising its rights and remedies upon default under the Loan Documents until
January 15, 2003. The Lender has agreed to forbear from enforcing its rights and
remedies upon default, but only upon the terms and conditions set forth herein.

         Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and between
the Lender and the Borrower, as follows:


                         ACKNOWLEDGMENT OF INDEBTEDNESS

         1.   The Borrower hereby acknowledges and agrees that it is
              unconditionally liable to the Lender for the following amounts in
              accordance with the terms of the Loan Documents and this
              Agreement, as of December 19, 2002:

              (a)  Revolving Loans:

                        Principal:                 $885,527.34


                                   Page 1 of 7

<PAGE>

              (b)  For any additional principal advances and all interest
                   heretofore or hereafter accruing, and all fees, penalties,
                   costs, expenses, and costs of collection (including
                   attorneys' fees and expenses) heretofore or hereafter
                   incurred by the Lender in connection with the Loan Documents.

              (c)  Hereinafter all amounts due as set forth in this Paragraph 1
                   and all other amounts payable pursuant to the terms of the
                   Loan Documents, shall be referred to collectively as the
                   "Obligations".

                                WAIVER OF CLAIMS

         2.   The Borrower hereby acknowledges and agrees that it has no
              offsets, defenses, claims, or counterclaims against the Lender, or
              its officers, directors, employees, attorneys, representatives,
              parent, affiliates, predecessors, successors, or assigns with
              respect to the Loan Documents, the Obligations, or otherwise, and
              that if the Borrower now has, or ever did have, any offsets,
              defenses, claims, or counterclaims against the Lender, or its
              officers, directors, employees, attorneys, representatives,
              parent, affiliates, predecessors, successors, or assigns, whether
              known or unknown, at law or in equity, from the beginning of the
              world through this date and through the time of execution of this
              Agreement, all of them are hereby expressly WAIVED, and the
              Borrower hereby RELEASES the Lender, and its officers, directors,
              employees, attorneys, representatives, parent, affiliates,
              predecessors, successors, and assigns from any liability therefor.

                         RATIFICATION OF LOAN DOCUMENTS

         3.   The Borrower hereby ratifies, confirms, and reaffirms all and
              singular the terms and conditions of the Loan Documents. The
              Borrower further acknowledges and agrees that, except as
              specifically modified in this Agreement, all terms and conditions
              of the Loan Documents shall remain in full force and effect.

                        LOCKBOX ACCOUNT; CASH MANAGEMENT

         4.   The Borrower has, prior to the execution of this Agreement,
              established a lockbox account (the "Lockbox") with the Lender,
              into which the Borrower has caused to be delivered all checks,
              drafts, cash and other remittances that are proceeds of the
              Collateral. Until all Obligations are paid in full and the Loan
              Agreement has been effectively terminated, the Borrower shall
              continue to maintain the Lockbox and cause such items to be
              forwarded to the Lockbox. The Lender shall credit all such
              payments (conditional upon final collection) received in the
              Lockbox against the Obligations daily in such order and manner as
              the Lender may determine to be appropriate.

                                    ADVANCES

         5.   From and after the execution of this Agreement until the
              occurrence of a Termination Event, the Lender shall, in its good
              faith business judgment, make Loans or other advances to the
              Borrower in accordance with the terms of the Loan Agreement so
              long as Borrower remains in compliance with the term and
              conditions of the Loan Agreement and this Agreement. The Borrower
              acknowledges and agrees that during the term of this Agreement,
              the Borrower shall not request Loans or other financial
              accommodations such


                                   Page 2 of 7

<PAGE>

              that the aggregate amount outstanding under the Loan Agreement
              would exceed $2,000,000 at any one time outstanding (nothing
              contained in this Section shall be deemed to limit, reduce, modify
              or otherwise affect any other term or condition of the Loan
              Agreement including, without limitation, the calculation of any
              covenant or fee set forth therein). The Borrower acknowledges and
              agrees that in the event that the Lender shall determine (in its
              good faith business judgment) to make any Loans or other advances:

              (a)  the making of such Loan or other advance by the Lender shall
                   not constitute a waiver of any Event of Default under the
                   Loan Documents, whether now existing or hereafter arising;

              (b)  any such Loan or other advance which is made by the Lender
                   shall be made pursuant to the terms and conditions of the
                   Loan Agreement and shall constitute an Obligation hereunder.

                                    REPAYMENT

         6.   Interest shall continue to accrue on the outstanding principal
              balance of the Obligations at the rate set forth in the Loan
              Documents, and the Borrower shall continue to pay all accrued
              interest, together with all other amounts which are or may become
              due under the Loan Documents, as and when due in accordance with
              the terms of the Loan Documents, unless otherwise specifically
              required by this Agreement.

                        SUPPLEMENTAL FINANCIAL REPORTING

         7.   From and after the execution of this Agreement, and in addition to
              all other financial reports required to be delivered under the
              Loan Agreement, the Borrower shall deliver such additional
              financial information to the Lender as may be requested by the
              Lender.

                          AMENDMENTS TO LOAN AGREEMENT

         8.   The Loan Agreement is hereby amended as follows:

                   (i) Section 2.1 of the Loan Agreement is hereby amended by
                   deleting the text "Notwithstanding the foregoing, the
                   Collateral does not include:" set forth therein and
                   substituting the text "The Collateral shall specifically
                   include" therefor.

                   (ii) Section 5.7 of the Loan Agreement is hereby amended by
                   adding the following sentence at the end of the Section:

                   "Silicon is hereby authorized to file such financing
                   statements, continuation statements or amendments to
                   financing statements, in any jurisdiction and with any filing
                   offices as Silicon may determine are necessary or advisable
                   to perfect the security interests granted to Silicon by the
                   Borrower".


                                   Page 3 of 7

<PAGE>

                              CONDITIONS PRECEDENT

         9.   The Borrower acknowledges and agrees that this Agreement shall not
              be effective until the following conditions have been satisfied:

                   (i) The Lender shall have received the fully executed Warrant
                   to Purchase Stock and Amendment No. 1 to Registration Rights
                   Agreement in the form attached hereto collectively as EXHIBIT
                   A and specifically incorporated by reference herein.

                   (ii) The Lender shall have received the fully executed
                   Intellectual Property Security Agreements in the form
                   attached hereto collectively as EXHIBIT B and specifically
                   incorporated by reference herein.

                   (iii) The Lender shall have received resolutions of the
                   Borrower authorizing the execution, delivery and performance
                   of this Agreement and all transactions contemplated hereby,
                   in form and substance satisfactory to the Lender.

                              FORBEARANCE BY LENDER

         10.  In consideration of the Borrower's performance in accordance with
              each and every term and condition of this Agreement, the Lender
              shall forbear from enforcing the Lender's rights and remedies as a
              result of the Borrower's default under Section 5.c of the Schedule
              to the Loan Agreement and Borrower's probable default under
              Section 5.a (i)(b) of the Schedule to the Loan Agreement until the
              occurrence of a Termination Event. The Borrower (i) acknowledges
              that such Events of Default have occurred under the Loan
              Documents, and (ii) agrees that nothing contained in this
              Agreement shall constitute a waiver by the Lender of such Events
              of Default. This Agreement shall only constitute an agreement by
              the Lender to forbear from enforcing its rights and remedies based
              upon the existing Events of Default referenced above upon the
              terms and conditions set forth herein. In consideration for such
              agreement to forbear, the Borrower shall pay to the Lender a
              forbearance fee in the amount of $50,000.00, which fee shall be
              (i) deemed fully earned upon the execution of this Agreement, (ii)
              retained by the Lender as a fee and not applied against the
              Obligations, and (iii) payable as follows: (a) $25,000.00 upon the
              execution of this Agreement, and (b) $25,000.00 on or before
              January 15, 2003.

                     ADDITIONAL EQUITY/SUBORDINATE FINANCING

         11.  The Borrower has advised the Lender that it intends to obtain and
              close upon additional unsecured, subordinated financing and/or
              issuance and sale of securities of the Borrower in accordance with
              the following timeframes:

                   (i) Furnish the Lender with a fully executed term sheet for
                   an additional $3,000,000.00 in equity or subordinated debt
                   financing, on terms and conditions satisfactory to the
                   Lender, on or before December 19, 2002; and

                           (ii) Cause a Capitalization Event to occur on or
                  before January 15, 2003.


                                   Page 4 of 7

<PAGE>

                   In the event the Borrower does not receive $4,000,000.00 from
                   the issuance and sale of equity securities of the Borrower
                   and/or the incurrence of subordinated debt financing on terms
                   and conditions satisfactory to the Lender on or before
                   January 15, 2003, the Borrower shall pay to the Lender an
                   additional fee of $10,000.00 on January 16, 2003 and on the
                   Monday of each week thereafter (the "Additional Fees") for so
                   long as any amounts remain outstanding under the Loan
                   Agreement. The Additional Fees shall be deemed earned as of
                   the date hereof and the acceptance of any such Additional
                   Fees shall not constitute an agreement on the part of the
                   Lender to forbear from exercising its rights and remedies
                   beyond the Termination Date.

                               TERMINATION EVENTS

         12.  The occurrence of any one or more of the following events shall
              constitute a termination event (each a "TERMINATION EVENT") under
              this Agreement:

              (a)  January 15, 2003;

              (b)  The failure of the Borrower to maintain a minimum Adjusted
                   Tangible Net Worth of at least $15,500,000.00 as of November
                   30, 2002.

              (c)  The failure of the Borrower to promptly, punctually, or
                   faithfully perform any term or condition of this Agreement as
                   and when due, including, without limitation, compliance with
                   each event set forth herein, on or before dates set forth
                   herein, it being expressly acknowledged and agreed that TIME
                   IS OF THE ESSENCE;

              (d)  The failure of the Borrower to pay any amount required to be
                   paid to the Lender under this Agreement or any of the Loan
                   Documents as and when due, it being expressly acknowledged
                   and agreed that TIME IS OF THE ESSENCE;

              (e)  The occurrence of any further Event of Default under the Loan
                   Documents.

                             RIGHTS UPON TERMINATION

         13.  Upon the occurrence of any Termination Event:

              (a)  The agreement of the Lender to forbear as set forth in this
                   Agreement shall automatically terminate and the Lender may
                   immediately commence enforcing its rights and remedies
                   pursuant to the Loan Documents, and otherwise, in such order
                   and manner as the Lender may determine appropriate; and

              (b)  All Obligations shall be immediately due and payable in full,
                   without demand, notice, or protest, all of which are hereby
                   expressly WAIVED.


                 REIMBURSEMENT OF COSTS AND COSTS OF COLLECTION

         14.  The Borrower shall immediately reimburse the Lender for any and
              all costs, expenses, and costs of collection (including reasonable
              attorneys' fees and expenses) incurred by the Lender in connection
              with the protection, preservation, and enforcement by the


                                   Page 5 of 7

<PAGE>

              Lender of its rights and remedies under the Loan Documents,
              including, without limitation, the negotiation and preparation of
              this Agreement.

                                     WAIVERS

         15.  JURY TRIAL. The Borrower hereby makes the following waiver
              knowingly, voluntarily, and intentionally, and understands that
              the Lender, in entering into this Agreement or making any
              financial accommodations to the Borrower, whether now or in the
              future, is relying on such a waiver: THE BORROWER HEREBY
              IRREVOCABLY WAIVES ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY
              TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE LENDER BECOMES A
              PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST
              THE LENDER OR IN WHICH THE LENDER IS JOINED AS A PARTY LITIGANT),
              WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, ANY
              RELATIONSHIP BETWEEN THE BORROWER, OR ANY OTHER PERSON, AND THE
              LENDER.

                                ENTIRE AGREEMENT

         16.  This Agreement shall be binding upon the Borrower and the
              Borrower's respective employees, representatives, successors, and
              assigns, and shall inure to the benefit of the parties and their
              successors and assigns. This Agreement and all documents,
              instruments, and agreements executed in connection herewith
              incorporate all of the discussions and negotiations between the
              Borrower and the Lender, either expressed or implied, concerning
              the matters included herein and in such other documents,
              instruments and agreements, any statute, custom, or usage to the
              contrary notwithstanding.

                            CONSTRUCTION OF AGREEMENT

         17.  In connection with the interpretation of this Agreement and all
              other documents, instruments, and agreements incidental hereto:

              (a)  All rights and obligations hereunder and thereunder,
                   including matters of construction, validity, and performance,
                   shall be governed by and construed in accordance with the law
                   of the Commonwealth of Massachusetts and are intended to take
                   effect as sealed instruments.

              (b)  In the event of any inconsistency between the provisions of
                   this Agreement and any other document, instrument, or
                   agreement entered into by and between the Lender and the
                   Borrower, the provisions of this Agreement shall govern and
                   control.

                         ILLEGALITY OR UNENFORCEABILITY

         18.  Any determination that any provision or application of this
              Agreement is invalid, illegal, or unenforceable in any respect, or
              in any instance, shall not affect the validity, legality, or
              enforceability of any such provision in any other instance, or the
              validity, legality, or enforceability of any other provision of
              this Agreement.


                                   Page 6 of 7

<PAGE>

                               INFORMED EXECUTION

         19.  The Borrower warrants and represents to the Lender that the
              Borrower has read and understands all of the terms and conditions
              of this Agreement, intends to be bound by the terms and conditions
              of this Agreement, and is executing this Agreement freely and
              voluntarily, without duress, after consultation with independent
              counsel of its own selection.

         IN WITNESS WHEREOF, this Agreement has been executed this 19th day of
December, 2002.

                     "BORROWER"

                     SATCON TECHNOLOGY CORPORATION

                     By:/s/ RALPH M. NORWOOD
                        -------------------------------------------

                     Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           -----------------------------------------------


                     SATCON POWER SYSTEMS, INC.

                     By:/s/ RALPH M. NORWOOD
                        -------------------------------------------

                     Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           -----------------------------------------------


                     SATCON APPLIED TECHNOLOGY, INC.

                     By:/s/ RALPH M. NORWOOD
                        -------------------------------------------

                     Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           -----------------------------------------------

                     SATCON ELECTRONICS, INC.

                     By:/s/ RALPH M. NORWOOD
                        -------------------------------------------

                     Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           -----------------------------------------------


                     SATCON POWER SYSTEMS CANADA LTD

                     By:/s/ RALPH M. NORWOOD
                        -------------------------------------------

                     Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           -----------------------------------------------


                     "LENDER"

                     SILICON VALLEY BANK

                     By:/s/ JOHN K. PECK
                        --------------------------------------------------

                     Title:VICE PRESIDENT
                           -----------------------------------------------


                                   Page 7 of 7