Document:

Exhibit
10.3

     

    AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

    

    This
Amended and Restated Employment Agreement (the "Agreement"), entered
into as of April 1, 2009, is by and between Beacon Power Corporation, a Delaware
corporation (the "Company"), and
Matthew L. Lazarewicz (the "Executive")

    

    WHEREAS,
the Executive is an employee of the Company, and the Company desires to retain
his services and he wishes to continue his employment by the
Company;

    

    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

    

    Section
1.  Term.  The
Company shall employ the Executive for a term commencing on the above date and
continuing until March 31, 2010, unless renewed or terminated pursuant to
Section 9.  The period of the Executive's employment hereunder is
referred to as the "Employment
Period."

    

    Section
2.  Duties.  The Executive
shall serve the Company as Vice President and Chief Technical Officer and shall
have duties and responsibilities consistent with such position.  Such
duties and responsibilities shall include, but not be limited to, management of
the Company's intellectual property and technology.  The Executive
will report to the Chief Executive Officer of the Company.  The
Executive will generally perform his services at the Company's principal
offices, which are currently located in Tyngsboro, Massachusetts; provided, however, that the
Executive may be required to travel from time to time in connection with Company
business.

    

    Section
3.  Full
Time; Best Efforts.  During the
Employment Period the Executive shall use his best efforts to promote the
interests of the Company and shall devote his full business time and efforts to
its business and affairs.  The Executive shall not engage in any
business activity which could reasonably be expected to interfere with the
performance of the Executive's duties, services and responsibilities
hereunder.

    

    Section
4.  Compensation.  The
Executive shall be entitled to compensation as follows:

    

    (a)           Base
Salary.  During the Employment Period, the Executive will
receive a salary at an annual gross rate of $189,280 (as the same may be
adjusted from time to time, the "Base Salary"), which
shall be payable in accordance with the Company’s regular payroll practices
applicable to senior executive officers.  The Executive's Base Salary
shall be reviewed by the Board of Directors of the Company (the "Board") at least
annually and may be increased (but not decreased) in the Board's discretion,
depending upon the performance of the Executive and of the Company.

    

    (b)           Annual
Bonus.  The Executive shall be eligible to receive an annual
bonus based on the achievement of individual and Company performance objectives
determined annually by the Compensation Committee of the Board in consultation
with the Executive.  The amount of the annual bonus will be targeted
at an amount equal to thirty-five percent (35%) of Base Salary per
year.  The Executive and the Compensation Committee of the Board will
set performance goals and targets for the annual bonus prior to March 31,
2008.  The Compensation Committee shall evaluate such performance
goals and targets and such annual bonus, if any, shall be paid on March 1,
2009.

    

    (c)           Long term incentive
compensation.  Effective on the effective date of this
Agreement, the Company has entered into a 2008 long term incentive compensation
arrangement with Executive, consisting of a non-qualified stock option and
restricted stock units.

    

    (d)           Withholding. The
Company may withhold from compensation payable to the Executive all applicable
federal, state, and local withholding taxes as required by law.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Section
5.  Benefits.

    

    (a)           Generally.  The
Executive will be entitled to such fringe benefits as are generally available to
the Company's executive officers, including group health and dental insurance
coverage, group long and short-term disability insurance coverage, and 401(k)
plan and stock plan participation.  He will also be entitled to a
fringe benefit consisting of reimbursement of the cost to the Executive (above
any applicable insurance coverage) of an executive physical every other year
(not to exceed $1,000 for each such physical).  In the event that any
insurance policy is paying disability benefits to Executive, and if the amount
of the Executive's monthly base salary that would be paid in the absence of such
disability is higher than the monthly insurance payments, then the Company shall
pay Executive an amount per month equal to such excess, for so long as the
Executive is employed with the Company.  No such difference shall be
payable after the Executive's employment expires or is terminated.

    

    (b)           Paid
Vacation.

    

    (i)  In
addition to U.S. statutory holidays, the Executive will be entitled to 20
business days of paid vacation per calendar year, accruing at the rate of 1.66
days per month.  The number of unused vacation days that may be
carried forward from one calendar year to the next shall be limited to up to ten
days of the current calendar year’s unused accrual (less an equal amount of any
unused PVA, defined below).   For any unused vacation accrual
from the current calendar year that cannot be carried over into the next year,
the Company shall pay the Executive a cash amount (based on the Executive's then
current year's base salary) equal to such excess up to a maximum not to exceed
ten vacation days.  Any such unused excess over ten vacation days from
the current calendar year that was accrued shall be forfeited.

    

    (ii)  Notwithstanding
the foregoing, any paid vacation time that the Executive had accrued prior to
January 1, 2009 (“Prior Vacation Accrual” or “PVA”) shall remain available for
the Executive’s use, provided that the Compensation Committee, in its sole
discretion, may elect from time to time to direct the Company to pay the
Executive a cash amount (based on the Executive’s then current year’s base
salary) equal to part or all of any such Prior Vacation Accrual.

    

    (iii)
Vacation time that is used by the Executive shall first be drawn from any unused
accrual with respect to the current calendar year, and then (assuming the
current year’s accrual has been used) then from any Prior Vacation
Accrual.  The Executive shall coordinate with the Chair of the Company
Compensation Committee if he wishes to use more than 20 vacation days in any
calendar year.

    

    (iv) Upon
any termination of employment, the Company shall pay Executive a lump sum equal
to any unused PVA, plus a lump sum equal to up to ten days of current year
vacation accrual.   Any remaining accrued but unused or unpaid
days shall be forfeited.

    

    (v) The
following table illustrates these principles as applied to Executive’s actual,
unused PVA as of the date hereof and to his possible vacation day use during
calendar 2009, assuming employment through December 21, 2009:

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            Executive’s

                                            Actual

                                          	 	
                                            Current

                                            Accrual for

                                          	 	
                                            Examples of Conceivable 

                                            Use During 2009

                                          	 	 	
                                            Ex. of

                                          	 	 	
                                            Ex. of 2009

                                            Accrual That

                                          	 	 	
                                            Ex. of Possible

                                            Carried

                                          	 
	
                                            PVA At

                                            1/1/09

                                          	 	
                                            2009  Cal.

                                            Yr  

                                          	 	
                                            From 

                                            PVA

                                          	 	 	
                                            From 2009 

                                            accrual

                                          	 	 	
                                            Req’d Paid

                                            to Exec.

                                          	 	 	
                                            Executive

                                            Forfeits 

                                          	 	 	
                                            Forward

                                            to 2010 

                                          	 
	
                                            46.96 days

                                          	 	
                                            20 days

                                          	 	 	-	 	 	
                                            5 days

                                          	 	 	
                                            10 days

                                          	 	 	
                                            5 days

                                          	 	 	
                                            46.96 days

                                          	 
	 
      	 	 
      	 	 	-	 	 	 	10	 	 	 	10	 	 	 	-	 	 	 	46.96	 
	 
      	 	 
      	 	 	-	 	 	 	20	 	 	 	-	 	 	 	-	 	 	 	46.96	 
	 
      	 	 
      	 	
                                            10
      days

                                          	 	 	 	20	 	 	 	-	 	 	 	-	 	 	 	36.96	 
	 
      	 	 
      	 	 	36.96	 	 	 	20	 	 	 	-	 	 	 	-	 	 	 	10	 
	 
      	 	 
      	 	 	46.96	 	 	 	20	 	 	 	-	 	 	 	-	 	 	 	-	 

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    (c)           Life
Insurance.  The Company will provide the Executive with group
term life insurance in an amount equal to no less than two times his Base Salary
plus $1,000,000.

    
      
         

      

      
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    Section
6.  Expense
Reimbursement.  The Executive will be entitled to reimbursement
of all reasonable and necessary business expenses incurred by the Executive in
the ordinary course of business on behalf of the Company, subject to
presentation of appropriate documentation and compliance with policies
established by the Board.

    

    Section
7.
Non-Disclosure
and Assignment of Invention Agreement; Indemnification Agreement.  The
parties acknowledge and agree that the Executive has executed and delivered to
the Company the Company's standard form of Invention and Non-Disclosure
Agreement and that the Company and the Executive have executed and delivered an
Indemnification Agreement in form and substance satisfactory to both parties
(the "Indemnification
Agreement").

    

    Section
8.  Non-Competition
and Non-Solicitation Covenants.

    

    (a)           Non-competition.  The
Executive agrees that during the Employment Period and for the longer of (i) 12 months
thereafter, and (ii) the period during which the Company is providing payment to
the Executive under Section 9(c) of this Agreement, he will not own, manage,
operate, control, be employed by, provide services as an independent contractor
or consultant to, own any stock or other investment in or debt of, or otherwise
be connected in any manner with the ownership, management, operation or control
of, any business or enterprise that at the time of termination, competes with
the Company or conducts business in a field in respect of which the Board is
making plans to enter.

    

    (b)           Non-solicitation.  The
Executive agrees that during the Employment Period and for two year thereafter,
he will not attempt to persuade or induce any employee of the Company to
terminate his or her employment with the Company for any reason.

    

    (c)           Acknowledgments by
Executive.  The Executive acknowledges that the covenants set
forth in this Section 8 are reasonable in scope and are no greater than is
necessary to protect the Company's legitimate business interests.  The
Executive further acknowledges that any breach by him of the covenants set forth
in this Section 8 would irreparably injure the Company, and that money damages
would not adequately compensate the Company for the injuries that it would
suffer.  The parties accordingly agree that in the event of any breach
or threatened breach by the Executive of any of the covenants set forth in this
Section 8, the Company may obtain, from any court of competent jurisdiction,
both preliminary and permanent injunctive relief in order to prevent the
occurrence or continuation of such injuries, without being required to prove
actual damages or post any bond or other security.  Nothing in this
Agreement shall prohibit the Company from pursuing any other legal or equitable
remedy that may be available to it in the event of the Executive's breach of any
of the covenants set forth in this Agreement.

    

    Section
9.  Termination.

    

    (a)           Employment
Termination.  The employment of
the Executive pursuant to this Agreement shall terminate upon the occurrence of
any of the following:

    

    (i)  At the election of the
Company, for Cause, immediately upon written notice by the Company to the
Executive.  For purposes of this Agreement, "Cause" shall be
deemed to exist upon a reasonable good faith finding by the Board that the
Executive has:

    

    (1) committed an act constituting
fraud, embezzlement or other felony, determined in the reasonable opinion of the
Board acting in its sole discretion, or

    

    (2) materially breached his obligations
under this Agreement or the Inventions and Nondisclosure Agreement, and failed
to cure same within 30 days after written notice thereof is given to him by the
Company, or

    

    (3) materially breached the Company's
material policies, including but not limited to the Company's policies regarding
insider trading and sexual harassment, or

    
      
         

      

      
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    (4) engaged in willful misconduct and
failed to cure same within 30 days after written notice thereof is given to him
by the Company.

    

    (ii)  At the election of the
Company, without Cause, upon at least 90 days written notice by the Company to
the Executive.

    

    (iii)  The death of the
Executive, or (in the discretion of the Company) the Disability of the
Executive.  For purposes of this Agreement, "Disability" shall be
considered to exist:

    

    (1) if
the Executive fails to perform his normal duties for at least 60 days (not
counting days taken for vacation), whether or not consecutive, during any
180-day period, or

    

    (2) if
the Executive's insurance company has confirmed that any disability insurance
benefits are going to be paid by reason of Executive's incapacitation,
or

    

    (3) if
the Board, acting in its sole discretion but after reasonable consultation with
Executive, concludes that the Executive suffers from a degree of physical or
mental incapacitation as a result of illness or accident which makes it
reasonably unlikely that the Executive will be able to perform his normal duties
for a period of 60 days.  In reaching this conclusion, the Board may
consult third parties, including, but not limited to, other employees,
physicians, psychiatrists, and counselors.

    

    (iv)  At the election of the
Executive, for any reason, upon at least 90 days prior written notice to the
Company.

    

    (v)  At the election of the
Executive for Good Reason, provided that the
Executive shall have given written notice to the Company within 30 days after he
becomes aware of the occurrence of any event of Good Reason specifying such
event, and such event shall be continued for a period of 30 days following such
notice.  For purposes of this Agreement, "Good Reason" means
any of the following events:

    

    (1) a
material diminution in the duties, responsibilities, position or job title of
the Executive without the Executive's written consent.  For example,
it will be considered such a diminution if in the event of a business
combination involving the Company by means of a reorganization, merger,
consolidation, recapitalization, or asset sale (other than one described below
in subparagraph 4), the Executive remains as Vice President and CTO of the
Company itself but is not appointed as the Vice President and CTO of the other
party to such combination by the 180th day
after closing (or, the Executive and the Company have not reached some other,
mutually acceptable arrangement by then).

    

    (2) a material breach by the Company of
its obligations under this Agreement or the Indemnification Agreement,
or

    

    (3) a change in the primary location
where the Executive is expected to perform his services hereunder to a location
that is more than 50 miles away from Tyngsboro, Massachusetts, or

    

    (4) a
Sale of the Business (as defined below)  For purposes of this
Agreement, a "Sale of
the Business" means (A) the acquisition by a person, group, or party of
50% or more of the outstanding capital stock of the Company in a single
transaction or series of contractually related transactions, (B) a change of a
majority of the members of the Board (other than by resignation or by any
replacement of such resigned Board member(s)) when the change of the various
directors occurs at substantially the same time, without the approval or consent
of the members of the Board before such change, (C) the acquisition of the
Company by means of a reorganization, merger, consolidation, recapitalization,
or asset sale, unless the owners of the capital stock of the Company before such
transaction own immediately after such transaction more than 50% of the capital
stock of the acquiring or succeeding entity in substantially the same
proportions (without giving effect to any funds that may be newly invested in
the Company or such acquiring or succeeding entity at about the same time), or
(D) the approval of a liquidation or dissolution of the
Company.

    
      
         

      

      
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    (b)  Effect of
Termination.

    

    (i)  Termination
Pursuant to Section 9(a)(i) relating to termination for cause or Section
9(a)(iv) relating to termination at the election of Executive for any
reason.  In the event the Executive's employment is terminated
pursuant to Section 9(a)(i) or Section 9(a)(iv), the Company shall pay to the
Executive his accrued Base Salary through the last date of his employment
hereunder (the "Termination Date")
and shall continue to provide to the Executive the benefits described in Section
5 (the "Benefits") through
the Termination Date, but shall have no further responsibility for any
compensation or benefits to the Executive for any time period subsequent to the
Termination Date.

    

    (ii)  Termination
pursuant to Section 9(a)(ii) relating to termination without cause.  In the event the
Executive's employment is terminated pursuant to Section 9(a)(ii), the Company
shall:

    

    (1) Pay to the Executive a cash amount
equal to his then monthly Base Salary multiplied by twelve.

    

    (2) Continue to provide the benefits
described in Sections 5(a) and 5(c) to the Executive until the first anniversary
of the Termination Date.

    

    (3) Within five business days after the
Termination Date, pay the Executive an amount equal to his bonus which was paid
(or which has been determined but not yet paid) with respect to the prior fiscal
year multiplied by a fraction, the numerator of which is the number of full
fiscal months that have elapsed in the then current fiscal year prior to the
Termination Date, and the denominator of which is 12.  In no event
shall payment under this Section 9(b)(ii)(3) exceed 80% of the Executive's base
salary for the prior year.  If the bonus with respect to the prior
fiscal year has not yet been determined by the date that the parties must
calculate the amount to be paid under this paragraph, then the parties shall
calculate this portion of the severance by reference to the bonus paid with
respect to the year next preceding the prior fiscal year.

    

               (iii)  Termination
pursuant to Section 9(a)(v) relating to termination at the election of Executive
for Good Reason.  In the event the
Executive's employment is terminated pursuant to Section 9(a)(v), the Company
shall:

    

    (1) Pay to the Executive a cash amount
equal to his then monthly Base Salary multiplied by twelve.

    

    (2) Continue to provide the benefits
described in Sections 5(a) and 5(c) to the Executive until the first anniversary
of the Termination Date.

    

    (3) Within five business days after the
Termination Date, pay the Executive an amount equal to his bonus which was paid
(or which has been determined but not yet paid) with respect to the prior fiscal
year multiplied by a fraction, the numerator of which is the number of full
fiscal months that have elapsed in the then current fiscal year prior to the
Termination Date, and the denominator of which is 12.  In no event,
shall payment under this Section 9(b)(iii)(3) exceed 80% of the Executive's base
salary for the prior year.  If the bonus with respect to the prior
fiscal year has not yet been determined by the date that the parties must
calculate the amount to be paid under this paragraph, then the parties shall
calculate this portion of the severance by reference to the bonus paid with
respect to the year next preceding the prior fiscal year.

    

               (iv)  Termination
pursuant to Section 9(a)(iii) relating to the death or disability of the
Executive.  In the event the Executive's employment is
terminated pursuant to Section 9(a)(iii), the Company shall:

    
      
         

      

      
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    (1) Continue to pay to Executive or his
estate, as the case may be, an amount equal to his then current Base Salary for
the three-month period following the Termination Date.

    

    (2) Continue for the 12-month period
following the Termination Date all health and dental insurance benefits the
Executive was entitled to at the Termination Date.

    

    (v)  Golden
Parachute Payment Excise Tax Protection.  In the event that the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (or any
successor penalty or excise tax subsequently imposed by law) applies to any
payments or benefits specifically paid or conferred only under this Agreement
(which shall not include any payments or benefits paid or conferred under the
long-term incentive compensation arrangement or the performance based long-term
incentive compensation arrangement referenced in Section 4(c)) (the “Excise Tax”), an
additional amount shall be paid by the Company to the Executive equal to the
amount of such Excise Tax (the “Gross Up Payment”); provided,
however in no event shall the aggregate amount payable by the Company to
Executive for any excise tax imposed by Section 4999 of the Code pursuant to
this Agreement and all other agreements between the Company and Executive exceed
$250,000.  Any such Gross Up Payment shall be made to the Executive as
soon as practicable, but in no event later than the close of the calendar year
following the calendar in which the Excise Tax is remitted to the applicable
taxing authority. The Company and its advisers shall make the determination of
the amount of the Gross Up Payment.  To the extent that the amount of
such Gross Up Payment exceeds the amount of Excise Tax actually paid by
Executive, Executive shall promptly pay to the Company such excess
amount.

    

    (c)           Continuation/Nonrenewal.  Unless
this Agreement has been otherwise terminated before the end of the scheduled
Employment Period as described in Section 1, the Company and the Executive agree
to discuss in good faith the possible continuation of the Executive’s
employment, commencing six months prior to such date.  If the Company
fails to offer the Executive a new employment agreement, with at least
equivalent material terms to this Agreement, by such date and in fact the
Executive ceases to be an employee of the Company (other than for Cause)
following such date the Company shall pay the Executive a monthly amount for
twelve months equal to his last prevailing monthly Base Salary, plus one-twelfth
of the Executive’s bonus for the most recent fiscal year of the Company, in
accordance with the Company’s regular payroll practices, less applicable
withholdings required by law.  If the bonus with respect to the most
recent fiscal year has not yet been determined by the date that the parties must
calculate the amount to be paid under this paragraph with respect to bonus, then
the parties shall calculate this portion of the severance by reference to the
bonus paid with respect to the year next preceding such most recent fiscal
year.

    

    Section
10.  No
Conflicting Agreements.  The
Executive represents and warrants to the Company that he is not a party to or
bound by any confidentiality, non-competition, non-solicitation or other
agreement or restriction that could conflict with or be violated by the
performance of his duties for the Company.

    

    Section
11.  No
Disparagement.  Each party agrees that at all times following
the termination of the Executive's employment hereunder, such party shall not
make or cause to be made, directly or indirectly, any statements to any third
party that disparage or denigrate the other party or, in the case of the
Company, any of its current or former directors, officers or employees, unless
required by law.

    

    Section
12.  Enforceability,
etc.  This Agreement shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision hereof
shall be prohibited or invalid under any such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement.  If any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity, or subject, such provisions shall
be construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law.

    

    Section
13.  Notices.  Any
notice or other communication given pursuant to this Agreement shall be in
writing and shall be personally delivered, sent by nationally recognized
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as
follows:

    
      
         

      

      
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                (a)
      If to the
      Executive:

                Matthew
      L. Lazarewicz

              	
                (b)
      If to the
      Company:

                Beacon
      Power Corporation

                65
      Middlesex Road

                Tyngsboro,
      MA  01879

                Attn:  Compensation
      Committee and Chief Executive
Officer

              

      

    

    or to
such other address as a party shall have designated by notice to the other
party.

    

    Section
14.  Governing
Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.

    

    Section
15.  Amendments
and Waivers.  No amendment or waiver of this Agreement or any
provision hereof shall be binding upon the party against whom enforcement of
such amendment or waiver is sought unless it is made in writing and signed by or
on behalf of such party.  The waiver by either party of a breach of
any provision of this Agreement by the other party shall not operate and be
construed as a waiver or a continuing waiver by that party of the same or any
subsequent breach of any provision of this Agreement by the other
party.  To the extent that the final regulations under Section 409A of
the Code require modifications to this Agreement in order to avoid that
section’s penalty tax, the parties agree to discuss amending this Agreement
accordingly.  Notwithstanding the foregoing, to the extent the Company
reasonably determines that any portion of the payments or benefits payable under
this Agreement is subject to Section 409A of the Code, such portion of payments
or benefits payable shall (i) to the extent required by Section 409A of the
Code, be delayed for six months from the Termination Date or (ii) to the extent
permitted under subsequent guidance from the Internal Revenue Service, be
otherwise made to comply with such Section 409A requirements, provided, however,
that any such action under this subsection (ii) that is more detrimental to
Executive than that in subsection (i) shall only be made with Executive’s
consent.  To the extent required in order to avoid accelerated
taxation and/or tax penalties under Section 409A, the Executive shall not be
considered to have terminated employment with the Company for purposes of the
Agreement and no payments shall be due under the Agreement which are payable
upon termination of employment until the Executive would be considered to have
incurred a “separation from service” from the Company within the meaning of
Section 409A.

     

    Section
16.  Binding
Effect.  This
Agreement shall be binding on and inure to the benefit of the parties hereto and
their respective heirs, executors and administrators, successors and assigns,
except that it may not be assigned by the Company without the Executive's
consent, provided that the Company may assign this Agreement to an entity that
acquires substantially all of the Company's assets by means of an asset sale,
merger or otherwise, provided further that such entity shall agree in writing to
assume and be bound by this Agreement.  This Agreement is personal to
the Executive and is not assignable by him.

    

    Section
17.  Entire
Agreement.  This Agreement constitutes the final and entire
agreement of the parties with respect to the matters covered hereby and replaces
and supersedes all other agreements and understandings relating hereto, other
than the RSU (restricted stock unit) and option agreements already in
place.

    

    Section
18.  Pronouns.  Whenever
the context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa.

    

    Section
19.  Survivability.  Sections 6-20 herein shall survive the termination of this Agreement.

    

    Section
20.  Counterparts.  This
Agreement may be executed in any number of counterparts, and with counterpart
signature pages, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

    
      
         

      

      
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    IN
WITNESS WHEREOF, this Agreement has been executed as a sealed instrument as of
the date first above written.

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  EXECUTIVE

                                	 	BEACON
      POWER CORPORATION
	 
      	 	 	 
      
	
                                  /s/ Matthew L. Lazarewicz

                                	 	By:	
                                  /s/ F. William Capp

                                
	
                                  Matthew
      L. Lazarewicz

                                	 	Name:  F.
      William Capp
	 
      	 	Title:  President
      and Chief Executive
Officer

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        - 8
-Exhibit
10.4

     

    BEACON
POWER CORPORATION

     

    Restricted
Stock Unit and Option Agreement

     

    This Restricted Stock Unit and Option
Agreement (this “Agreement”), dated as of April 3, 2009
(the “Effective Date”),
is by and between Beacon Power Corporation (the “Company”) and F. William Capp
(“Executive”), an
executive officer of the Company.

     

    WHEREAS,
this Agreement is intended to provide Executive compensation in the form of
restricted stock units (or “RSUs”) that convert into
shares of the Company’s common stock, $.01 par value per share (the “Common Stock”);

     

    WHEREAS,
this Agreement is also intended to provide Executive with a non-qualified stock
option to purchase shares of the Common Stock pursuant to the terms and
conditions set forth herein;

     

    NOW
THEREFORE, it is agreed as follows:

     

    ARTICLE
I.         RESTRICTED STOCK UNIT
AWARD

     

    1.1           Restricted
Stock Unit Award.  Subject to the
terms and conditions of this Agreement and pursuant to the Company’s Third
Amended and Restated 1998 Stock Incentive Plan (the “Plan”), the Company hereafter
will grant RSUs to Executive in accordance with the vesting table set forth
below.  On each vesting date set forth below (each a “Vesting Date”), the Company
shall be considered to have awarded RSUs in the indicated amount to the
Executive.

     

    
      
        
          
            
              	
                      % of total RSUs Vested

                    	 	
                      Vesting Date

                    	 	
                      RSUs Vesting

                      on Vesting Date

                    	 	 	
                      Total RSUs Vested 

                      to Date

                    	 
	
                      8.33%

                    	 	
                      March
      31, 2009

                    	 	 	3,235	 	 	 	3,235	 
	
                      8.33%

                    	 	
                      June
      30, 2009

                    	 	 	3,235	 	 	 	6,470	 
	
                      8.33%

                    	 	
                      September
      30, 2009

                    	 	 	3,235	 	 	 	9,705	 
	
                      8.33%

                    	 	
                      December
      31, 2009

                    	 	 	3,235	 	 	 	12,940	 
	
                      8.33%

                    	 	
                      March
      31, 2010

                    	 	 	3,235	 	 	 	16,175	 
	
                      8.33%

                    	 	
                      June
      30, 2010

                    	 	 	3,235	 	 	 	19,410	 
	
                      8.33%

                    	 	
                      September
      30, 2010

                    	 	 	3,235	 	 	 	22,645	 
	
                      8.33%

                    	 	
                      December
      31, 2010

                    	 	 	3,235	 	 	 	25,880	 
	
                      8.33%

                    	 	
                      March
      31, 2011

                    	 	 	3,235	 	 	 	29,115	 
	
                      8.33%

                    	 	
                      June
      30, 2011

                    	 	 	3,235	 	 	 	32,350	 
	
                      8.33%

                    	 	
                      September
      30, 2011

                    	 	 	3,235	 	 	 	35,585	 
	
                      8.37%

                    	 	
                      December
      31, 2011

                    	 	 	3,235	 	 	 	38,820	 

            

          

        

      

    

     

    1.2           Conversion
to Common Stock.  Each vested RSU shall convert into one (1)
share of Common Stock on the applicable Vesting Date; provided, that, if the
applicable Vesting Date occurs during a period in which Executive is (a) subject
to a lock-up agreement restricting Executive’s ability to sell Common Stock in
the open market, (b) restricted from selling Common Stock in the open market
because a trading window is not available, in the opinion of Company, or (c)
trading is otherwise not appropriate, in the reasonable and good faith opinion
of Company, such conversion of vested RSUs into shares of Common Stock shall be
delayed until the date immediately following the expiration of the lock-up
agreement or the opening of a trading window or confirmation by Company that
trading is appropriate, as the case may be, provided, however, that in no event
shall conversion be delayed beyond March 15 of the year following the Vesting
Date year.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
II.       NON-QUALIFIED STOCK OPTION
GRANT

     

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

    

    
      
        
          
            
              
                
                  	
                          Shares:

                        	 	
                          Exercise
      Price:

                        	 
	
                          349,535 

                        	 	$	0.49	 

                

              

            

          

        

      

    

    

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

    

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

    

    
      
        
          
            
              
                	
                        % of total Shares Vested

                      	 	
                        Vesting Date

                      	 	
                        Shares Vesting

                        on Vesting Date

                      	 	 	
                        Total Shares Vested 

                        to Date

                      	 
	
                        8.33%

                      	 	
                        March
      31, 2009

                      	 	 	29,128	 	 	 	29,128	 
	
                        8.33%

                      	 	
                        June
      30, 2009

                      	 	 	29,128	 	 	 	58,256	 
	
                        8.33%

                      	 	
                        September
      30, 2009

                      	 	 	29,128	 	 	 	87,384	 
	
                        8.33%

                      	 	
                        December
      31, 2009

                      	 	 	29,128	 	 	 	116,512	 
	
                        8.33%

                      	 	
                        March
      31, 2010

                      	 	 	29,128	 	 	 	145,640	 
	
                        8.33%

                      	 	
                        June
      30, 2010

                      	 	 	29,128	 	 	 	174,768	 
	
                        8.33%

                      	 	
                        September
      30, 2010

                      	 	 	29,128	 	 	 	203,896	 
	
                        8.33%

                      	 	
                        December
      31, 2010

                      	 	 	29,128	 	 	 	233,024	 
	
                        8.33%

                      	 	
                        March
      31, 2011

                      	 	 	29,128	 	 	 	262,152	 
	
                        8.33%

                      	 	
                        June
      30, 2011

                      	 	 	29,128	 	 	 	291280	 
	
                        8.33%

                      	 	
                        September
      30, 2011

                      	 	 	29,128	 	 	 	320,408	 
	
                        8.37%

                      	 	
                        December
      31, 2011

                      	 	 	29,127	 	 	 	349,535	 

              

            

          

        

      

    

    

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

    

    2.3          Exercise of
Option.

    

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

     

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

    

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

    
      
         

      

      
        - 2
-

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

    ARTICLE
III.        TERMINATION OF
EMPLOYMENT

     

    3.1           Termination
of Employment.  

     

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

     

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

     

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

     

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

    

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

    
      
         

      

      
        - 3
-

        
          

        

      

      
         

      

    

    ARTICLE
IV.        GENERAL
PROVISIONS

    

    4.1           Acquisition
Events.  Upon the occurrence of an Acquisition Event (as
defined below), or the execution by the Company of any agreement with respect to
an Acquisition Event, the authorized administrator of the Plan shall take any
one or more of the following actions with respect to the RSUs and the Option:
(i) provide that the RSUs and/or the Option shall be assumed, or equivalent
equity compensation shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof); (ii) upon written notice to Executive,
provide that any portion of the RSUs that are vested but not converted and/or
any portion of the Shares underlying the Option that are vested but not
exercised will become converted or exercisable, as the case may be, in full as
of a specified time (the “Acceleration Time”) prior to
the Acquisition Event and will terminate immediately prior to the consummation
of such Acquisition Event, except to the extent exercised by Executive between
the Acceleration Time and the consummation of such Acquisition Event; (iii) in
the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the “Acquisition Price”), provide
that (A) the unvested RSUs shall terminate upon consummation of such Acquisition
Event and Executive shall receive, in exchange therefor, a cash payment equal to
the amount equal to the Acquisition Price multiplied by the number of shares of
Common Stock subject to such unvested RSUs, (B) the Option shall terminate upon
consummation of such Acquisition Event and Executive shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (x) the
Acquisition Price multiplied by the number of shares of Common Stock subject to
the Option (whether or not then convertible or exercisable), exceeds (y) the
aggregate exercise price of the Option; and (iv) provide that the unvested RSUs
and/or the Option (A) shall become exercisable, realizable or vested in full, or
shall be free of all conditions or restrictions, as applicable to the Option,
prior to the consummation of the Acquisition Event, or (B), if applicable, shall
be assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof).

    

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

    

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

    

    4.3           Golden
Parachute Payment Excise Tax Protection.  In the event that the
excise tax imposed by Section 4999 of the Code, (or any successor penalty or
excise tax subsequently imposed by law) applies to any payments or benefits
specifically paid or conferred only under this Agreement (the “Excise Tax”), an additional
amount shall be paid by the Company to the Executive equal to the amount of such
Excise Tax (the “Gross Up
Payment”); provided, however in no event shall the aggregate amount
payable by the Company to Executive for any excise tax imposed by Section 4999
of the Code pursuant to this Agreement and all other agreements between the
Company and Executive exceed $250,000.  The Company and its advisers
shall make the determination of the amount of the Gross Up
Payment.  To the extent that the amount of such Gross Up Payment
exceeds the amount of Excise Tax actually paid by Executive, Executive shall
promptly pay to the Company such excess amount.

    
      
         

      

      
        - 4
-

        
          

        

      

      
         

      

    

    ARTICLE
V.          TRANSFERABILITY

     

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

     

    ARTICLE
VI.        MISCELLANEOUS

     

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

    

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

    

    6.3           No Right
as Stockholder.  Executive shall not be entitled to vote any
shares of Common Stock that may be acquired through conversion of RSUs or the
Shares underlying the Option to Common Stock, shall not receive any dividends
attributed to such shares of Common Stock, and shall have no other rights of a
stockholder with respect to the RSUs and/or the Option unless and until the
Common Stock issuable upon conversion of the RSUs has been delivered to
Executive or the Option is duly exercised by Executive and the Common Stock is
issued.

    

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

    

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

    

    6.6           Withholding.  Executive
shall pay to Company, or make provision satisfactory to Company for payment of,
any taxes required by law to be withheld in
connection with this Agreement no later than each Vesting Date upon which
Company vests RSUs to Executive.  No shares of Common Stock will be
issued pursuant to the exercise of the Option unless and until Executive pays to
the Company, or makes provision satisfactory to the Company for payment of, any
federal, state or local withholding taxes required by law to be withheld in
respect of the Option.  Executive may satisfy such tax obligations by
delivering to Company cash in the form of wire transfer or check and Company
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to Executive.

    
      
         

      

      
        - 5
-

        
          

        

      

      
         

      

    

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

    

    6.8          Notices.  Any
notice hereunder to the Company shall be addressed to Beacon Power Corporation,
Attn: Compensation Committee, 234 Ballardvale Street, Wilmington, MA 01887, and
any notice hereunder to Executive shall be sent to the address reflected on the
payroll records of the Company, subject to the right of either party to
designate at any time hereafter in writing some other address.

    

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

    

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

    

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

    

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

    

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

    

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        - 6
-

        
          

        

      

      
         

      

    

     

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

     

    
      
        
          
            
              
                	
                        EXECUTIVE:

                      	 	
                        BEACON
      POWER CORPORATION

                      
	 
      	 	 
      
	
                        By:

                      	
                        /s/ F. William Capp

                      	 	
                        By:

                      	
                        /s/ Jack P. Smith

                      
	 
      	
                        Signature

                      	 	 
      	
                        Signature

                      
	 
      	 	 
      
	
                        Name:  F.
      William Capp

                      	 	
                        Name:  Jack
      P. Smith

                      
	
                        Address:

                      	 	
                        Title:  Chairman,
      Compensation
Committee

                      

              

            

          

        

      

    

    
      
         

      

      
        - 7
-

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