Document:

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(the  PREVIOUS  LICENSE)  which is  superseded  by this  Agreement  (the  "CELL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

<PAGE>

     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<PAGE>   1
                                                                    EXHIBIT 10.1

                             PAIN THERAPEUTICS, INC.

                            INDEMNIFICATION AGREEMENT

        THIS INDEMNIFICATION AGREEMENT ("AGREEMENT") is made as of this ______
day of _____________, ______, by and between PAIN THERAPEUTICS, INC., a Delaware
corporation (the "COMPANY"), and ("INDEMNITEE").

        WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;

        WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;

        WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and

        WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.

        NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

        1. INDEMNIFICATION.

                (a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no

<PAGE>   2

reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that (i) Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, or (ii) with respect to any criminal action or proceeding,
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.

                (b) Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or proceeding if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been finally adjudicated by court order or judgment to be liable to
the Company in the performance of Indemnitee's duty to the Company and its
stockholders unless and only to the extent that the court in which such action
or proceeding is or was pending shall determine upon application that, in view
of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for expenses and then only to the extent that the court
shall determine.

        2. EXPENSES; INDEMNIFICATION PROCEDURE.

                (a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.

                (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the Company
at the address shown on the signature page of this Agreement (or such other
address as the

                                     - 2 -
<PAGE>   3

Company shall designate in writing to Indemnitee). Notice shall be deemed
received three business days after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.

                (c) Procedure. Any indemnification and advances provided for in
Section 1 and this Section 2 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or By-laws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 12 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action or proceeding in advance of its final disposition)
that Indemnitee has not met the standards of conduct which make it permissible
under applicable law for the Company to indemnify Indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Company and
Indemnitee shall be entitled to receive interim payments of expenses pursuant to
Subsection 2(a) unless and until such defense may be finally adjudicated by
court order or judgment from which no further right of appeal exists. It is the
parties' intention that if the Company contests Indemnitee's right to
indemnification, the question of Indemnitee's right to indemnification shall be
for the court to decide, and neither the failure of the Company (including its
Board of Directors, any committee or subgroup of the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.

                (d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

                (e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by

                                     - 3 -
<PAGE>   4

Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.

        3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.

                (a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's By-laws or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute
or rule which expands the right of a Delaware corporation to indemnify a member
of its Board of Directors, an officer or other corporate agent, such changes
shall be ipso facto, within the purview of Indemnitee's rights and Company's
obligations, under this Agreement. In the event of any change in any applicable
law, statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its Board of Directors, an officer or other corporate
agent, such changes, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement shall have no effect on this Agreement
or the parties' rights and obligations hereunder.

                (b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its By-laws, any
agreement, any vote of stockholders or disinterested Directors, the Delaware
Corporation Law or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.

        4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.

        5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from

                                     - 4 -
<PAGE>   5

indemnifying its directors and officers under this Agreement or otherwise.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.

        6. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.

        7. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.

        8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

                (a) EXCLUDED ACTS. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of liability
under the applicable law.

                (b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to

                                     - 5 -
<PAGE>   6

indemnification under this Agreement or any other statute or law or otherwise as
required under Section 145 of the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or bringing
of such suit; or

                (c) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or

                (d) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.

                (e) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.

        9. CONSTRUCTION OF CERTAIN PHRASES.

                (a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.

                (b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.

                                     - 6 -
<PAGE>   7

        10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.

        11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.

        12. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all costs and expenses, including reasonable attorneys' fees, incurred
by Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.

        13. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and acknowledged in writing as received by the addressee, on
the date of such receipt, or (ii) if mailed by domestic certified or registered
mail with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.

        14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.

        15. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be performed
entirely within Delaware.

        16. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable to
corporation effectively to bring suit to enforce such rights.

        17. CONTINUATION OF INDEMNIFICATION. All agreements and obligations of
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the Company and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim

                                     - 7 -
<PAGE>   8

or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee was serving in the capacity referred to herein.

        18. AMENDMENT AND TERMINATION. Subject to Section 17, no amendment,
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.

                                     - 8 -
<PAGE>   9

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                       PAIN THERAPEUTICS, INC.

                                       By:
                                          ------------------------------------
                                       Title:
                                             ---------------------------------

                                       Address:  250 East Grand Avenue, Suite 70
                                                 So. San Francisco, CA  94080

AGREED TO AND ACCEPTED:

INDEMNITEE:

-----------------------------------
        (Signature)

Address:
        ---------------------------

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

                                     - 9 -

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