EXHIBIT 10.27

                                        Confidential    treatment    has    been
                                        requested for portions of this document,
                                        deleted portions are blacked out.
                                                    Represented by
                                                        [***]

                                    AGREEMENT



                                 by and between


                         FUEL CELL ENERGY, INC. ("FCE")


                     (Formerly Energy Research Corporation)



                                       and



                         MTU MOTOREN-UND TURBINEN-UNION

                          FRIEDRCHSHAFEN GmbH ("MTU")


                 (Successor to Messerschmitt-Bolkow-Blohm GmbH)





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This  Agreement  is made and  entered  into  this 15 th day of Dec.,  1999  (the
Effective Date) by and between FCE and MTU.

                                     WHEREAS

FCE and MTU presently are parties to the Balance of Plant  Cross-License of July
16,1998 (the BOP CROSS-LICENSE), and the License Agreement of September 29, 1989
(the  PREVIOUS  LICENSE)  which is  superseded  by this  Agreement  (the  "CELL
LICENSE").

FCE has developed  Carbonate  Fuel Cell  technologies  known as the "Direct Fuel
Cell  (TM)"  (DFC(TM))  including  fuel cell  stacks,  components  thereto,  and
manufacturing methods, processes and procedures thereto.

FCE intends to continue  development  of the DFC(TM) Know How (as defined below)
and provide the results to MTU in accordance with Article V below.

FCE  has  established  a  fuel  cell   manufacturing   facility  in  Torrington,
Connecticut, USA which is capable of providing reasonable DFC(TM) cell and stack
production requirements for both FCE and MTU.

FCE and MTU  retain  the  right  to  independently  pursue  the  development  of
Carbonate Fuel Cell  technologies as each Party sees fit at its sole discretion.
Notwithstanding  this  right,  FCE and MTU shall  endeavor  to develop  the best
Carbonate Fuel Cell  technology  with as much global  product  commonality as is
reasonable.

MTU plans to develop the [***] CELL (as defined below) and may provide the [***]
CELL Know How to FCE in a license to be negotiated.

MTU's sales or licenses of carbonate fuel cell power plants using the [***] CELL
are  subject to and not exempt  from the  royalties  owed to FCE under this Cell
License  Agreement so long as the [***] CELL uses  DFC(TM) Know How.  [***] CELL
Know How developed by MTU is not subject to the Cell License  Agreement  even if
one or more [***] CELL elements are developed in parallel by FCE.

MTU has,  under the Previous  License,  developed  Existing  Carbonate Fuel Cell
improvements (EXISTING IMPROVEMENTS) as defined below, which have or may be used
by FCE hereunder.

FCE and MTU agree to work in the spirit of a fair partnership between equals and
each Party  acknowledges the intellectual  property  contributions and rights of
the other Party.

FCE  warrants,  represents  and agrees that it has the capacity and authority to
grant the licenses hereunder and to be bound by the terms of this CELL LICENSE.

MTU  warrants,  represents  and agrees that it has the capacity and authority to
grant the licenses hereunder and to be bound by the terms of this CELL LICENSE.

The  substance of those terms of the  Previous  License  which were  intended to
survive the termination of the Previous License have been incorporated herein.


<PAGE>


                                    THEREFORE

In consideration of the mutual covenants  contained herein, FCE and MTU agree as
follows:

Article I - Definitions

1.   The  term  "DIRECT   FUELCELL(TM)   (DFC(TM))"  means  a  molten  carbonate
     electrochemical  device,  in  cell or  stack  form,  for use in  converting
     hydrocarbon  or  any  other   appropriate  fuel  or  fuel  mixtures  by  an
     electrochemical  reaction into  electricity;  said device  representing the
     current  state  of the  art  achieved  by FCE at the  signing  date of this
     Agreement and  presently  being  characterized  by, but not limited to, the
     following:

     o    bipolar plate with integral wet seal area

     o    corrugated steel anode and cathode collectors

     o    porous nickel oxide cathode,  manufactured by  dry-doctoring of nickel
          powder

     o    porous  nickel-aluminum  anode,  manufactured  by organic solvent tape
          casting

     o    reaction bonded matrix, manufactured by organic solvent tape casting

     o    extruded  reforming  catalyst  integrated  into the  corrugated  anode
          current collector

     o    reforming units for the indirect internal reforming of fuel

     The term DFC(TM) includes individual components and materials and all such
components and materials collectively when used in fuel cell stacks.

2.   [***]

3.   The term "RATING" means the minimum rating of the electrical  output of the
     DFC(TM)  in  kilowatts  at an  average  voltage  of 0.70  volts per cell as
     determined after a 100 hour uninterrupted acceptance test.


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4.   a. The term  "DFC(TM)  KNOW-HOW"  means  any and all  information  (whether
     patented,  patentable or not) of FCE in respect of DFC(TM)  including,  but
     not  by  way  of  limitation,   laboratory  and   manufacturing   data  and
     developments,    engineering   and   processing   information,    drawings,
     descriptions and specifications,  which presently and/or during the life of
     this  CELL  LICENSE  are or  may be  useful  in  the  design,  development,
     manufacture  and/or use of DFC(TM) and are known to and/or possessed and/or
     acquired  by FCE  during  the life of this  CELL  LICENSE,  subject  to any
     obligations on the part of FCE to maintain information of (either developed
     by or for) third parties  confidential  and excluding  information of third
     parties obtained under other agreements.

     4.b. The term [***] CELL KNOW-HOW" means any and all  information  (whether
     patented, patentable or not) of MTU in respect of [***] CELL including, but
     not  by  way  of  limitation,   laboratory  and   manufacturing   data  and
     developments,    engineering   and   processing   information,    drawings,
     descriptions and specifications,  which presently and/or during the life of
     this  CELL  LICENSE  are or  may be  useful  in  the  design,  development,
     manufacture  and/or use of the [***] CELL and are known to and/or possessed
     and/or acquired by MTU during the life of this CELL LICENSE, subject to any
     obligations on the part of MTU to maintain information of (either developed
     by or for) third parties  confidential  and excluding  information of third
     parties obtained under other agreements.

5.   The term"PATENT RIGHTS" means severally and collectively:

     a.   Any and all patents presently owned and patent  applications owned and
          filed presently  and/or during the life of this CELL LICENSE by FCE or
          MTU in any country of the Exclusive Territory  describing and claiming
          DFC(TM)

     b.   Any and all patents to issue on or result from the patent applications
          included in Section 5.a. above; and

     c.   Any and  all  reissues  and  extensions  of any  and all of the  above
          patents.

6.   The term "EXISTING  IMPROVEMENTS"  means any and all  information  (whether
     patented,  patentable or not) of MTU and/or its  Affiliates,  in respect of
     DFC(TM) products  including,  but not by way of limitation,  laboratory and
     manufacturing   data   and   developments,   engineering   and   processing
     information,  drawings, descriptions, and specifications,  which are or may
     be useful in the design, development and/or manufacture of DFC(TM) known to
     and/or  possessed  and/or  acquired by MTU during the life of the  Previous
     License  Agreement,  subject  to  any  obligations  on the  part  of MTU to
     maintain  information  of third  parties  confidential,  including  but not
     limited to:

     o    Water based slurry systems,

     o    Double layer cathode,

     o    High  Velocity  Oxygen  Flame  (HVOF)  aluminizing  of  wet  seals,  o
          Multi-layer protection for Anode Current Collectors, and

     o    Thermal   treatment  of  Cathode   Current   Collectors  for  improved
          conductivity.

7.   The term  "EXCLUSIVE  TERRITORY"  shall mean:  (i) the countries of Western
     Europe,  Eastern  Europe and the Middle East as set forth in Parts A, B and
     C,  respectively,  of  Schedule  1 which is  attached  hereto and made part
     hereof.

8.   The term  "EXCLUSIVE"  shall  mean that the  granting  party  shall have no
     further right to grant to third  parties the same or any other  licenses in
     respect of such Patents and/or Know-How and itself retains no such licenses
     or other rights in respect of same, in the


<PAGE>

field of use and  geographic  area  covered  by, and for the term of, the grant,
unless such licenses or rights are specifically  retained herein, as provided in
Article II Section 6 below.

9.   The term"NON-EXCLUSIVE TERRITORY" shall mean the countries of South America
     and Africa.

10.  The  term  "NON-EXCLUSIVE"  shall  mean,  when  used in  connection  with a
     specific grant of a license under Patents and/or Know-How  hereunder,  that
     the  granting  party  may grant  the same or any  other  licenses  to third
     parties in respect of such Patents and/or Know-how,  and itself retains for
     itself as  provided in Article II Section 6 below such  licenses  and other
     rights in respect of same, in the field of use and geographic  area covered
     by, and for the term of, the grant.

11.  The term "AFFILIATE" shall mean any entity in which FCE or MTU respectively
     own at least  30% of the  equity or any  entity  which is owned by or under
     common ownership with FCE or MTU respectively.

12.  The term  "CONSORTIUM  or  CONSORTIA"  shall mean an agreement  between MTU
     (including  Affiliates  as  the  case  may  be)  and  one or  more  non-MTU
     affiliates for exploiting the development, manufacture, use and sale of the
     DFC(TM) Know How.

13.  The term  "COMPETITOR"  shall mean a business  rival of FCE or MTU which is
     selling  or  planning  to sell  fuel  cell  power  plants to FCE's or MTU's
     intended carbonate fuel cell power plant customers.

Article II  - Licenses

1.   FCE hereby grants to MTU an Exclusive license, with the right to sublicense
     as provided in Article II Section 7 (the DFC(TM) License) to sell, develop,
     make or have made,  use and/or  practice  FCE's  DFC(TM)  Patent Rights and
     DFC(TM) Know How in the Exclusive Territory.  FCE also hereby grants to MTU
     a Non-Exclusive  license, to sell,  develop,  make or have made, use and/or
     practice   FCE's  DFC(TM)  Patent  Rights  and  DFC(TM)  Know  how  in  the
     Non-Exclusive Territory.

2.   MTU hereby  agrees to  negotiate in good faith the grant of [***] CELL KNOW
     HOW  licenses  for  territories  to be  defined  and for  royalty  payments
     discussed  under Article IV, once the [***] CELL KNOW HOW is  substantiated
     and ready for commercialization.

3.   MTU hereby grants to FCE an Exclusive  royalty-free license, with the right
     to   sublicense   as  provided  in  Article  II  Section  8  (the  Existing
     Improvements License), to sell, use, make or have made, use and/or practice
     the Existing Improvements anywhere except the MTU exclusive territory.

4.   MTU may convert the DFC(TM) License to a  Non-Exclusive  DFC(TM) License at
     its  sole  option  at the end of each  succeeding  calendar  year  from the
     effective date of this CELL LICENSE,  upon thirty (30) days prior notice to
     FCE. In such case,  royalties shall be revised in accordance with Article V
     below.  MTU shall  continue  to have  access  to the  DFC(TM)  Patents  and
     Know-how  if the  license  becomes  non-exclusive,  however  MTU's right to
     sub-license shall terminate per Article II Section 7 below.

5.   This DFC(TM)  license is subject to existing and future  commitments by FCE
     to the United States Government and the Electric Power Research  Institute,
     and is subject  to the  applicable  export  controls  of the United  States
     Government in effect at the time of exercise of the license by MTU.

<PAGE>

6.   FCE retains a Non-Exclusive  right to make, have made, use,  develop and/or
     sell and have sold DFC(TM) products under the Patent Rights and/or Know-how
     in South America and Africa alone or jointly with third parties (including,
     without limitation, joint ventures,  partnerships and any other contractual
     arrangements).

7.   MTU  sub-licenses  of FCE's DFC(TM)  Patent Rights and Know How may only be
     granted upon prior  written  approval by FCE (except to MTU's  Affiliates).
     Approval  of MTU  sub-licenses  granted to  Consortia  members  who are not
     members of the existing  Consortium  comprising the companies Ruhrgas,  RWE
     Energie,  Elkraft  and Haldor  Topsoe,  may be withheld by FCE in the event
     that the Consortia member is a Competitor of FCE, which shall be determined
     in FCE's sole and exclusive discretion. In the event the license granted in
     Article II  Section 1 becomes  Non-Exclusive  (i) any and all  sub-licenses
     granted by MTU shall  become  Non-Exclusive;  and (ii) MTU's right to grant
     further sub-licenses shall terminate.

8.   FCE  sub-licenses  of MTU's  Existing  Improvements  do not  require  prior
     written  approval by MTU except if this  sub-license is planned with an MTU
     Competitor   which  shall  be   determined  in  MTU's  sole  and  exclusive
     discretion.

9.   MTU agrees to use its best efforts and to diligently  promote the marketing
     of DFC(TM) Products in their territory.

10.  MTU hereto contemplates  establishing  marketing,  distribution and service
     agreements  with  third  parties  in  their  Exclusive  territory.   It  is
     understood that each such agreement shall require notification of the other
     Party only, notwithstanding Article II Section 7 above.

Article III - DFC(TM) Selling

1.   It is  understood  by the Parties that the DFC(TM)  License is based on and
     includes the selling of DFC(TM) stacks and components by FCE to MTU.

2.   FCE agrees to sell MTU DFC components  and stacks.  The price to be charged
     to MTU by FCE shall be equal to FCE's direct and indirect costs  determined
     in accordance with the Federal Acquisition  Regulation Part 31 plus a [***]
     ([***] %) fee. At the  beginning  of each  fiscal  year FCE will  establish
     Overhead and G&A rates as part of its budgeting process.  MTU will agree in
     advance as to the volume and timing of  production  which has been included
     for  their  orders  in the FCE  budget . The  budgeted  rates  will then be
     "fixed" for  purposes of all billing to MTU for DFC  components  and stacks
     purchased  during that fiscal year.  FCE will be at risk for any  deviation
     from these fixed rates.  If MTU modifies the volume and/or the schedule for
     their work then MTU shall bear the changes in  Manufacturing  Overhead  and
     G&A rates resulting from these modifications

Article IV - Payments

1.   The license fee set forth in the Previous License Agreement is cancelled.

2.   MTU shall pay FCE a royalty of [***]  dollars  ($[***])  for the  Exclusive
     DFC(TM)  License for each  kilowatt  of Rating  upon  shipment of any power
     plant in the  Exclusive  Territory  which  utilizes  the  licensed  DFC(TM)
     products  made by or for MTU,  used by, sold by or for MTU or leased by MTU
     and/or any  sub-licensee  to MTU. In the event MTU  exercises  its right to
     convert the DFC(TM)  license in the Exclusive  Territory to a Non-Exclusive
     License and for all shipments into the Non-Exclusive Territory, the above


<PAGE>

royalty  shall be reduced to [***]  ($[***]).  Escalation  shall be applied  per
Article IV Section 4 below.

3.   MTU shall pay a minimum annual royalty based on the following:

     a.   for the Exclusive  DFC(TM) License the greater of $[***], or the [***]
          per kilowatt ($[***]) royalty rate per Article IV Section 2 above with
          escalation  calculated  per  Article IV Section 4 below times [***] of
          the total kilowatts of United States,  Canada and Mexico  shipments of
          DFC(TM) products, or

     b.   for the  Non-Exclusive  DFC(TM) License the greater of $ [***], or the
          [***] per  kilowatt  ($[***])  royalty  rate per  Article IV Section 2
          above with escalation  calculated per Article IV Section 4 below times
          [***] of the total  kilowatts  of United  States,  Canada  and  Mexico
          shipments of DFC(TM) products, and

     c.   This minimum royalty shall be offset as a credit against actual future
          royalties owed by MTU to FCE per Article IV Section 2 above.

4.   The  royalty  payment  rates set forth in Article IV Section 2 and 3 above,
     shall be adjusted by the increase in the United States Consumer Price Index
     (CPI) from September,  1999 to the date of each sale, based on the ratio of
     the CPI as of September, 1999 compared to the CPI at the month of the sale.
     This adjustment shall be subject to a limit of increase per year of 7%.

5.   All payment required under this Article IV shall be made within thirty (30)
     days of the close of the calendar quarter of each year of this CELL LICENSE
     Agreement.

6.   The  Parties  agree to  negotiate  in good  faith the terms of a [***] CELL
     license based on the proportion of [***] CELL Know How and DFC(TM) Know How
     and related benefits.

Article V - DFC(TM) KNOW HOW

1.   FCE shall provide MTU all information embodying DFC(TM) Know How during the
     life of this CELL LICENSE upon a time schedule and in accordance with MTU's
     requirements as mutually agreed by the Parties.

2.   MTU agrees to control and treat as secret and  proprietary any DFC(TM) Know
     How received from FCE. MTU shall develop and implement  such  procedures as
     may be required to prevent the intentional or negligent disclosure to third
     parties of any DFC(TM) Know How  communicated  by FCE. The following  shall
     not  be  considered  or  treated  as  secret  and  proprietary  under  this
     provision:

     2.1  any DFC(TM)  Know How that has been or become  published  or generally
          known to the trade of others without breach or fault of MTU,

     2.2  any DFC(TM) Know How received  prior to the  disclosure of FCE legally
          by MTU from any third party who, to the best of MTU's knowledge, after
          reasonable  inquiry,  did not obtain same by breach of any  obligation
          owed to FCE,  and who  imposes  no  obligation  of secrecy on MTU with
          respect to such any DFC(TM) Know How.

3.   Any  rights  of FCE  related  to its  DFC(TM)  Know  How  remain  with  FCE
     regardless of any contributions of MTU related to the DFC(TM) Know How.

<PAGE>

Article VI - Existing Improvements

1.   MTU has provided the  Existing  Improvements  to FCE as of the date of this
     Agreement, in accordance with the terms of the Previous License.

2.   The term "Existing  Improvements" shall not be deemed to include technology
     independently owned, developed, purchased or licensed by any MTU Consortium
     member or Affiliate,  unless such  technology is developed and intended for
     use by any such member or Affiliate  as  Improvements  to the  manufacture,
     sale or use of  DFC(TM)  products  licensed  hereunder.  In the  event  FCE
     desires to use such technology which was not developed and intended for use
     as an  Improvement,  FCE must  separately  license such technology from its
     owner.

Article VII - Records, Reports and Notices

MTU shall keep  separate  records of sales and use of any DFC(TM)  products  and
shall report to FCE on a quarterly basis.  Such records shall include records of
sub-licensees as applicable.

Notices under this CELL LICENSE shall go to the respective  signers of this CELL
LICENSE Agreement or their successors.

Article VIII - Term, Termination

1.   The DFC(TM) Licenses in Article II, Section 1 shall terminate at the end of
     5 (five) years from the effective date of this CELL LICENSE  Agreement (the
     "Initial Term"). MTU shall have the right to extend the Initial Term of the
     DFC(TM)  Licenses  for an  additional  5 (five)  year  period by giving FCE
     advance  written notice of extension not less than 180 (one hundred eighty)
     days  prior  to  expiration  of the  Initial  Term  of  this  CELL  LICENSE
     Agreement.  Any extension  after a term of 10 years needs mutual consent of
     the Parties related to terms and conditions.  The Parties endeavor to reach
     such consent 9 months prior to expiration of the CELL LICENSE Agreement.

2.   Upon termination of this CELL LICENSE Agreement MTU shall continue to enjoy
     in perpetuity  FCE's  DFC(TM)  Licensed Know How as set forth in Article II
     hereof  with  respect  to  patent  rights  owned  by FCE as of the  date of
     termination  and with respect to know how required to be provided to MTU to
     the date of  termination,  provided  that such  licenses  and rights  shall
     automatically  be  converted  from  Exclusive to  Non-Exclusive  rights and
     licenses  and provided  that MTU shall pay a royalty at the full  exclusive
     rate specified in Article IV Section 2 ($[***] /kW Rating) plus  escalation
     as  specified  in  Article IV Section 4, but  without  any  minimum  annual
     royalty requirement.

3.   Upon termination hereunder,  all DFC(TM) Licensed Know How shall be held in
     confidence  by MTU for 15  (fifteen)  years after the date of  termination,
     unless exempt by Article V, Section 2.1 and/or 2.2.

4.   In case  one  Party  fails to  perform  any of its  obligations  hereunder,
     including without  limitation,  the failure to pay the royalties defined in
     Article IV, the other Party claiming  default may notify the first Party in
     writing of such default.

     4.1  In the  case  of a  material  or a  non-material  default,  the  Party
          claiming  default  shall  have the right to treat  this  CELL  LICENSE
          Agreement  as in full  force and effect  and to take  proper  steps to
          enforce compliance.

<PAGE>

     4.2  In the case of a material  default,  the Party claiming  default shall
          have the further option to terminate this CELL LICENSE.

     4.3  In either event the Party  claiming  default shall also have the right
          to recover  any sums  payable  hereunder  and any  damages  for breach
          hereof.

     4.4  In case the Party  claiming  default so elects to terminate  this CELL
          LICENSE  Agreement,  it shall  first send to the other  Party  written
          notice of its  intention,  together with a statement as to the grounds
          upon which the intended  action is based. If within a period of ninety
          (90) days  after  such  notice  the  other  Party  shall  have met the
          objections  presented and shall have  complied with the  provisions of
          this CELL  LICENSE  Agreement,  then the notice  shall become null and
          void and of no effect and the other  Party shall not be obliged to pay
          any damages;  otherwise,  the notice shall remain  effective  and this
          CELL LICENSE  Agreement shall cease and terminate at the expiration of
          such period.

5.   In the event  either  Party is  adjudicated  a  bankrupt  and can no longer
     fulfill its obligations under this CELL LICENSE Agreement, the non-bankrupt
     party shall have a right to  terminate  this CELL  LICENSE  Agreement  upon
     giving the bankrupt party fifteen (15) days advance  written notice of such
     termination.

6.   In case of a [***] CELL License  grant under Article II Section 2 the rules
     set forth under Article VIII Section 1 to 5 above will apply accordingly.

7.   Upon natural expiration of this CELL LICENSE at the end of the Initial Term
     or any extended term under Article VIII Section 1, so long as FCE continues
     to  utilize  MTU  Existing  Improvements  provided  pursuant  to Article VI
     hereto, MTU shall provide FCE with a comprehensive list of the Improvements
     of MTU's employees  giving rise to the obligation on the part of MTU to pay
     employee  royalties  under German law. FCE shall  promptly pay quarterly to
     MTU  sixty-five  Cents  ($0.65)  per  kilowatt  Rating plus  escalation  as
     specified in Article IV Section 4, for each DFC(TM)  Product made using one
     or more  Improvements  of MTU's employees and made by or for, used by, sold
     by or for or leased by FCE, its  permitted  sublicensees  under this or its
     other   permitted   third  parties  under  this  (the   "Employee   Royalty
     Reimbursement Payment") for all periods from and after such expiration.

Article IX - Arbitration, Governing Law

1.   Should any  dispute,  controversy  or claim  arise  between  FCE and MTU in
     connection with,  relating to or rising out of this CELL LICENSE Agreement,
     efforts to resolve such an issue shall be made by the  respective  Parties.
     If a resolution  is not  achieved,  either Party may refer the issue to the
     executive  officers of FCE and MTU, who shall  endeavor to reach a mutually
     acceptable resolution.

2.   In the event an  acceptable  resolution  is not reached  within thirty (30)
     days of the  request  to the  officers  made per  Article IX Section 1, the
     Parties shall submit the dispute to nonbinding  mediation  with a certified
     mediator to be mutually  agreed upon by the Parties.  Each Party shall bear
     its own expenses (including attorneys' fees) for such mediation proceeding.

3.   In the event an  acceptable  resolution  is not reached  within thirty (30)
     days of the initiation of mediation  proceedings  per Article IX Section 2,
     then the issue  shall be  submitted  to  arbitration  before  the  American
     Arbitration  Association  in  accordance  with the  Rules  of the  American
     Arbitration Association then in effect. The arbitration shall take place in
     the


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     County and State of New York,  U.S.A. and the substantive law applicable to
     the  arbitration  shall  be that  of the  State  of New  York,  U.S.A.  The
     arbitration  award shall be final and binding upon the parties.  Such award
     may be  confirmed  in any court  having  jurisdiction  and reduced to final
     judgment.

Article X - Infringements

1.   In the event of an  infringement  by a third party against any claim of any
     DFC(TM)  patent  licensed  hereunder,  or  in  the  event  of  a  claim  of
     infringement  against either Party for use of any such patent,  the Parties
     shall each have the right to undertake  appropriate legal action or defense
     in their own name,  or if so  required  by law,  in the name of the  patent
     owner. The Party to such action shall have the full cooperation and support
     of the other Party,  including for example,  access to records and employee
     testimony as needed and shall provide full  communication  of the status of
     such action.

2.   Each Party hereunder shall be responsible for its own legal and other costs
     in case of an infringement suit brought by a Party hereunder.

3.   The Party  owning  the  Patent  against  which a claim of  infringement  is
     brought shall always be responsible for legal costs of defending  against a
     claim  of  infringement  (i.e.  FCE  shall be  responsible  for the cost of
     defending  an  infringement  suit  against  MTU  regarding  MTU's use of an
     FCE-owned  European  patent,  and MTU shall be responsible  for the cost of
     defending  an  infringement  suit  against  FCE  regarding  FCE's use of an
     MTU-owned U.S. patent).

4.   In the event of an award of damages  resulting from any  infringement  suit
     brought by FCE or MTU, the Parties shall mutually agree on division of such
     award.

5.   Neither Party may consent to settlement of any  infringement  claim against
     itself if such  settlement  would result in  elimination or decrease of any
     patent  rights  owned by the other  party  without the consent of the other
     Party.

6.   In the  event a  patent  infringement  suit  results  in a  final  judicial
     decision or settlement  resulting in damages  charged  against either Party
     for use of the other Party's  patents,  the Patent owner shall be obligated
     to share in such  damages at 50% of the total  damage award up to a maximum
     of $250,000 in total.

7.   The provisions of this Article X shall survive the termination of this CELL
     LICENSE  Agreement  for  fifteen  years  or  until  expiration  of the last
     surviving patent licensed hereunder, whichever is later.

Article XI - Filing Of Patent Applications

1.   FCE, acting in its sole discretion, may cause to be filed or may have filed
     in FCE's name patent applications in countries of the Exclusive  Territory,
     either individually,  or under the European Patent Convention,  counterpart
     to U.S. patent  applications filed by FCE during the term of this Agreement
     and  included  in  the  Patent  Rights;   provided,   however,   that  such
     counterparts  shall  at least be filed  nationally  or under  the  European
     Patent Convention to cover Germany.

2.   In each year of this Agreement,  MTU shall pay the cost of maintenance fees
     for maintaining the Patent Rights ("Maintenance Costs") up to and including
     the first Ten Thousand United States Dollars ($10,000.00) FCE shall pay the
     cost of all prosecution fees and expenses  (including,  without limitation,
     costs for attorneys fees, filing fees, prosecution expenses,  issuance fees
     and any other fees and  expenses)  for  seeking  and


<PAGE>

     obtaining the Patent Rights and making the filings  contemplated under this
     Article XI ("Prosecution  Costs") up to and including the first Twenty Five
     Thousand United States Dollars  ($25,000.00).  All Maintenance  Costs which
     exceed Ten Thousand United States Dollars  ($10,000.00) and all Prosecution
     Costs which exceed Twenty Five Thousand United States Dollars  ($25,000.00)
     in any year of this Agreement shall be shared equally by FCE and MTU.


Article XII - Other Agreements, Successors and Assigns

1.   MTU  acknowledges  that FCE shall have the exclusive right to: (i) seek and
     undertake  contracts related to DFC(TM) Products and Know How with the U.S.
     Government, U.S. industry and other entities in the U.S.; and (ii) seek and
     undertake   contracts  for  developmental  or  demonstration  power  plants
     utilizing  DFC(TM) Products and Know How in the U.S. MTU and its Affiliates
     and/or  Consortia  members,  only  those  who have had  access  to  DFC(TM)
     Know-how  shall  not  compete  directly  or  indirectly  with  FCE  for the
     contracts  identified in the previous  sentence  and/or in the  manufacture
     and/or sale of DFC(TM)  Products and Know How in the United States,  Canada
     or Mexico.

2.   FCE acknowledges that provided the licenses granted to MTU hereunder do not
     become  Non-Exclusive,  MTU shall have the exclusive right to: (i) seek and
     undertake  contracts  related to DFC(TM)  Products  and Know How or related
     funding with the German  Government,  the European Union or any commercial,
     industrial,  utility and  governmental  entities in Europe,  provided  such
     contracts  and funding are for  activities  to be conducted in Europe;  and
     (ii) seek and undertake  contracts for developmental or demonstration power
     plants contracts related to DFC(TM) Products and Know How in Europe.

3.   This Agreement is to extend to and be binding upon the permitted successors
     and assigns of FCE and MTU.

4.   Neither  Party shall have the right to assign or  otherwise  transfer  this
     Agreement or any of its rights or obligations  hereunder  without the prior
     written consent of the other party.  Notwithstanding anything herein to the
     contrary,  either Party shall have the right to assign this  Agreement  and
     its  rights  and  obligations  hereunder  to an  Affiliate  to said  Party,
     provided,  however, that, prior to any such assignment,  (i) said Affiliate
     delivers to the other Party a  counterpart  of this  Agreement  executed by
     said Affiliate  including a statement that the Affiliate agrees to be bound
     by and  perform  the  obligations  of the  assigning  Party  and  (ii)  the
     assigning Party delivers to the other Party a written  agreement  providing
     that the assigning Party shall remain  primarily liable for the performance
     of the assignee's  obligations under this Agreement and a guarantee of such
     Affiliate's  performance  satisfactory  in all respects to the other Party.
     The provisions of this Section 4 shall continue after natural expiration or
     termination of this  Agreement  with respect to all rights and  obligations
     which continue after or survive such expiration or termination.

Article XIII -  Substitution  of Provisions,  Order of  Precedence,  Survival of
Provisions

1.   If any provision of this CELL LICENSE  Agreement  should be or become fully
     or partly  invalid or  unenforceable  for any reason  whatsoever  or should
     violate any applicable law, this CELL LICENSE Agreement is to be considered
     divisible as to such  provision and such  provision is to be deemed deleted
     from this CELL LICENSE  Agreement,  and the  remainder of this CELL LICENSE
     Agreement shall be valid and binding as if such provision were not included
     herein.  There shall be  substituted  for any such  provision  deemed to be
     deleted a suitable  provision which, as far as is legally  possible,  comes

<PAGE>

     nearest to what the parties desired or would have desired  according to the
     sense and purpose of this CELL LICENSE  Agreement,  had they considered the
     point when concluding this CELL LICENSE Agreement.

2.   In the event of any conflict  between the  provisions  of this CELL LICENSE
     and the Previous  License the provisions of this CELL LICENSE shall prevail
     over the Previous License.

3.   The provisions listed below shall survive termination of this CELL LICENSE:
     Export   Control   provisions   set  forth  in   Article   II   Section  4;
     Confidentiality  provisions  set forth in  Article V Section 2 and  Article
     VIII Section 3; Continuing license rights set forth in Article VIII Section
     2;  Royalty  obligations  set forth in Article  VIII  Section 7; Article X,
     Infringements  in  its  entirety;   and  Article  XII,  Other   Agreements,
     Successors and Assigns, in its entirety.

Article XIV - No Requirement for Specific Research

It is  acknowledged  by both  Parties  hereto that  nothing in this CELL LICENSE
Agreement  requires or shall be construed  as requiring  either Party to conduct
any specific research or development for the other Party.

Article XV - Publicity Releases and Disclosure of Agreement

1.   Neither Party hereto shall issue or release to any third party  information
     in any way related to the execution, performance or terms and conditions of
     this  Agreement  (except  as  specifically   allowed  and/or   contemplated
     hereunder)  without the prior  written  consent of the other  party,  which
     consent shall not be unreasonably  withheld,  except for disclosures  which
     are required to be made by applicable laws or rules and regulations.

2.   If as part of a grant  application or other process to receive funding from
     a government or governmental agency including the European Union and any of
     its agencies (a "Governmental Authority"), it is necessary for either Party
     or its sublicensees to disclose the other Party's Know-how,  then the Party
     desiring  to make  such  disclosure  will  submit  to the  other  Party the
     required  disclosure  prior  to such  party  incurring  the  obligation  to
     disclose the same to the respective Governmental Authority. If either Party
     believes that such a disclosure  will de detrimental to its interest,  then
     such  information  may only be  disclosed  if such  Governmental  Authority
     agrees to keep such  information  confidential  substantially in accordance
     with the confidentiality provisions contained in Article V Section 2.

Article XVI - Entire Agreement, Modifications

This CELL LICENSE Agreement constitutes the entire agreement between the Parties
hereto with respect to the DFC(TM)  License  hereof and merges any and all prior
agreements,  understandings  and  representations.  No modification of this CELL
LICENSE  Agreement  shall be valid  unless in writing  and signed by each of the
parties hereto.


<PAGE>


IN WITNESS WHEREOF,  the parties hereto have caused this CELL LICENSE  Agreement
to be executed in a manner binding upon them by their duly  authorized  officers
as of the date shown below.

FUEL CELL ENERGY, INC.

By:       /S/ Jerry D. Leitman
          --------------------

Name: Jerry D. Leitman

Title:   President and Chief Executive Officer

Date:        Dec 15, 1999


MTU MOTOREN-UND TURBINEN-UNION FRIEDRICHSHAFEN GmbH

By:      /S/ M. A. Bode                             /S/ P. Kraus
         -----------------------                    -------------

Name:           Bode                                     Kraus

Title:

Date:        Dec 15, 1999                              Dec 15, 1999


<PAGE>




                  Exhibit I of FCE / MTU CELL LICENSE Agreement


Part A  Western Europe                  Part B  Eastern Europe

        Andorra                                 Albania
        Austria                                 Bulgaria
        Belgium                                 Czech Republic
        Cyprus                                  Slovakia
        Denmark                                 Hungary
        Federal Republic of Germany             Poland
        Finland                                 Romania
        France                                  All states of the former USSR
        Great Britain and                       including, but not limited to
        Northern Ireland                        CIS (Commonwealth of Independent
        Greece                                  States)
        Greenland                               Yugoslavia
        Ireland                                 Slovenia
        Iceland                                 Croatia
        Italy
        Liechtenstein
        Luxembourg
        Malta
        Monaco
        Netherlands
        Norway
        Portugal
        San Marino
        Spain
        Sweden
        Switzerland
        The Vatican State




Part C  Middle East

        Bahrain                                 Syria
        Iran                                    Turkey
        Iraq                                    United Arab Emirates (UAE)
        Israel                                  Yemen, Arab. Rep.
        Jordan                                  Yemen, Peoples Rep.
        Kuwait
        Lebanon
        Oman
        Qatar
        Saudi-Arabia


<PAGE>



                                TABLE OF CONTENTS


       WHEREAS

       Article I       -       Definitions

       Article II      -       Licenses

       Article III     -       DFC(TM) Selling

       Article IV      -       Payments

       Article V       -       DFC(TM) KNOW HOW

       Article VI      -       Existing Improvements

       Article VII     -       Records, Reports and Notices

       Article VIII    -       Term, Termination

       Article IX      -       Arbitration, Governing Law

       Article X       -       Infringements

       Article XI      -       Filing Of Patent Applications

       Article XII     -       Other Agreements, Successors and Assigns

       Article XIII    -       Substitution of Provisions, Order of Precedence,
                               Survival of Provisions

       Article XIV     -       No Requirement for Specific Research

       Article XV      -       Publicity Releases and Disclosure of Agreement

       Article XVI     -       Entire Agreement, Modifications

       Exhibit I of FCE / MTU CELL LICENSE Agreement