Exhibit 10.5


 


BEACON POWER CORPORATION


 


OPTION
AGREEMENT


 


This
Option Agreement (this “Agreement”), dated as of                           
(the “Effective Date”), is by and between
Beacon Power Corporation (the “Company”) and                       
(“Executive”), an executive officer of the
Company.


 


WHEREAS,
this Agreement is intended to provide Executive with a non-qualified stock
option to purchase shares of the Common Stock pursuant to the terms and
conditions of this Agreement and the Company’s Third Amended and Restated 1998
Stock Incentive Plan (the “Plan”);


 


NOW
THEREFORE, it is agreed as follows:


 


ARTICLE I.                                NON-QUALIFIED
STOCK OPTION GRANT


 


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


 


	
  Shares:

  	
   

  	
  Exercise Price:

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  
					



 


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


 


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


 


	
  % of total Shares Vested

  	
   

  	
  Vesting Date

  	
   

  	
  Shares Vesting
 on Vesting Date

  	
   

  	
  Total Shares Vested
 to Date

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.33%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.37%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


The right of exercise
shall be cumulative so that to the extent the Option is not exercised in any
period to the maximum extent permissible it shall continue to be exercisable,
as a whole or in part, with respect to all Shares for which it is vested until
the earlier of the Final Exercise Date or the termination of the Option under
this Agreement or the Plan.


 

















 


13                                  Exercise of Option.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE II.                            TERMINATION OF EMPLOYMENT


 


2.1                               Termination
of Employment.


 


(a)                                  General.  Except as indicated below in (b), if
Executive terminates his employment for any reason, including by resignation,
or if the Company terminates his employment with or without a Breach of Conduct
(as defined below), Executive may retain all Shares underlying the Option that
have vested before the Termination Notice Date (as defined below).  However, he will not be entitled to receive
and shall forfeit any Shares underlying the Option that are scheduled to be
vested after the Termination Notice Date.


 


The “Termination
Notice Date” means the date on which Executive resigns (or if
earlier, the date on which Executive notifies Company that Executive will
resign), or the date on which Company terminates the employment for or without
a Breach of Conduct (or if earlier, the date on which the Company notifies
Executive that employment will be so terminated).


 


(b)                                 Special Rules for Options.  In the case of termination of employment by
reason of death, disability (as defined under the Executive’s employment
agreement), resignation or without Breach of Conduct, the vested Shares
underlying the Option will expire if not exercised within 365 days after the
Termination Notice Date.  In the case of
termination of employment for Breach of Conduct, all vested Shares underlying
the Option will expire immediately on the written declaration of the authorized
administrator of the Plan.


 


2

















 


Such declaration shall be
communicated in writing to Executive.  In
addition, the Company may, in its sole discretion, by written notice, demand
that any or all stock certificates for Shares acquired pursuant to the exercise
of the Option, or any profit realized from the sale or transfer of such Shares,
be returned to the Company within five days of receipt of such notice, and any
exercise price paid by Executive shall be returned to Executive by the Company
immediately thereafter, without interest. 
The Company shall be entitled to reimbursement of reasonable attorney
fees and expenses incurred in seeking to enforce its rights under this
paragraph.


 


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


 


ARTICLE
III.                        GENERAL PROVISIONS


 


3.1                               Acquisition Events. 
Upon the occurrence of an Acquisition Event (as defined below), or the
execution by the Company of any agreement with respect to an Acquisition
Event,  the authorized administrator of
the Plan shall take any one or more of the following actions with respect to
the Option, upon written notice to Executive: (i) provide that the Option
shall be assumed, or equivalent equity compensation shall be substituted, by
the acquiring or succeeding corporation (or an affiliate thereof); (ii) provide
that any portion of the Shares underlying the Option that are not vested will
become vested in full as of a specified time (the “Acceleration Time”) prior to the Acquisition Event and will
terminate immediately prior to the consummation of such Acquisition Event,
except to the extent exercised by Executive between the Acceleration Time and
the consummation of such Acquisition Event; or (iii) provide that the
Option shall terminate upon consummation of such Acquisition Event and
Executive shall receive, in exchange therefor, a cash payment equal to the
amount (if any) by which (x) the fair market value of the proceeds payable
to a share of Common Stock in connection with the Acquisition Event multiplied
by the number of shares of Common Stock subject to the Option (whether or not
then convertible or exercisable), exceeds (y) the aggregate exercise price
of the Option.


 


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


 


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


 


3.3                               Golden
Parachute Payment Excise Tax Protection.  In the event that the excise tax imposed by Section 4999
of the Code, (or any successor penalty or excise tax subsequently imposed by
law) applies to any payments or benefits specifically paid or conferred only
under this Agreement (the “Excise Tax”),
an additional amount shall be paid by the Company to the Executive equal to the
amount of such Excise Tax (the “Gross Up
Payment”); provided, 


 


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however in no event shall
the aggregate amount payable by the Company to Executive for any excise tax
imposed by Section 4999 of the Code pursuant to this Agreement and all
other agreements between the Company and Executive exceed $                      . 
The Company and its advisers shall make the determination of the amount
of the Gross Up Payment.  To the extent
that the amount of such Gross Up Payment exceeds the amount of Excise Tax
actually paid by Executive, Executive shall promptly pay to the Company such
excess amount.


 


ARTICLE IV.                       TRANSFERABILITY


 


4.1                               Nontransferability
of Agreement and the Option.  This Agreement and the Option may not be
sold, assigned, transferred, pledged or otherwise encumbered by Executive,
either voluntarily or by operation of law, except by will or the laws of
descent and distribution. 
Notwithstanding the foregoing, Executive’s transfer to a revocable trust
that is solely for the benefit of Executive and Executive’s spouse and/or issue
during Executive’s lifetime and transfer under such trust at Executive’s death
to the trust’s intended beneficiaries shall not be deemed to be prohibited by
the foregoing provisions.  If any person
other than Executive, Executive’s then current spouse, and Executive’s issue
shall possess a vested interest in such trust during the lifetime of Executive,
such interest shall not be recognized hereunder as giving such person any right
to the benefit of the shares of Common Stock issuable upon conversion
thereof.  During the lifetime of
Executive, the Option shall be exercisable only by Executive.


 


ARTICLE V.                           MISCELLANEOUS


 


5.1                               Provisions of the Plan. 
This Agreement is subject to the provisions of the Plan, a copy of which
Executive hereby acknowledges receiving with this Agreement.


 


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


 


5.3                               No
Right as Stockholder. 
Executive shall not be entitled to vote Shares underlying the Option, shall
not receive any dividends attributed to such shares of Common Stock, and shall
have no other rights of a stockholder with respect to the Option unless and
until the Option is duly exercised by Executive and the Common Stock is issued.


 


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


 


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


 


5.6                               Withholding.   No shares of Common Stock will be issued pursuant to
the exercise of the Option unless and until Executive pays to the Company, or
makes provision satisfactory to the Company for payment of, any federal, state
or local withholding taxes required by law to be withheld in respect of the
Option.  Executive may 


 


4

















 


satisfy
such tax obligations by delivering to Company cash in the form of wire transfer
or check and Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to Executive.


 


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


 


5.8                               Notices. 
Any notice hereunder to the Company shall be addressed to Beacon Power
Corporation, Attn: Compensation Committee, 65 Middlesex Road, Tyngsboro,
MA  01879, and any notice hereunder to
Executive shall be sent to the address reflected on the payroll records of the
Company, subject to the right of either party to designate at any time
hereafter in writing some other address.


 


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


 


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


 


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


 


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


 


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


 


5.14                        Severability;
Titles and Subtitles; Gender; Singular and Plural; Counterparts; Facsimile.


 


(a)                                  In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.


 


(b)                                 The titles of
the sections and subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.


 


(c)                                  The use of any
gender in this Agreement shall be deemed to include the other genders, and the
use of the singular in this Agreement shall be deemed to include the plural
(and vice versa), wherever appropriate.


 


(d)                                 This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together constitute one instrument.


 


(e)                                  Counterparts of
this Agreement (or applicable signature pages hereof) that are manually
signed and delivered by facsimile transmission shall be deemed to constitute
signed original counterparts hereof and shall bind the parties signing and
delivering in such manner.


 


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IN
WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the Effective Date.


 


	
  EXECUTIVE:

  	
  BEACON
  POWER CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  

  	
   

  	
  By:

  	
  /s/
  

  
	
  Signature

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:  

  	
  Name:  

  
	
   

  	
   

  
	
  Address:

  	
  Title: