Document:

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                                                               Exhibit 10.1.17

                     AMENDED AND RESTATED LICENSE AGREEMENT

THIS AMENDED AND RESTATED LICENSE AGREEMENT (the "Agreement"), made as of the
October 23, 1998, amends and restates the agreement made on the 28th day of May,
1997 (the "Effective Date") by and between SatCon Technology Corporation, a
Delaware corporation, whose office is located at 161 First St., Cambridge,
Massachusetts, 02142 U.S.A. ("SatCon") and Beacon Power Corporation, a Delaware
corporation whose office is located at 6D Gill Street, Woburn, Massachusetts,
01801 U.S.A. ("Licensee").

WHEREAS, SatCon has formed Licensee as a wholly-owned subsidiary to develop
technology relating to flywheel energy storage products; and

WHEREAS, SatCon, through its ownership of Licensee, will benefit from the
success of Licensee's product development efforts and therefore desires to
enable Licensee to utilize certain of SatCon's existing rights in the
development of new products for the flywheel energy storage market;

NOW THEREFORE, in consideration of the mutual agreements and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby confirmed, and intending to be legally bound
hereby, the parties agree as follows:

1.   DEFINITIONS

1.1 "COVERED PRODUCT" MEANS A PRODUCT OR PROCESS COVERED BY A VALID CLAIM of a
SatCon Patent Right or which embodies SatCon Know-How.

1.2 "LICENSEE IMPROVEMENTS" MEANS ANY OF LICENSEE'S INVENTIONS,
             improvements, modifications, enhancements and derivative works
             having application outside the FES field and deriving from or based
             upon any SatCon Rights developed prior to earliest of (i) the
             completion by the Licensee of an Initial Public Offering that
             raises at least $25,000,000 of gross proceeds to the Licensee; (ii)
             the fifth anniversary of this Agreement; or (iii) the date shares
             of Licensee are put to SatCon pursuant to Section 1.4 of the
             Securities Purchase Agreement.

             1.3  "FES FIELD" MEANS THE FIELD OF FLYWHEEL ENERGY STORAGE
             PRODUCTS, systems and processes for stationary terrestrial (in- or
             on-ground or affixed to structures on ground) applications, but not
             for satellite or other nonterrestrial applications.

             1.4  "SATCON IMPROVEMENTS" MEANS ANY OF INVENTIONS, IMPROVEMENTS,
             modifications, enhancements and derivative works having application
             in the FES field deriving from or based upon any SatCon Rights,
             that are developed by or for SatCon or any of its controlled
             subsidiaries other than Licensee prior to the earliest of (i) the
             completion by the Licensee of an

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             Initial Public Offering that raises at least $25,000,000 of gross
             proceeds to the Licensee; (ii) the fifth anniversary of this
             Agreement; or (iii) the date shares of Licensee are put to SatCon
             pursuant to Section 1.4 of the Securities Purchase Agreement..

             1.5  "SATCON KNOW-HOW" MEANS ALL TECHNICAL KNOWLEDGE, INFORMATION
             AND KNOW- how, whether treated as a trade secret or otherwise, and
             whether embodied in a copyrighted work or not, which relates to the
             FES Field and is owned by SatCon or in which SatCon has a
             sublicensable interest as of the date of this Agreement.

             1.6  "SATCON PATENT RIGHTS" MEANS (a) THE UNITED STATES PATENTS
             LISTED ON

             EXHIBIT A HERETO, (b) ALL CORRESPONDING PATENTS AND PATENT
             applications filed and the resulting patents issued in other
             jurisdictions, (c) all divisions, continuations and
             continuations-in- part of the patents referred to in the foregoing
             clauses (a) and (b), and (d) all reissues, reexaminations and
             extensions thereof.

             1.7 "SATCON RIGHTS" MEANS, COLLECTIVELY, THE SATCON KNOW-HOW AND
             THE SatCon Patent Rights.

             1.8  "SECURITIES PURCHASE AGREEMENT" MEANS THE SECURITIES PURCHASE
             AGREEMENT DATED AS OF OCTOBER 23, 1998 BY AND AMONG SATCON,
             LICENSEE, PERSEUS CAPITAL, L.L.C., DUQUESNE ENTERPRISES AND
             MICRO-GENERATION TECHNOLOGY FUND, L.L.C.

1.9  "VALID CLAIM" MEANS A CLAIM OF AN UNEXPIRED PATENT WHICH SHALL NOT
             have been withdrawn, canceled or disclaimed, nor held invalid by a
             court of competent jurisdiction in an unappealed or unappealable
             decision, or a claim of a patent application which has not been on
             file for more than seven years.

2.   LICENSES

       2.1 SATCON LICENSE. SATCON HEREBY GRANTS TO THE LICENSEE, AND THE
       Licensee hereby accepts, a perpetual (subject to termination pursuant to
       Section 6), worldwide, royalty-free, exclusive right and license (the
       "SatCon License"), subject to the terms and conditions of this Agreement,
       to make, have made, use, offer to sell, sell, have sold, import, repair,
       modify, market, create derivative works of and otherwise commercially
       exploit Covered Products in the FES Field.

       2.2  SUBLICENSING.  LICENSEE SHALL HAVE THE RIGHT TO GRANT SUBLICENSES
       under the SatCon Rights to make, have made, use, offer to sell, sell,
       have sold, import, repair, modify, market, create derivative works of and
       otherwise commercially exploit the Covered Products in the FES Field. All
       sublicenses of the SatCon Rights by Licensee shall be pursuant to written
       sublicense agreements. Licensee shall provide SatCon a copy of any such

                                       -2-

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agreement within thirty (30) days after entering into it. SatCon shall maintain
any such agreement in strict confidence.

             2.3  IMPROVEMENTS.
             (a) Licensee hereby grants to SatCon, and SatCon hereby accepts, a
             perpetual, worldwide, royalty-free, exclusive right and license,
             subject to the terms and conditions of this Agreement, to make,
             have made, use, offer to sell, sell, have sold, import, repair,
             modify, market, create derivative works of and otherwise
             commercially exploit products covered by Licensee Improvements
             outside of the FES Field

             (b) SatCon hereby grants to Licensee, and Licensee hereby accepts,
             a perpetual, worldwide, royalty-free, exclusive right and, subject
             to the terms and conditions of this Agreement, to make, have made,
             use, offer to sell, sell, have sold, import, repair, modify,
             market, create derivative works of and otherwise commercially
             exploit products covered by SatCon Improvements in the FES Field.

3.   INTELLECTUAL PROPERTY

       3.1  OWNERSHIP OF INTELLECTUAL PROPERITY.  ALL SATCON RIGHTS AND SATCON
       Improvements and the goodwill associated therewith are and shall remain
       the property of SatCon or its licensor and no ownership interest therein
       is being conveyed to Licensee under this Agreement. All Licensee
       Improvements and the goodwill associated therewith are and shall remain
       the property of Licensee, subject to SatCon's ownership of any underlying
       SatCon Rights, and no ownership interest in the Licensee Improvements is
       being conveyed to SatCon under this Agreement. SatCon represents and
       warrants to Licensee that SatCon has good and valid title to the SatCon
       Patent Rights, and has the right to grant Licensee the licenses granted
       under this Agreement.

       3.2  PROPRIETARY NOTICES.  THE LICENSEE SHALL INCLUDE IN EACH COVERED
       Product, or the documentation therefor, an acknowledgment of SatCon's
       ownership of the SatCon Rights in a form reasonably acceptable to SatCon.
       SatCon shall include in each SatCon product embodying Licensee
       Improvements, or the documentation therefor, an acknowledgment of
       Licensee's ownership of the Licensee Improvements in a form reasonably
       acceptable to Licensee.

       3.3  PATENT PROSECUTION.
             (a) The parties shall consult with each other in all efforts to
             file, prosecute and maintain the SatCon Patent Rights throughout
             the world, including all decisions regarding the scope of patent
             coverage, claim language, whether to pursue or continue to pursue

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             patent protection in any jurisdiction and other matters bearing
             upon the substantive content of patents. SatCon shall pay all costs
             of such efforts where the parties agree upon the action to be
             taken.

             (b) If the parties disagree on any action to be taken with respect
             to the prosecution, issuance or maintenance of the SatCon Patent
             Rights, the parties shall take the action resulting in the least
             diminution of the SatCon Patent Rights, and if the action taken
             results in increased costs or in costs that would be avoided by not
             taking such action, such increased costs or costs that would be
             avoided shall be borne by the party requesting such action.

                   3.4  ASSERTION OF SATCON RIGHTS.
             (a) Each party shall report promptly in writing to the other any
             known or suspected infringement or misappropriation of the SatCon
             Patent Rights or of other SatCon Rights in the FES Field anywhere
             in the world. The parties shall consult with each other on all
             efforts to initiate and prosecute an infringement or other
             appropriate suit against any third party who at any time has
             infringed, or is suspected of infringing, any of the SatCon Patent
             Rights or of other SatCon Rights in the FES Field.

             (b) Licensee shall have the exclusive right to initiate an
             infringement or other appropriate suit, in the name of SatCon if
             necessary, against any third party who at any time has infringed,
             or is suspected of infringing, any of the SatCon Rights in the FES
             Field. Licensee shall have the sole and exclusive right to control,
             select counsel for and settle any such suit and shall pay all
             expenses of such suit. Any damages, settlements, recoveries or
             other consideration received by Licensee for past infringement or
             misappropriation as a result of such litigation shall be retained
             by Licensee. If Licensee initiates suit in the name of SatCon, then
             Licensee shall indemnify SatCon for any damages SatCon is ordered
             to pay to a third party in such suit.

             (c) SatCon shall have the exclusive right to initiate an
             infringement or other appropriate suit against any third party who
             at any time has infringed, or is suspected of infringing, any of
             the SatCon Rights outside of the FES Field. SatCon shall have the
             sole and exclusive right to control, select counsel for and settle
             any such suit and shall pay all expenses of such suit. Any damages,
             settlements, recoveries or other consideration received by SatCon
             for past infringement or misappropriation as a result of such
             litigation shall be retained by SatCon.

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             (d) Each party, at its expense, will reasonably cooperate with the
             other party in the conduct of a suit under this Section 3.4, such
             cooperation to include the making of affidavits, the answering of
             interrogatories, the making of persons available for depositions
             and appearances as witnesses, the production of documents, and the
             like.

4.   NONDISCLOSURE

       4.1 The parties agree that the SatCon Know-How, confidential portions of
       the SatCon Patent Rights, and information relating to the filing,
       maintenance, prosecution, assertion and litigation of the SatCon Rights
       (collectively, the "SatCon Confidential Information") constitute the
       confidential and proprietary information and the valuable trade secrets
       of SatCon in which Licensee has the exclusive rights granted herein.
       Neither party shall publish, disseminate or disclose the SatCon
       Confidential Information, in whole or in part, to any third party, except
       to its distributors, customers, licensees, sublicensees and independent
       contractors who have a need to know such SatCon Confidential Information,
       and further provided that such distributors, customers, licensees,
       sublicensees and independent contractors have agreed in writing to
       maintain the confidentiality of such SatCon Confidential Information with
       at least the same degree of protection set forth herein.

       4.2 Licensee shall not use the SatCon Confidential Information except as
       expressly permitted by this Agreement. Each party shall protect the
       confidentiality of the SatCon Confidential Information using reasonable
       security measures. All personnel who are permitted to access or use the
       SatCon Confidential Information shall be required to sign agreements
       obligating them to maintain the confidentiality of the SatCon
       Confidential Information indefinitely, and not to use the SatCon
       Confidential Information except as permitted by this Agreement. A party
       shall notify the other party promptly and in writing of the circumstances
       surrounding any suspected possession, use or knowledge of the SatCon
       Confidential Information or any part thereof at any location or by any
       person or entity other than those authorized by this Agreement, and shall
       take further steps as may reasonably be requested by the other party to
       prevent or remedy any such violation. Each party is permitted to make
       reasonable inquiries concerning the other party's compliance with the
       provisions of this Section 4.

       4.3 Notwithstanding Sections 4.1 and 4.2, (i) SatCon may disclose SatCon
       Confidential Information to a third party when such disclosure is, in
       SatCon's reasonable business judgment, necessary for its business outside
       the FES Field; (ii) Licensee may disclose SatCon Confidential Information
       to a third party when such disclosure is, in Licensee's reasonable
       business judgment, necessary for its business in the FES Field; (iii) a
       party shall not

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             be required to maintain the confidentiality of any information that
             (a) is or becomes public or available to the general public
             otherwise than through any act or default of such party or (b) is
             received by such party from a third party who has no obligation to
             maintain the confidentiality of such information; and (iv) a party
             may disclose SatCon Confidential Information to the extent required
             by a court or other governmental authority, provided that (a) the
             party gives the other party reasonable notice of the disclosure,
             (b) the party uses reasonable efforts to resist disclosing the
             SatCon Confidential Information, and (c) the party cooperates with
             the other party on request to obtain a protective order or
             otherwise limit the disclosure.

5.   DISCLAIMERS; LIMITATIONS

       5.1 EXCEPT AS PROVIDED IN SECTION 3.1, SATCON DISCLAIMS ALL WARRANTIES,
       WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE SATCON
       RIGHTS, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF,
       NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.

       5.2 SATCON SHALL HAVE NO LIABILITY WHATSOEVER FOR DAMAGES TO LICENSEE FOR
       ANY CAUSE RELATING TO OR ARISING FROM THE SATCON RIGHTS, REGARDLESS OF
       THE FORM OF ANY CLAIM OR ACTION, INCLUDING DIRECT, INDIRECT, SPECIAL,
       CONSEQUENTIAL, PUNITIVE AND EXEMPLARY DAMAGES, AND ANY DAMAGES ARISING
       FROM LOSS OF DATA, LOSS OF PROFITS, BUSINESS INTERRUPTION, AND ALL OTHER
       CAUSES, EVEN IF SATCON HAS BEEN MADE AWARE OF THE POSSIBILITY OF SUCH
       DAMAGES, EXCEPT AS OTHERWISE REQUIRED BY LAW.

       5.3 The parties acknowledge and agree that the unauthorized use,
       disclosure, transfer or dissemination of the SatCon Confidential
       Information will diminish substantially the value of such SatCon
       Confidential Information and is likely to irreparably harm the other
       party and not to be susceptible of cure by monetary damages; and that if
       a party or any employee, agent, affiliate, officer or subsidiary of such
       party breaches the provisions of Sections 2, 3.1 or 4 hereof, the other
       party shall, without limiting its other rights or remedies, be entitled
       to equitable relief to enjoin or prevent such breach.

       5.4 The design, manufacture, testing, marketing and distribution of the
       Covered Products are the responsibility of Licensee. Therefore, Licensee
       agrees to defend, indemnify and hold SatCon harmless from and against

                                       -6-

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             any and all expenses, charges, costs, fees, damages and settlements
             incurred by SatCon in connection with any claim by any customer,
             reseller or other third party relating in any way to the Covered
             Products or the incorporation of the SatCon Know-How therein.

6.   TERM AND TERMINATION

       6.1 TERM. THIS AGREEMENT, AND THE LICENSES GRANTED HEREIN, SHALL REMAIN
       in effect until terminated as set forth below.

       6.2  TERMINATION. THIS AGREEMENT MAY BE TERMINATED:
             (a) by SatCon, immediately if the Licensee has materially breached
             (i) any obligation under this Agreement and has not cured such
             breach within one hundred twenty (120) days following the date on
             which SatCon. has given written notice specifying the facts
             constituting the breach, if such breach is susceptible of cure, or
             (ii) any obligation under this Agreement, if such breach is not
             susceptible of cure.

             (b) by SatCon effective immediately and without any requirement of
             notice, if (i) all Purchasers to the Securities Purchase Agreement
             dated October 23, 1998 have exercised their Put Rights (as defined
             in that agreement) and (ii) the Licensee files for or consents to a
             general assignment for the benefit of creditors, files a petition
             in bankruptcy or liquidation, or is adjudicated bankrupt or
             insolvent under the laws of any jurisdiction for the general
             benefit of creditors of an insolvent or financially troubled
             debtor, or if a petition in bankruptcy or liquidation is filed
             against Licensee and is not finally dismissed by a court of
             competent jurisdiction within forty-five (45) days of such filing;

             6.3  EFFECTS OF TERMINATION.  UPON TERMINATION OF THIS AGREEMENT,
             ALL rights, licenses and obligations of the parties under this
             Agreement shall cease, and Licensee and its sublicensees shall
             deliver to SatCon, at the Licensee's expense, all originals and
             copies of any materials describing the SatCon Know-How, including
             all compilations, translations, and partial copies, whether or not
             modified, and all patent prosecution, maintenance and litigation
             files relating to the SatCon Patent Rights in the possession of
             Licensee and its counsel. The Licensee shall certify in writing
             within ten (10) business days following termination that it and its
             sublicensees have complied with this Section 6.3. Notwithstanding
             the foregoing, the provisions of Sections 2.3(a) (as applicable
             only to Licensee Improvements in existence as of the date of
             termination), 4, 5, 6.3 and 7.2 of this Agreement shall survive any
             termination or expiration of this Agreement in accordance with
             their terms.

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7.   MISCELLANEOUS

       7.1  AGREEMENT TERMS.  NEITHER PARTY HERETO SHALL DISCLOSE THE TERMS OR
       conditions of this Agreement to any third party without the prior written
       consent of the other party, except (a) as required by order or rule of a
       governmental authority including, without limitation, the
       United States Securities and Exchange Commission, (b) that copies of this
       Agreement may be provided to Duquesne Enterprises, Inc., Perseus Capital,
       L.L.C., and Micro Generation Fund, L.L.C.

       7.2  GOVERNING LAWS.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
       IN accordance with the laws of the Commonwealth of Massachusetts, U.S.A.,
       excluding its choice of law rules. Each party hereby consents to the
       personal jurisdiction of the Federal and state courts of the Commonwealth
       of Massachusetts for the purpose of the resolution of all disputes
       arising under this Agreement.

       7.3  COMPLIANCE WITH LAWS. THE LICENSEE SHALL COMPLY WITH ALL APPLICABLE
       laws, legislation, rules, regulations, export restrictions, governmental
       requirements and industry standards existing from time to time with
       respect to the Covered Products and the performance by the Licensee of
       its obligations hereunder.

       7.4  ENTIRE AGREEMENT. THIS AGREEMENT, INCLUDING ITS EXHIBITS,
       CONSTITUTES the entire agreement between SatCon and the Licensee with
       respect to the subject matter hereof, and shall not be released,
       discharged, supplemented, interpreted, amended, varied, or modified in
       any manner except by an instrument in writing signed by an authorized
       officer or representative of each of the parties hereto.

       7.5  NO WAIVERS.  NO DELAY OR OMISSION ON THE PART OF EITHER PARTY TO
       THIS Agreement in requiring performance by the other party or in
       exercising any right hereunder shall operate as a waiver of any provision
       hereof or of any right or rights hereunder; and the waiver, omission or
       delay in requiring performance or exercising any right hereunder on any
       one occasion shall not be construed as a bar to or waiver of such
       performance or right on any future occasion.

       7.6  SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT SHALL FOR ANY
       REASON be held illegal or unenforceable, such provision shall be deemed
       separable from the remaining provisions of this Agreement and shall in no
       way affect or impair the validity or enforceability of the remaining
       provisions of this Agreement.

       7.7  SECTION HEADINGS. SECTION HEADINGS OF THIS AGREEMENT ARE FOR
       descriptive purposes only and shall not control or alter the meaning of
       this Agreement.

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       7.8  RELATIONSHIP OF THE PARTIES. THE PARTIES SHALL FOR ALL PURPOSES BE
       considered independent contractors with respect to each other, and
       neither shall be considered an employee, employer, agent, principal,
       partner or joint venturer of the other.

       7.9 NOTICES. FOR THE PURPOSES OF THIS AGREEMENT, AND FOR ALL NOTICES AND
       correspondence hereunder, the addresses of the respective parties are as
       follows:

       If to SatCon: SatCon Technology Corporation

       161 First Street Cambridge, Massachusetts 02142-1771
       Attn:  President Fax:   (617) 661-3373

with a copy to                      Jeffrey N. Carp, Esq.
                                    Hale and Dorr LLP
                                    60 State Street
                                    Boston, Massachusetts 02109
                                    Fax:      (617) 526-5000

If to Licensee:                     Beacon Power Corporation
                                    6D Gill Street
                                    Woburn, MA 01801
                                    Attn:   President
                                    Fax:      (781) 938-9401

with copies to:                     Perseus Capital, L.L.C.
                                    The Army and Navy Club Building
                                    1627 I Street, N.W., Suite 610
                                    Washington, D.C. 20006
                                    Attn:   Kenneth M. Socha
                                    Fax No. (202) 463-6215

                                    Arnold & Porter
                                    555 12th Street, N.W.
                                    Washington, D.C. 20004
                                    Attn:   Robert B. Ott
                                    Fax No.:     (202) 942-5999

                                    Anthony J. Villotti, Vice President
                                    Duquesne Enterprises, Inc.
                                    One Northshore Center, Suite 100
                                    12 Federal Street
                                    Pittsburgh, PA 15212
                                    Fax No.:

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              Robert W. Shaw, Jr. Arete Corporation P.O. Box 1299 Center Harbor,
              New Hampshire 03226 Fax No.: (603) 253-9799

              No change of address shall be binding upon the other party hereto
              until written notice thereof is received by such party at the
              address show herein. All notices shall be in English and shall be
              effective upon receipt if delivered personally or sent by
              facsimile, two days after shipment by overnight delivery service
              and five (5) days after mailing if sent by certified mail return
              receipt requested.

              7.10 ASSIGNMENT AND CORPORATE REORGANIZATION. THE RIGHTS GRANTED
              TO THE Licensee under this Agreement are personal in character.
              Except as provided herein, neither this Agreement nor any rights
              granted hereby may be assigned by the Licensee voluntarily or by
              operation of law without SatCon's prior written consent and any
              such attempted assignment shall be null and void. For purposes of
              this Agreement, "assignment" shall be deemed not to include the
              transfer of all or substantially all of the assets of, or a
              majority interest in the voting stock of, the Licensee, or the
              merger of the Licensee with one or more entities. SatCon may
              assign its rights under this Agreement without the consent of the
              Licensee. This Agreement shall inure to the benefit of and be
              binding upon any permitted successor or assign of either party.

              [Remainder of Page Intentionally Blank]

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IN WITNESS WHEREOF, SatCon and the Licensee have duly executed this Agreement as
of the dates written below:

LICENSEE:                                      SATCON:

BEACON POWER CORPORATION                       SATCON TECHNOLOGY CORPORATION

By: /s/ William E. Stanton                     BY: /s/ DAVID B. EISENHAURE
   -----------------------------                  ----------------------------
Name:     WILLIAM E. STANTON                   NAME:    DAVID B. EISENHAURE
     ---------------------------                     -------------------------
Title:    PRESIDENT & CEO                      TITLE:   PRESIDENT
      --------------------------                     -------------------------
Date:     OCTOBER 27, 1998                     DATE:    OCTOBER 23, 1998
     ---------------------------                    --------------------------

                      [Signature Page to License Agreement]

                                       -1-<PAGE>

                                                               Exhibit 10.1.18

                            Beacon Power Corporation
                                161 First Street
                            Cambridge, MA 02142-1221

                                  May 28, 1997

Duquesne Enterprises
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212

Gentlemen:

         This letter shall serve to confirm our mutual agreement concerning one
or more Distributor Agreements (each, a "Distributor Agreement") to be entered
into between the undersigned, Beacon Power Corporation, a Delaware corporation
("BPC"), and Duquesne Enterprises, a Pennsylvania corporation ("DE"), at such
time, and from time to time, as one or more of BPC's flywheel energy storage
systems for use in stationary energy storage applications (the "Products") are
commercially acceptable, as determined by DE and BPC, acting in good faith.

         The terms and conditions to be included in each Distributor Agreement
shall include, without limitation, the following:

         1. DE shall be appointed as BPC's sole and exclusive distributor for
the sale of the Products in the states of Pennsylvania, Ohio, West Virginia, New
York, Maryland, Delaware, Virginia and the District of Columbia (the
"Territory"), with the following exclusions (in which event DE shall have the
nonexclusive right to distribute the Products):

                  (a) BPC shall be entitled to distribute the Products directly
         to cable television and telephone companies; and

                  (b) BPC shall be entitled to distribute the Products directly
         to electric utilities for internal use by such electric utilities; and

                  (c) BPC and DE shall negotiate, in good faith, additional
         exceptions to DE's exclusive rights in connection with distribution by
         BPC of the Products to others which do not detract from DE's exclusive
         rights in the Territory.

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         2. DE shall have the nonexclusive right to distribute the Products
outside of the Territory unless such right is prohibited by other BPC
agreements. The Board of Directors of BPC shall have the right to terminate DE's
nonexclusive right to distribute the Products in any geographical area outside
of the Territory at any time that the Board of Directors deems such termination
to be commercially necessary or desirable.

         3. The term of each Distributor Agreement shall be for a period of 20
years from the date of each Product's commercial availability.

         4. All purchases of the Products by DE shall be at the lower of (i) the
cost of goods sold plus 30%, or (ii) at "most favored nation" prices established
by BPC from time to time for bona fide purchasers of similar quantities of the
Products as are purchased by DE. The cost of the Products shall be determined in
a manner consistent with generally accepted accounting principles and BPC's
accounting procedures for other product sales. DE acknowledges that the cost of
goods sold shall include certain overheads such as indirect labor, depreciation
and occupancy costs. Typical terms and warranties shall apply to all purchases
by DE.

         5. DE's right to serve as the exclusive distributor for the Products in
the Territory shall be dependent upon DE fulfilling reasonable minimum annual
sales quotas which shall be negotiated by the parties in good faith, on an
annual basis, but which shall be not less than 60% and not more than 70% of the
number of Product units sold for the preceding year in all other states (the
"Non-Territory"), with respect to which an exclusive or non-exclusive
distributor (other than DE or one of its affiliates) (the "Other Distributors")
has been appointed and been in operation for a period of at least two years. In
determining the foregoing minimum quota, adjustment will be made to reflect the
relative population in the Territory and the Non-Territory and all sales by an
Other Distributor will be assumed to have been made in the territory assigned to
such Other Distributor. By way of example, assume that (i) sales of a Product in
the Non-Territory are 1,000,000 units, (ii) the population of the Non-Territory
is 200,000,000, and (iii) the population of the Territory is 20,000,000. The
basis for the sales quota would be 10% (e.g., the Territory population/the
Non-Territory population) times the units sold, or 100,000. Accordingly, the
sales quota would be between 60% and 70% of the base, or 60,000 to 70,000 units.
Notwithstanding any provision to the contrary contained herein, DE and BPC agree
that in no event shall DE be subject to more onerous sales quotas than any other
exclusive distributor of BPC from time to time.

         6. Each Distributor Agreement shall provide that DE shall make payment
to BPC within 30 days of each invoice. All invoices shall be delivered to DE
within 5 days of the date of the invoice.

         7. DE shall have the right to use subdistributors, subject to the
following provisions: (i) all subdistribution agreements shall be subject to
BPC's approval, which approval shall not be unreasonably withheld, (ii) in the
event that DE uses subdistributors that are not affiliated with DE, its parent,
subsidiaries or affiliates, such non-affiliated subdistributors shall be subject
to BPC's approval, which approval shall not be unreasonably withheld, and (iii)
in the event that

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DE uses subdistributors that are affiliated with DE, its parent, subsidiaries or
affiliates, such affiliated subdistributors shall not be subject to BPC's
approval.

         8. BPC and DE acknowledge and agree that DE, its parent, subsidiaries
and affiliates, shall have the right to promote, sell, market, support and
distribute products which may be similar to or in competition with the Products.
Notwithstanding the foregoing, DE agrees not to compete with BPC in the
manufacture, sale, distribution or support of stationary flywheel energy storage
systems.

         9. All disputes between the parties under a Distributor Agreement,
including conflicts involving the exclusive geographic territory and exclusive
market rights, shall be settled and finally determined by arbitration in
accordance with the Rules of Commercial Arbitration of the American Arbitration
Association. Any arbitration shall be conducted by 1 arbitrator. The judgment
upon the award rendered in any such arbitration shall be final, binding upon the
parties and non-appealable and may be entered in any court having jurisdiction
thereof. All fees and expenses of the arbitrators and all other expenses of
arbitration, except for attorney's fees, shall be paid by the party that does
not prevail in such arbitration. Each party shall bear its own attorney's fees.

         10. Each Distributor Agreement shall contain the following as events of
default:

                  (a)      DE fails, refuses or neglects to pay promptly any
                           amounts owed to BPC;

                  (b)      DE fails to meet the minimum annual sales quota as
                           described in paragraph 5 of this Letter Agreement in
                           two years out of each five year period unless
                           cumulative sales during the life of the Distributor
                           Agreement exceed cumulative minimum annual sales
                           quotas;

                  (c)      DE fails to perform any of its material covenants,
                           obligations or responsibilities under any Distributor
                           Agreement which failure remains uncured for 30 days
                           after notice thereof from BPC;

                  (d)      The dissolution, termination of existence,
                           liquidation, insolvency or business failure of DE, or
                           the appointment of a custodian or receiver for DE or
                           any part of its property if such appointment is not
                           terminated or dismissed within 30 days;

                  (e)      The institution by DE of any proceeding under the
                           United States Bankruptcy Code or any other federal or
                           state bankruptcy, reorganization, receivership,
                           insolvency or other similar law affecting the rights
                           of creditors generally or the making by DE of a
                           composition of any assignment or trust mortgage for
                           the benefit of creditors;

                  (f)      The institution against DE of a proceeding under the
                           United States Bankruptcy Code or any other federal or
                           state bankruptcy, reorganization,

<PAGE>

                           receivership, insolvency or other similar law
                           affecting the rights of creditors generally, which
                           proceeding is not dismissed within 30 days of filing.

                  In the event that DE is in default pursuant to (a) above, DE
may cure such default by paying the amount owed to BPC within 30 calendar days
after delivery by BPC of the aforementioned default notice. In the event that DE
is in default pursuant to (b) above, DE may cure such default by paying to BPC
the additional profit that BPC would have earned had DE met the minimum annual
sales quota during each such year. In the event that any default is not cured by
DE after notice and the passage of the cure period, BPC may terminate this
Agreement.

         11. Each Distributor Agreement shall contain such other terms and
conditions, including without limitation, delivery, service requirements,
warranties, limitations of liabilities, and confidentiality terms as DE and BPC
shall mutually agree, acting in good faith.

         Please confirm your agreement with the foregoing by executing and
returning the enclosed counterpart original of this letter agreement, whereupon
this letter agreement shall be a binding agreement between BPC and DE.

<PAGE>

Intending to be legally bound hereby,
                                                   Beacon Power Corporation

                                                   By: /s/DAVID B. EISENHAURE
                                                      _______________________

                                                     Title:  President
                                                          ____________________

Accepted and agreed to,
with the intent to be legally bound,
this 23rd day of May, 1997.

Duquesne Enterprises

By: /s/ANTHONY J. VILLIOTTI
   __________________________

Title: Vice President
       ______________________

<PAGE>

              Intending to be legally bound hereby,

                                                    Beacon Power Corporation

                                                    By: /s/David B. Eisenhaure
                                                       _______________________

                                                    Title:  President
                                                         ____________________

Accepted and agreed to,
with the intent to be legally bound,
this 23rd day of May, 1997.

Duquesne Enterprises

By:  /s/Anthony J. Villiotti
    _______________________

Title: Vice President
       ______________________

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