Document:

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                                                                 Exhibit 10.1.6

                           INVESTORS RIGHTS AGREEMENT

INVESTORS RIGHTS AGREEMENT (this "Agreement") is dated as of May 23, 2000 by and
among (i) Beacon Power Corporation, a Delaware corporation (the "COMPANY"), (ii)
the stockholders of the Company who are listed on Schedule A hereto (each, a
"SCHEDULE A STOCKHOLDER" and collectively, the "SCHEDULE A STOCKHOLDERS"), and
(iii) the other stockholders of the Company listed on Schedule B hereto (each,
an "INVESTOR" and collectively, the "INVESTORS"). The Schedule A Stockholders
and the Investors are collectively referred to herein as the "STOCKHOLDERS" and
individually as a "STOCKHOLDER". Certain terms used in this Agreement are
defined in EXHIBIT A hereto.

                                 R E C I T A L S

A. Each of the Investors has made an investment in the Company by acquiring
shares of the Company's capital stock (the "SHARES").

B. In consideration of the investment made in the Company by each of the
Investors, the Schedule A Stockholders and the Company have agreed to enter into
this Agreement and to grant to the Investors the rights set forth herein.

                                    AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants contained herein, the Stockholders and the Company (each a "PARTY" and
collectively, the "PARTIES") agree as follows:

1.       BOARD OF DIRECTORS REPRESENTATION

1.1. REPRESENTATION. From and after the date hereof, each Stockholder shall vote
all of the voting securities of the Company over which such Stockholder has
voting control so as to effect the following:

(a) Subject to clause (c) below, the authorized number of directors of the
Company's Board of Directors (the "BOARD") shall be established at seven
members.

                  (b) The following Persons shall be elected to the Board at
                  each election of directors during the term of this Agreement:

                        (i) two Persons designated by Perseus Capital, L.L.C.

("PERSEUS");

                        (ii) one Person designated by DQE Enterprises, Inc.

("DUQUESNE");

(iii) subject to Section 1.3 herein, one Person designated by GE Capital Equity
Investments, Inc. ("GE");

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                        (iv) one Person designated by Mechanical Technologies
                        Incorporated ("MTI");

                        (v) one Person designated by SatCon Technology
                        Corporation ("SATCON"); and

                        (vi) William Stanton for as long as he remains the Chief
                        Executive Officer of the Company or, if Mr. Stanton
                        ceases to be the Chief Executive Officer of the Company,
                        one Person jointly chosen by SatCon and Perseus.

The Persons elected to the Board pursuant to clauses (i) through (iv) are
referred to herein as the "INVESTOR REPRESENTATIVES".

                  (c) At any time, any Person designated to serve on the Board
                  hereunder may be removed from the Board (and thereupon from
                  all committees thereof) with or without cause, at the written
                  request of the Stockholder (or Stockholders) that designated
                  such director in accordance herewith.

                  (d) In the event that any Person designated to serve on the
                  Board hereunder for any reason ceases to serve as a director
                  of the Board or any committee thereof during such director's
                  term of office, the resulting vacancy on the Board or any
                  Committees shall be filled by a Person designated by the
                  Stockholder (or Stockholders) that designated the director
                  vacating the office in accordance herewith.

                  (e) In the event (i) the Company breaches in any material
                  respect any of its covenants or agreements under the
                  Securities Purchase Agreement dated as of May 23, 2000 by and
                  among the Company, Perseus, Duquesne, Micro-Generation
                  Technology Fund, L.L.C. ("MICRO"), GE, MTI, Penske Corporation
                  and the Beacon Group Energy Investment Fund, L.P. ("Beacon
                  Fund") (the "CLASS F AGREEMENT") or any Related Agreement (as
                  defined in the Class F Agreement) and fails to cure such
                  breach within 30 days after the delivery of a written notice
                  to the Company describing such breach in reasonable detail,
                  (ii) it becomes known that any of the representations and
                  warranties of the Company contained in the Class F Agreement
                  were not true and correct in all material respects as the date
                  of the Closing (as defined in the Class F Agreement) and such
                  inaccuracy is not cured within 30 days after the delivery of a
                  written notice to the Company describing such inaccuracy in
                  reasonable detail, (iii) the Company fails to redeem any
                  shares of its Class F Preferred Stock as required by the
                  Company's Certificate of Incorporation (as then in effect) at
                  the time such redemption is required (including without
                  limitation any failure to redeem that is based on a lack of
                  legally available funds or any other legal or contractual
                  prohibition or restriction upon redemption), or (iv) the
                  Company or any of its subsidiaries becomes the subject of any
                  proceeding under the Bankruptcy Code or any similar statute
                  (whether voluntarily or involuntarily), then upon the
                  occurrence of any such event the Board shall be increased by
                  two additional members who shall be designated by holders of a
                  majority of the outstanding shares of the Company's Class F
                  Preferred Stock. To the extent any cure of a breach by the
                  Company described in clause (i) or (ii) of the immediately
                  preceding sentence would not cure any adverse effect resulting
                  from such initial breach, no cure

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period shall be deemed to be available to the Company with respect to such
breach. Such increase in the size of the Board shall continue in effect until
the breach or inaccuracy referenced in clause (i) or (ii) has been fully cured,
the redemption referenced in clause (iii) has been fully effected, or the
proceeding referenced in clause (iv) has been dismissed, as the case may be.

1.2. ANNUAL BUDGET. At least 15 days prior to the beginning of each fiscal year,
the Board shall, with the approval of a majority of the Investor
Representatives, approve and adopt a budget for the Company for such fiscal year
(in each case, an "Annual Budget").

1.3. OBSERVER RIGHTS. For so long as Micro holds any capital stock of the
Company, the Company shall invite a representative from Micro to attend all
meetings of the Board, at the Company's expense, in a nonvoting observer
capacity. For so long as Beacon Fund holds at least 5% of the capital stock of
the Company, on a fully diluted basis, the Company shall invite a representative
from Beacon Fund to attend all meetings of the Board, at the Company's expense,
in a nonvoting observer capacity. GE may, at its sole discretion, elect to have
a representative attend meetings of the Board as an observer in lieu of
designating a director pursuant to Section 1.1(b)(iii) above. The Company shall
provide all such representatives with the same financial and other information
that is provided to the members of the Board in connection with any meetings of
the Board. As a condition of the observer rights granted in this Section, each
of Micro, Beacon Fund and GE agrees to abide by the Company's insider trading
rules to the extent they are applicable to all members of the Board, and each
such representatives of Micro, Beacon Fund and GE shall agree to abide by the
Company's insider trading rules to the extent they are applicable to all members
of the Board.

1.4 RESTRICTIONS ON SALES BY MANAGEMENT. Except for transfers to Family Members,
the Company shall prohibit each of its officers and other members of the
Company's management team who hold in excess of 100,000 shares on a fully
diluted basis from transferring any shares of capital stock of the Company
without the Company first obtaining the affirmative vote of at least a
two-thirds majority of the holders of Class F Preferred Stock, provided such
two-thirds majority must consist of at least two holders of Class F Preferred
Stock.

2.       REGISTRATION RIGHTS

2.1. DEFINITIONS. For purposes of this Section 2:

"Commencement Date" means the 180th day after the date on which the first of the
following events occurs: (i) the Company consummates its initial public offering
of securities under the Securities Act, (ii) the company registers a class of
securities under Section 12(b) or 12(g) of the Exchange Act or (iii) the Company
becomes required to file periodic reports with the Commission under Section
15(d) of the Exchange Act.

"Commission" means the Securities and Exchange Commission or any successor
thereto.

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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.

"Holder" means (i) an Investor, (ii) the partners, members or stockholders of an
Investor collectively provided that such partners, members or stockholders act
through such Investor or its successor and (iii) any person or entity to whom an
Investor or any person or entity identified in clause (ii) of this definition
sells, transfers or assigns Registrable Securities, other than in a sale
pursuant to Rule 144 under the Securities Act or a registration effected
pursuant to this Agreement.

"Majority-In-Interest" means Holders of a majority of the Registrable
Securities.

"Register," "registered," and "registration" refer to an underwritten
registration effected by preparing and filing with the Commission a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such registration
statement or document.

"Registration Expenses" means all expenses in connection with the Company's
performance of or compliance with its obligations under this Section 2,
including, without limitation, all (i) registration, qualification and filing
fees; (ii) fees, costs and expenses of compliance with securities or blue sky
laws (including reasonable fees, expenses and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters in a registration may designate, subject to the limitation as set
forth in subsection (h) of Section 2.5 hereof); (iii) printing expenses; (iv)
messenger, telephone and delivery expenses; (v) fees, expenses and disbursements
of counsel for the Company and of all independent certified public accountants
retained by the Company (including the expenses of any special audit and "cold
comfort" letters required by or incident to such performance); (vi) Securities
Act liability insurance if the Company so desires; (vii) fees, expenses and
disbursements of any other individuals or entities retained by the Company in
connection with the registration of the Registrable Securities; (viii) fees,
costs and expenses incurred in connection with the listing of the Registrable
Securities on each national securities exchange or automated quotation system on
which the Company has made application for the listing of its Common Stock; and
(ix) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties and expenses of any annual audit). Registration Expenses shall
not include selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale of Registrable
Securities, or counsel fees and any other expenses incurred by Holders in
connection with any registration that are not specified in the immediately
preceding sentence.

"Registrable Securities" means any shares of Common Stock of the Company owned
by any Holder or that may be acquired by any Holder upon the conversion of any
convertible security or the exercise or conversion of any warrant, option or
similar right owned by any Holder, but only to the extent such shares constitute
"restricted securities" under Rule 144 under the Securities Act. Notwithstanding
the

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foregoing, (i) until such time as all Registrable Securities held by Holders
other than SatCon have been sold pursuant to Rule 144 under the Securities Act
or a registration effected pursuant to this Agreement, securities held by SatCon
and its Affiliates shall not exceed, in the aggregate, 20% of the total
Registrable Securities held by all Investors and (ii) no shares of Common Stock
of the Company owned by any Schedule A Stockholder (other than SatCon) shall
constitute Registrable Securities for purposes of Section 2.2 hereof.

"Requestor" means the Holder or Holders that request the registration in
question.

"Securities Act" means the Securities Act of 1933, as amended, or any successor
statute.

2.2. DEMAND REGISTRATIONS.

                  (a) REQUEST FOR REGISTRATION. If at any time on or after the
                  Commencement Date, the Majority-In-Interest with respect to
                  any registration to be effected on a Form S-1 (or any
                  successor long form) or any Holder with respect to any
                  registration to be effected on a form other than a Form S-1
                  (or any successor long form) submits a written request (a
                  "Demand Notice") to the Company that the Company register
                  Registrable Securities under and in accordance with the
                  Securities Act (a "Demand Registration"), then the Company
                  shall:

                        (i) within five days after receipt of such Demand
                        Notice, give written notice of the proposed registration
                        to all other Holders; and

                        (ii) as soon as practicable, use best efforts to effect
                        such registration as may be so requested and as would
                        permit or facilitate the sale and distribution of all or
                        such portion of such Registrable Securities as are
                        specified in such request, together with all or such
                        portion of the Registrable Securities of any Holders
                        joining in such request as are specified in written
                        requests received by the Company within 20 days after
                        the date the Company mails the written notice referred
                        to in clause (i) above.

Notwithstanding the foregoing, if the Company shall furnish to the Holders a
certificate signed by the president of the Company stating that in the good
faith judgment of the Board, it would be seriously detrimental to the Company or
its stockholders for a registration statement to be filed on or before the date
filing would be required in connection with any Demand Registration and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing or delay its effectiveness for
a reasonable period not to exceed 60 days provided that such right shall not be
exercised more than once with respect to a request for registration hereunder
during any period of twelve consecutive months. The Company will pay all
Registration Expenses in connection with such withdrawn request for
registration.

Notwithstanding the foregoing, the Company shall not be required to effect (i)
more than two registrations on any form other than a Form S-3 (or any successor
short

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form), (ii) any registration where the anticipated aggregate gross proceeds from
the sale of the Registrable Securities to be included in such registration is
less than $500,000, or (iii) any registration requested within less than six
months after the filing of another registration pursuant to this Section 2 in
which all of the Registrable Securities requested to be included in such
registration by participating Holders were so included.

                  (b) UNDERWRITING. In connection with any registration under
                  this Section 2.2, if so requested by the Requestor, the
                  Company shall enter into an underwriting agreement with one or
                  more underwriters selected by the Requestor having terms and
                  conditions customary for such agreements.

                  (c) SHELF REGISTRATION. If at the time the Company registers
                  Registrable Securities under the Securities Act pursuant to
                  this Section 2.2, the sale or other disposition of such
                  Registrable Securities by the Holders may be made pursuant to
                  a registration statement on Form S-3 (or any successor form
                  that permits the incorporation by reference of future filings
                  by the Company under the Exchange Act), such registration
                  statement, unless otherwise directed by the Requestor, shall
                  be filed as a "shelf" registration statement pursuant to Rule
                  415 under the Securities Act (or any successor rule). Any such
                  shelf registration shall cover the disposition of all
                  Registrable Securities in one or more underwritten offerings,
                  block transactions, broker transactions, at-market
                  transactions and in such other manner or manners as may be
                  specified by the Requestor. The Company shall use its best
                  efforts to keep such "shelf" registration continuously
                  effective as long as the delivery of a prospectus is required
                  under the Securities Act in connection with the disposition of
                  the Registrable Securities registered thereby and in
                  furtherance of such obligation, shall supplement or amend such
                  registration statement if, as and when required by the rules,
                  regulations and instructions applicable to the form used by
                  the Company for such registration or by the Securities Act or
                  by any other rules and regulations thereunder applicable to
                  shelf registrations. On one occasion during each twelve
                  consecutive months such shelf registration statement remains
                  effective, upon their receipt of a certificate signed by the
                  president of the Company in accordance with the last paragraph
                  of Section 2.2(a) hereof, the Holders will refrain from making
                  any sales of Registrable Securities under the shelf
                  registration statement for a period of up to 60 days; provided
                  that this right to cause the Holders to refrain from making
                  sales shall not be exercised by the Company during the one
                  year period following any exercise of the Company's right to
                  defer the filing or delay its effectiveness of a registration
                  statement under the penultimate paragraph of Section 2.2(a).

2.3. COMPANY REGISTRATION.

                  (a) NOTICE OF REGISTRATION. If at any time or from time to
                  time, the Company shall determine to register any of its
                  Capital Stock, whether or not for its own account, other than
                  a registration relating to employee benefit plans or a
                  registration effected on Form S-4, the Company shall:

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                        (i) provide to each Holder written notice thereof at
                        least twenty days prior to the filing of the
                        registration statement by the Company in connection with
                        such registration; and

                        (ii) include in such registration, and in any
                        underwriting involved therein, all those Registrable
                        Securities specified in a written request by each Holder
                        received by the Company within fifteen days after the
                        Company mails the written notice referred to above,
                        subject to the provisions of Section 2.3(b) below.

                  (b) UNDERWRITING. The right of any Holder to registration
                  pursuant to this Section 2.3 shall be conditioned upon the
                  participation by such Holder in the underwriting arrangements
                  specified by the Company in connection with such registration
                  and the inclusion of the Registrable Securities of such Holder
                  in such underwriting to the extent provided herein. All
                  Holders proposing to distribute their Registrable Securities
                  through such underwriting shall (together with the Company)
                  enter into an underwriting agreement in customary form with
                  the managing underwriter selected for such underwriting by the
                  Company and take all other actions, and deliver such opinions
                  and certifications, as may be reasonably requested by such
                  managing underwriter. Notwithstanding any other provision of
                  this Section 2.3, if the managing underwriter determines that
                  marketing factors require a limitation of the number of shares
                  to be underwritten, the managing underwriter may limit the
                  number of Registrable Securities to be included in such
                  registration. The Company shall so advise all Holders
                  distributing Registrable Securities through such underwriting,
                  and there shall be excluded from such registration and
                  underwriting, to the extent necessary to satisfy such
                  limitation, first shares which the Company wishes to register
                  for the account of third parties, then shares held by the
                  Holders and, thereafter, to the extent necessary, shares which
                  the Company wishes to register for its own account. As among
                  the Holders as a group, the number of Registrable Securities
                  that may be included in the registration and underwriting
                  shall be allocated in proportion, as nearly as practicable, to
                  the respective amounts of Registrable Securities required to
                  be included (determined without regard to any requirement of a
                  request to be included in such registration) in such
                  registration held by all Holders at the time of filing the
                  registration statement. To facilitate the allocation of shares
                  in accordance with the above provisions, the Company may round
                  the number of shares allocated to any Holder to the nearest
                  100 shares.

                  (c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
                  the right to terminate or withdraw any registration initiated
                  by it under this Section 2.3 prior to the effectiveness of
                  such registration whether or not any Holder has elected to
                  include Registrable Securities in such registration.

2.4. EXPENSE OF REGISTRATION. All Registration Expenses incurred in connection
with the registration and other obligations of the Company pursuant to Sections
2.2, 2.3 and 2.5 shall be borne by Company.

2.5. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Section 2 to effect the registration of Registrable
Securities, the Company shall:

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                  (a) promptly prepare and file with the Commission a
                  registration statement with respect to such Registrable
                  Securities on any form that may be utilized by the Company and
                  that shall permit the disposition of the Registrable
                  Securities in accordance with the intended method or methods
                  of disposition thereof, and use its best efforts to cause such
                  registration statement to become effective as promptly as
                  practicable and remain effective thereafter as provided
                  herein, provided that prior to filing a registration statement
                  or prospectus or any amendments or supplements thereto,
                  including documents incorporated by reference after the
                  initial filing of any registration statement, the Company will
                  furnish to each of the Investors whose Registrable Securities
                  are covered by such registration statement, their counsel and
                  the underwriters copies of all such documents proposed to be
                  filed sufficiently in advance of filing to provide them with a
                  reasonable opportunity to review such documents and comment
                  thereon;

(b) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement, including such
amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, provided that except in the
case of a shelf registration under Section 2.2(c) such registration statement
need not be kept effective and current for longer than 120 days subsequent to
the effective date of such registration statement;

                  (c) provide customary indemnity and contribution arrangements
                  to any qualified independent underwriter or qualified
                  independent pricer as defined in Schedule E of the Bylaws of
                  the National Association of Securities Dealers, Inc. (a
                  "Qualified Independent Underwriter/Pricer"), if requested by
                  such Qualified Independent Underwriter/Pricer, on such
                  reasonable terms as such Qualified Independent
                  Underwriter/Pricer customarily requires;

                  (d) subject to receiving reasonable assurances of
                  confidentiality, for a reasonable period after the filing of
                  such registration statement, and throughout each period during
                  which the Company is required to keep a registration
                  effective, make available for inspection by the selling
                  holders of Registrable Securities being offered, and any
                  underwriters, and their respective counsel, such financial and
                  other information and books and records of the Company, and
                  cause the officers, directors, employees, counsel and
                  independent certified public accountants of the Company to
                  respond to such inquiries as shall be reasonably necessary, in
                  the judgment of such counsel, to conduct a reasonable
                  investigation within the meaning of Section 11 of the
                  Securities Act;

                  (e) promptly notify the selling holders of Registrable
                  Securities and any underwriters and confirm such advice in
                  writing, (i) when such registration statement or the
                  prospectus included therein or any prospectus amendment or
                  supplement or post-effective amendment has been filed, and,
                  with respect to such registration statement

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or any post-effective amendment, when the same has become effective, (ii) of any
comments by the Commission, by the National Association of Securities Dealers
Inc. ("NASD"), and by the blue sky or securities commissioner or regulator of
any state with respect thereto or any request by any such entity for amendments
or supplements to such registration statement or prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company cease to be true and correct in
all material respects, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (vi) at any time when a prospectus is required
to be delivered under the Securities Act, that such registration statement,
prospectus, prospectus amendment or supplement or post-effective amendment, or
any document incorporated by reference in any of the foregoing, contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading;

                  (f) furnish to each selling holder of Registrable Securities
                  being offered, and any underwriters, prospectuses or
                  amendments or supplements thereto, in such quantities as they
                  may reasonably request and as soon as practicable, that update
                  previous prospectuses or amendments or supplements thereto;

                  (g) permit selling holders of Registrable Securities to rely
                  on any representations and warranties made to any underwriter
                  of the Company or any opinion of counsel or "cold comfort"
                  letter delivered to any such underwriter, and indemnify each
                  such holder to the same extent that it indemnifies any such
                  underwriter;

                  (h) use best efforts to (i) register or qualify the
                  Registrable Securities to be included in a registration
                  statement hereunder under such other securities laws or blue
                  sky laws of such jurisdictions within the United States of
                  America as any selling holder of such Registrable Securities
                  or any underwriter of the securities being sold shall
                  reasonably request, (ii) keep such registrations or
                  qualifications in effect for so long as the registration
                  statement remains in effect and (iii) take any and all such
                  actions as may be reasonably necessary or advisable to enable
                  such holder or underwriter to consummate the disposition in
                  such jurisdictions of such Registrable Securities owned by
                  such holder; PROVIDED, HOWEVER, that the Company shall not be
                  required for any such purpose to (x) qualify generally to do
                  business as a foreign corporation in any jurisdiction wherein
                  it would not otherwise be required to qualify but for the
                  requirements of this Section 2.5(h), (y) subject itself to
                  taxation in any such jurisdiction or (z) consent to general
                  service of process in any such jurisdiction;

                  (i) cause all such Registrable Securities to be listed or
                  accepted for quotation on each securities exchange or
                  automated quotation system on which the Company's Common Stock
                  then trades;

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                  (j) otherwise use best efforts to comply with all applicable
                  provisions of the Securities Act, and rules and regulations of
                  the Commission, and make available to its security holders, as
                  soon as reasonably practicable, an earnings statement covering
                  a period of at least twelve months which shall satisfy the
                  provisions of Section 11(a) of the Securities Act and Rule 158
                  thereunder; and

                  (k) provide a legal opinion of the Company's outside counsel,
                  dated the effective date of such registration statement (and,
                  if such registration statement includes an underwritten public
                  offering, dated the date of the closing under the underwriting
                  agreement), with respect to the registration statement, each
                  amendment and supplement thereto, the prospectus included
                  therein (including the preliminary prospectus) and such other
                  documents relating thereto in customary form and covering such
                  matters of the type customarily covered by legal opinions of
                  such nature.

2.6. INDEMNIFICATION. In the event any of the Registrable Securities are
included in a registration statement under this Section 2:

                  (a) the Company will indemnify each Holder who participates in
                  such registration, each of its officers and directors and
                  partners and such Holder's separate legal counsel and
                  independent accountants, and each person controlling such
                  Holder within the meaning of Section 15 of the Securities Act,
                  and each underwriter, if any, and each person who controls any
                  underwriter within the meaning of Section 15 of the Securities
                  Act, against all expenses, claims, losses, damages or
                  liabilities (or actions in respect thereof), including any of
                  the foregoing incurred in settlement of any litigation,
                  commenced or threatened, arising out of or based on any untrue
                  statement (or alleged untrue statement) of a material fact
                  contained in any registration statement, prospectus, offering
                  circular or other document, or any amendment or supplement
                  thereto, incident to any such registration, qualification or
                  compliance, or based on any omission (or alleged omission) to
                  state therein a material fact required to be stated therein or
                  necessary to make the statements therein, in light of the
                  circumstances in which they were made, not misleading, or any
                  violation by the Company of any rule or regulation promulgated
                  under the Securities Act applicable to the Company in
                  connection with any such registration, qualification or
                  compliance, and the Company will reimburse each such Holder,
                  each of its officers and directors and partners and such
                  Holder's separate legal counsel and independent accountants
                  and each person controlling such Holder, each such underwriter
                  and each person who controls any such underwriter, for any
                  legal and any other expenses reasonably incurred in connection
                  with investigating, preparing or defending any such claim,
                  loss, damage, liability or action, provided that the Company
                  will not be liable in any such case to the extent that any
                  such claim, loss, damage, liability or expense arises out of
                  or is based on any untrue statement or omission or alleged
                  untrue statement or omission, made in reliance upon and in
                  conformity with written information furnished to the Company
                  by an instrument duly executed by such Holder or underwriter
                  and stated to be specially for use therein.

                  (b) Each Holder, severally and not jointly, will, if
                  Registrable Securities held by such Holder are included in the
                  securities as to which such registration, qualification or
                  compliance is being effected, indemnify the Company, each

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of its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, persons, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding any other provision herein, each Holder's indemnification
obligations under this Section 2.6(b) shall be limited to an amount not to
exceed the net proceeds received by such Holder resulting from sales pursuant to
such registration statement, prospectus, offering circular or other document.

                  (c) Each party entitled to indemnification under this Section
                  6 (the "Indemnified Party") shall give notice to the party
                  required to provide indemnification (the "Indemnifying Party")
                  promptly after such Indemnified Party has actual knowledge of
                  any claim as to which indemnity may be sought provided that
                  failure to give such prompt notice shall not relieve the
                  Indemnifying Party of its obligations hereunder unless it is
                  materially prejudiced thereby, and shall permit the
                  Indemnifying Party to assume the defense of any such claim or
                  any litigation resulting therefrom, provided that counsel for
                  the Indemnifying Party, who shall conduct the defense of such
                  claim or litigation, shall be approved by the Indemnified
                  Party (whose approval shall not unreasonably be withheld).
                  Such Indemnified Party shall have the right to employ separate
                  counsel in any such action and to participate in the defense
                  thereof, but the fees and expenses of such counsel shall be
                  that of such Indemnified Party unless (i) the Indemnifying
                  Party has agreed to pay such fees and expenses or (ii) the
                  Indemnifying Party shall have failed to assume the defense of
                  such action or proceeding and employ counsel reasonably
                  satisfactory to such Indemnified Party in any such action or
                  proceeding or (iii) the named parties to any such action or
                  proceeding (including any impleaded parties) include both such
                  Indemnified Party and the Indemnifying Party and such
                  Indemnified Party shall have been advised by counsel that
                  there may be one or more legal defenses available to such
                  Indemnified Party which are different from or additional to
                  those available to the Indemnifying Party (in which case, if
                  such Indemnified Party notifies the Indemnifying Party in
                  writing of an election to employ separate counsel at the
                  expense of the Indemnifying Party, the Indemnifying Party
                  shall not have the right to assume the defense of such action
                  or proceeding on behalf of such Indemnified Party, it being
                  understood, however, that the Indemnifying Party then shall
                  have the right to employ

                                       11
<PAGE>

separate counsel at its own expense and to participate in the defense thereof,
and shall not, in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all Indemnified Parties, which firm shall be
designated in writing by a majority of the Indemnified Parties who are eligible
to select such counsel). No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnified Party may consent to entry of any judgment or enter
into any settlement without the prior written consent of the Indemnifying Party.

                  (d) If the indemnification provided for in this Section 2.6 is
                  held by a court of competent jurisdiction to be unavailable to
                  an Indemnified Party with respect to any loss, liability,
                  claim, damage or expense referred to herein, then the
                  Indemnifying Party, in lieu of indemnifying the Indemnified
                  Party, shall contribute to the amount paid or payable by such
                  Indemnified Party with respect to such loss, liability, claim,
                  damage or expenses in the proportion that is appropriate to
                  reflect the relative fault of the Indemnifying Party and the
                  Indemnified Party in connection with the statements or
                  omissions that resulted in such loss, liability, claim,
                  damage, or expense, as well as any other relevant equitable
                  considerations. The relative fault of the Indemnifying Party
                  and the Indemnified Party shall be determined by reference to,
                  among other things, whether the untrue or alleged untrue
                  statement of material fact or the omission to state a material
                  fact relates to information supplied by the Indemnifying Party
                  or by the Indemnified Party, and the parties' relative intent,
                  knowledge, access to information and opportunity to correct or
                  prevent such statement or omission. Notwithstanding any other
                  provision herein, each Holder's contribution obligations under
                  this Section 2.6(d) shall be limited to an amount not to
                  exceed the net proceeds received by such Holder resulting from
                  sales pursuant to such registration statement, prospectus,
                  offering circular or other document.

2.7. RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Registrable Securities to the public without registration, after such time
as a public market exists for the Common Stock, the Company shall use reasonably
diligent efforts to:

                  (a) Make and keep public information available, as those terms
                  are understood and defined in Rule 144 under the Securities
                  Act, beginning 90 days after the Company registers a class of
                  securities under Section 12 of the Exchange Act or completes a
                  registered offering under the Securities Act; or

                  (b) File with the Commission in a timely manner all reports
                  and other documents required of the Company under the
                  Securities Act and the Exchange Act (at any time after it has
                  become subject to such reporting requirements);

                                       12
<PAGE>

(c) Furnish to any Holder promptly upon request a written statement as to its
compliance with the reporting requirements of Rule 144 (at any time after 90
days after the Company completes a registered offering under the Securities
Act), and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell Registrable Securities
without registration.

2.8. TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled to exercise
any right provided for in this Section 2 after the earlier of (a) ten years
following the Commencement Date and (b) the date all Registrable Securities held
by such Holder may be sold in a single three-month period under Rule 144 under
the Securities Act.

2.9. INFORMATION TO BE PROVIDED BY THE HOLDERS. Each Holder whose Registrable
Securities are included in any registration pursuant to this Agreement shall
furnish the Company such information regarding such Holder and the distribution
proposed by such Holder as may be reasonably requested in writing by the Company
and as shall be required in connection with such registration or the
registration or qualification of such securities under any applicable state
securities law.

2.10. "STAND-OFF" AGREEMENT. Each Holder, if requested by the managing
underwriter of the initial public offering of securities by the Company, shall
agree not to sell or otherwise transfer or dispose of any Registrable Securities
or other securities of the Company then held by such Holder for a specified
period of time that is customary under the circumstances (not to exceed 180
days) following the effective date of the registration statement for such
offering; provided that (a) no such agreement shall be required unless the
officers, directors and any other stockholders holding at least 1% of the total
Common Share Equivalents enter into a similar agreement covering the same period
of time and (b) such agreement shall contain terms customary for such
agreements; and further provided, that if the managing underwriter agrees to
release any officer, director or stockholder holding at least 1% of the total
Common Share Equivalents (a "Released Holder") from its stand-off obligations
under this Section 2.10, all other Holders shall be released from their
respective stand-off obligations and be allowed to participate, together with
such Released Holder, on a pro rata basis in such offering. The Company may
impose stop transfer instructions to enforce any required agreement of the
Holders under this Section 2.10.

3.       PURCHASE RIGHTS REGARDING FUTURE SALES OF CAPITAL SECURITIES BY THE
         COMPANY

Subject to the terms and conditions specified in this Section 3, the Company
hereby grants to each Investor a purchase right with respect to future sales
by the Company of its Capital Securities (as hereinafter defined). Each Investor
shall be entitled to apportion the

                                       13
<PAGE>

purchase right hereby granted it among itself and its members, partners and
affiliates in such proportions as it deems appropriate. Each time the Company
proposes to offer any shares of, or any securities convertible into or
exercisable or exchangeable for any shares of, any class of its capital stock
(collectively, "Capital Securities"), the Company shall first make an offering
of such Capital Securities to each Investor in accordance with the following
provisions:

                  (a) The Company shall deliver a notice by certified mail (a
                  "Company Sales Notice") to the Investors stating (i) its bona
                  fide intention to offer such Capital Securities, (ii) the
                  number of such Capital Securities to be offered, and (iii) the
                  price and terms, if any, upon which it proposes to offer such
                  Capital Securities.

                  (b) Within 20 Business Days after receipt of a Company Sales
                  Notice, each Investor that desires to purchase any of the
                  Capital Securities specified in such Company Sales Notice at
                  the price and on the terms specified in such Sales Notice
                  shall provide to the Company a written notice (a "Company
                  Purchase Notice") setting forth the number of such Capital
                  Securities such Investor is willing to purchase. If the total
                  number of Capital Securities specified in all of the Company
                  Purchase Notices received by the Company within such period
                  exceeds the total number of Capital Securities specified in
                  such Company Sales Notice or such greater number of Capital
                  Securities that the Company is willing to sell at the price
                  and on the terms specified in such Company Sales Notice, then
                  the Capital Securities to be sold shall be allocated among the
                  Investors in the same proportion that each such Investor's
                  Common Share Equivalents bear to the total Common Share
                  Equivalents owned by all of the Investors that have delivered
                  Company Purchase Notices; provided that if such allocation
                  would result in any Investor being allocated Capital
                  Securities under this subsection (b) in excess of the total
                  number of Capital Securities that it specified in its Purchase
                  Notice, such excess Capital Securities shall be allocated
                  among the other Investors that have not been allocated Capital
                  Securities equal to the number of Capital Securities specified
                  in their Company Purchase Notices in a manner that results in
                  such other Investors receiving in the aggregate under this
                  subsection (b) an equal percentage of the total number of
                  Capital Securities specified in their respective Company
                  Purchase Notices. All allocations made pursuant to this
                  subsection (b) shall be rounded to the nearest whole Capital
                  Security. The Capital Securities allocated to each Investor
                  under this subsection (b) shall be purchased by such Investor
                  at the price and on the terms specified in the Company Sales
                  Notice at a closing to be held within 40 Business Days after
                  the delivery of the Company Sales Notice. Such date shall be
                  specified by the Company in a written notice delivered to each
                  Investor participating in such sale at least 10 Business Days
                  prior thereto.

                  (c) If all Capital Securities that the Investors are entitled
                  to purchase pursuant to Section 3(b) are not elected to be
                  purchased as provided in Section 3(b) hereof, the Company may,
                  during the 120-day period following the expiration of the
                  period provided in Section 3(b) hereof, offer the remaining
                  unsubscribed portion of such Capital Securities to any Person
                  or Persons at a price not less than, and upon terms no more
                  favorable to the offeree than, those specified in the Company
                  Sales Notice with respect thereto. If the Company does not
                  enter into an agreement for the sale of such Capital
                  Securities within such period, or if such agreement is not
                  consummated within 30

                                       14
<PAGE>

days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Capital Securities shall not be offered unless first
reoffered to the Investors in accordance herewith.

                  (d) The purchase right granted in this Section 3 shall not be
                  applicable (i) to the issuance or sale of Common Stock (or
                  options therefor) to consultants, officers, directors and
                  employees for the primary purpose of soliciting or retaining
                  their employment or services in a transaction or pursuant to a
                  plan approved by the Board, (ii) as part of or after a
                  Qualified Initial Public Offering, (iii) the issuance of
                  securities pursuant to the conversion or exercise of
                  outstanding convertible securities or warrants, options or
                  similar rights, (iv) the issuance of securities in connection
                  with a bona fide business acquisition by the Company, whether
                  by merger, consolidation, sale of assets, sale or exchange of
                  stock or otherwise, (v) the issuance of warrants, options or
                  similar securities to a bank or other institutional lender as
                  consideration for the extension of credit by such lender to
                  the Company, or (vi) the issuance of stock, warrants or other
                  securities or rights to persons or entities with which the
                  Company has business relationships provided such issuances are
                  for other than primarily equity financing purposes and
                  provided that at the time of any such issuance, the aggregate
                  of such issuance and similar issuances in the preceding
                  twelve-month period do not exceed 2% of the then outstanding
                  Common Stock of the Company (assuming full conversion and
                  exercise of all convertible and exercisable securities then
                  outstanding) or such issuance is expressly approved by a
                  majority of the director representatives of the Investors on
                  the Board.

4.       INFORMATION AND INSPECTION RIGHTS

4.1 INFORMATION. The Company shall deliver to each Investor for so long as such
Investor (together with and any Persons whose securities are aggregated with
those of such Investor pursuant to Section 8.9 hereof for purposes of the
Agreement) holds 500,000 Common Share Equivalents:

                  (a) as soon as practicable, but in any event within 120 days
                  after the end of each fiscal year of the Company, an income
                  statement of the Company for such fiscal year, a cash flow
                  statement of the Company for such fiscal year, and a balance
                  sheet of the Company as of the end of such fiscal year, with
                  each such financial statement to be in reasonable detail,
                  prepared in accordance GAAP, and audited and certified by a
                  firm of independent public accountants of nationally
                  recognized standing selected by the Company;

                  (b) as soon as practicable, but in any event within sixty days
                  after the end of each of the first three quarters of each
                  fiscal year of the Company, unaudited statements of income and
                  cash flows of the Company for such fiscal quarter and an
                  unaudited balance sheet of the Company as of the end of such
                  fiscal quarter;

                                       15
<PAGE>

(c) within thirty days of the end of each calendar month, unaudited statements
of income and cash flows and balance sheet of the Company for and as of the end
of such month, in reasonable detail;

                  (d) as soon as practicable, but in any event at least thirty
                  days prior to the end of each fiscal year, a budget and
                  business plan of the Company for the next fiscal year,
                  prepared on a monthly basis, including balance sheets and
                  statements of cash flows for such months and, as soon as
                  prepared, any other budgets or revised budgets prepared by the
                  Company;

(e) with respect to the financial statements called for in subsections (b) and
(c) of this Section 4.1, an instrument executed by the Chief Financial Officer
or President of the Company certifying that such financial statements were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation, cash flows and changes in shareholders' equity for the period
specified, subject to year-end audit adjustments; and

                  (f) such other information relating to the financial
                  condition, business, prospects or corporate affairs of the
                  Company as such Investor may from time to time request.

4.2. INSPECTION. During any period in which a Investor is entitled to receive
the materials specified in Section 4.1 hereof, the Company shall permit such
Investor, at such Investor's expense, to visit and inspect the Company's
properties during normal business hours and upon reasonable prior notice, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers and accountants, all at such reasonable
times and upon reasonable notice as may be requested by such Investor.

5.       RIGHT OF FIRST OFFER

5.1. NOTICE. In the event any Schedule A Stockholder (a "Selling Stockholder")
desires to sell, transfer or otherwise dispose of any or all of the shares of
capital stock of the Company owned of record or beneficially by such Stockholder
or any securities ultimately convertible into or exercisable for any such shares
of capital stock (collectively, the "Target Shares"), such Selling Stockholder
shall promptly deliver to the Company and the Investors, a written notice of
such intended disposition (a "Disposition Notice") setting forth the proposed
terms and conditions thereof, including the number and type of securities to be
disposed of, any conditions to such disposition, the proposed timing of such
disposition, and the minimum consideration such Selling Stockholder will accept
in payment for such securities. Except as otherwise provided herein, a Schedule
A Stockholder may not sell, transfer or otherwise dispose of any shares of
capital stock of the Company or any securities ultimately convertible into or
exercisable for such

                                       16
<PAGE>

shares of capital stock unless it delivers to the Company and the Investors a
Disposition Notice and complies with the provisions of this Section 5.1 or
unless the proposed sale, transfer or disposition is exempt under Section 5.6
hereof from the right of first offer granted herein.

5.2. THE COMPANY'S RIGHT. The Company shall, for a period of thirty days
following receipt of a Disposition Notice, have the right to purchase the Target
Shares specified therein upon the terms and conditions specified in the
Disposition Notice, subject to the conditions contained in this Section 5.2.
Such right shall be exercisable by written notice (the "Exercise Notice")
delivered to the Selling Stockholder and the Investors prior to the expiration
of such thirty-day exercise period. If such right is exercised with respect to
all of the Target Shares specified in the Disposition Notice, then the Company
shall complete the repurchase of such Target Shares, by no later than twenty
Business Days after the delivery of the Exercise Notice. At such time, the
Selling Stockholder shall deliver to the Company the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. Alternatively, if such right is exercised with respect to only a
portion of the Target Shares specified in the Disposition Notice, then such
right to repurchase shall be contingent upon the election of one or more of the
Investors to repurchase the remaining Target Shares. The Company shall notify
the Investors of its intent to repurchase only a portion of the Target Shares
within the thirty-day exercise period above defined. In such event, the
Company's repurchase of such Target Shares shall be consummated, if at all, at
the time of the Investors' exercise of its repurchase rights in accordance with
Section 5.3 hereof. In the event one or more of the Investors do not elect to
repurchase the remaining Target Shares, the Company shall be deemed to have
waived its right under this Section 5.2.

5.3. THE INVESTORS' RIGHT. Subject to the rights of the Company under Section
5.2 hereof, for a period of the shorter of (i) thirty days from receipt of the
Disposition Notice and (ii) fifteen days from receipt of written notice of the
Company's election either to waive its purchase right or to repurchase only a
portion of the Target Shares, each of the Investors shall have the right to
purchase all of the Target Shares if the Company has elected to waive its right,
or all or a portion of the remaining balance of the Target Shares after the
Company has elected to repurchase only a portion thereof, upon the terms and
conditions specified in the Disposition Notice. The Investors shall exercise
such right in the same manner and subject to the same rights and conditions as
the Company, as more specifically set forth in paragraph 5.2 above. To the
extent that the Target Shares need to be allocated among the Investors, they
shall be allocated PRO RATA based on the holdings of Common Share Equivalents of
each Investor that desires to exercise its purchase right.

5.4. NON-EXERCISE OF PURCHASE RIGHT. In the event an Exercise Notice with
respect to any portion of the Target Shares is not given to the Selling
Stockholder by the Company or any of the Investors within the period specified
herein following the date of the Company's and the Investors' receipt of the
Disposition Notice, then subject to compliance with the provisions of Section
5.5 hereof, the Selling Stockholder shall have a period of 120 days thereafter
in which to sell the Target Shares upon terms and conditions (including the
purchase price) no more favorable to the acquirer than those

                                       17
<PAGE>

specified in the Disposition Notice. It shall be a condition to any such
disposition that the acquiror agree to be bound by and comply with all of the
provisions of this Agreement applicable to such Selling Stockholder with respect
to such Target Shares. In the event the Selling Stockholder does not consummate
the sale or disposition of the Target Shares within such 120 day period, the
Company's and the Investors' purchase rights shall continue to be applicable to
any subsequent disposition of the Target Shares by the Selling Stockholder until
such right terminates in accordance with Section 8.1 hereof.

5.5. EXEMPT TRANSFERS. Notwithstanding the foregoing, the purchase rights of the
Company and the Investors set forth in this Section 5 shall not apply to any
transfer by a Selling Stockholder to (a) the ancestors, descendants, siblings or
spouse of the Selling Stockholder or to trusts for the benefit of such persons
or the Selling Stockholder, (b) to such Selling Stockholder's Affiliates, or (c)
in the case of a Selling Stockholder that is a private investment company, to
the partners, members, stockholders or other investors of such Selling
Stockholders as a distribution or similar transfer from such Selling
Stockholder; provided that in each of the foregoing cases, the transferee shall
furnish the Investors and the Company with a written agreement to be bound by
and comply with all provisions of this Agreement. Such transferred stock shall
remain subject to the provisions of this Agreement, and such transferee shall be
treated as a "Stockholder" (and a transferee of a Schedule A Stockholder shall
be treated as a "Schedule A Stockholder") for the purposes of this Agreement.

5.6 ADDITIONAL RESTRICTION ON DISPOSITIONS BY MANAGEMENT. No Schedule A
Stockholder who is an officer or employee of the Company as of the date hereof
or becomes an officer or employee of the Company after the date hereof shall
sell or otherwise dispose of any shares of the capital stock of the Company
without the prior approval of a majority of the Investor Representatives on the
Board.

6.       CO-SALE RIGHTS

6.1. NOTICE. In the event an Investor that holds at least 2,500,000 Common Share
Equivalents or a Schedule A Stockholder (a "Selling Major Stockholder") desires
to accept a bona fide offer from a financially capable acquiror for the sale,
transfer or other disposition of any or all of the shares of capital stock of
the Company owned of record or beneficially by such Selling Major Stockholder or
any securities ultimately convertible into or exercisable for any such shares of
capital stock (collectively, the "Sale Shares"), such Selling Major Stockholder
shall promptly deliver to the Company and the other Stockholders, a written
notice of such intended disposition (a "Sale Notice") setting forth the terms
and conditions thereof, including the number and type of securities to be
disposed of, any conditions to such disposition, the proposed timing of such
disposition, the consideration to be paid for such securities and the identity
of the proposed acquirer. Except as otherwise provided herein, a Selling Major
Stockholder may not sell, transfer or otherwise dispose of any shares of capital
stock of the Company or any securities ultimately convertible into or
exercisable for such shares of capital stock unless it delivers to the Company
and the Stockholders a Sales Notice and complies with the

                                       18
<PAGE>

provisions of this Section 6 or unless the proposed sale, transfer or
disposition is exempt under Section 6.6 hereof from the co-sale rights granted
herein.

6.2. GRANT OF CO-SALE RIGHTS. Each Stockholder (other than the Selling Major
Stockholder) shall have the right, exercisable upon written notice to the
Selling Major Stockholder within thirty days after receipt of the Selling Major
Stockholder's Sale Notice, to participate in such sale of the Sale Shares on the
same terms and conditions as those set forth in the Sale Notice. To the extent
any other Stockholder exercises such right of participation (a "Participating
Stockholder"), the number of shares of Sale Shares that the Selling Major
Stockholder may sell in the transaction shall be correspondingly reduced. The
right of participation of each Stockholder shall be subject to the terms and
conditions set forth in this Section 6.2.

(a) Each Participating Stockholder and the Selling Major Stockholder shall be
deemed to own the number of shares of Common Stock that it actually owns plus
the number of shares of Common Stock that are issuable upon conversion of any
convertible securities of the Company or upon the exercise of any warrants,
options or similar rights then owned by it at an exercise price less than the
purchase price specified in the Sale Notice.

                  (b) Each Participating Stockholder may sell all or any part of
                  a number of Sale Shares equal to the product obtained by
                  multiplying (i) the aggregate number of Sale Shares by (ii) a
                  fraction, the numerator of which is the number of shares of
                  Common Stock of the Company deemed to be owned by such
                  Participating Stockholder and the denominator of which is the
                  total number of outstanding shares of Common Stock of the
                  Company deemed to be owned by the Selling Major Stockholder
                  and all Participating Stockholders.

                  (c) Each Participating Stockholder may effect its
                  participation in the sale by delivering to the Selling Major
                  Stockholder for transfer to the acquirer one or more
                  certificates, properly endorsed for transfer, which represent:

                        (i) the number of shares that it elects to sell pursuant
                        to this Section 6.2;

                        (ii) that number of shares of convertible securities of
                        the Company that is at such time convertible into the
                        number of shares of Common Stock that it has elected to
                        sell pursuant to this Section 6.2; provided, however,
                        that if the acquirer objects to the delivery of
                        convertible securities of the Company in lieu of Common
                        Stock, the Participating Stockholder may, to the extent
                        permitted by the terms of such security, convert and
                        deliver Common Stock as provided in subparagraph (i)
                        above; or

(iii) a combination of the foregoing that in the aggregate represents the number
of shares of Common Stock to be sold by the Participating Stockholder.

                                       19
<PAGE>

6.3. PAYMENT OF PROCEEDS. The stock certificates that the Participating
Stockholders deliver to the Selling Major Stockholder pursuant to Section 6.2
shall be transferred by the Selling Major Stockholder to the acquirer in
consummation of the sale of the Sale Shares pursuant to the terms and conditions
specified in the Sale Notice, and the Selling Major Stockholder shall promptly
thereafter remit to the Participating Stockholders that portion of the sale
proceeds to which such Participating Stockholder is entitled by reason of its
participation in such sale.

6.4. NON-EXERCISE. The exercise or non-exercise of the rights of the
Participating Stockholders hereunder to participate in one or more sales of Sale
Shares made by the Selling Major Stockholder shall not adversely affect its
right to participate in subsequent sales by the Selling Major Stockholder. In
the event none of the Stockholders elect to exercise their co-sale rights
hereunder with respect to a disposition, the Selling Major Stockholder that sent
the Sale Notice regarding such disposition may consummate such disposition in
accordance with the terms specified in the Sale Notice but only within 90 days
after the expiration of the Stockholders' co-sale rights.

6.5. PROHIBITED TRANSFERS. In the event a Major Stockholder should sell any Sale
Shares of the Company in contravention of the co-sale rights of any other
Stockholder under this Agreement (a "Prohibited Transfer"), such other
Stockholder shall have the option to sell to the Selling Major Stockholder a
number of shares of Common Stock of the Company (either directly or through
delivery of convertible securities) equal to the number of shares that such
other Stockholder would have been entitled to sell had such Prohibited Transfer
been effected in accordance with Section 6.2 hereof, on the following terms and
conditions:

                  (a) The price per share at which the shares are to be sold to
                  the Selling Major Stockholder shall be equal to the price per
                  share paid to the Selling Major Stockholder by the third-party
                  acquiror or acquirer of the Selling Major Stockholder's Sale
                  Shares in the disposition referenced in the Sale Notice.

                  (b) The other Stockholder shall deliver to the Selling Major
                  Stockholder, within 30 days after it has received notice from
                  the Selling Major Stockholder or otherwise become aware of the
                  Prohibited Transfer, the certificate or certificates
                  representing shares to be sold, each certificate to be
                  properly endorsed for transfer.

                  (c) The Selling Major Stockholder shall, upon receipt of the
                  certificates for the repurchased shares, pay the aggregate
                  purchase price therefor, by certified check or bank draft made
                  payable to the order of such other Stockholder, and shall
                  reimburse the other Stockholder for any additional expenses
                  reasonably incurred, including reasonable legal fees and
                  expenses, incurred in effecting such purchase and resale.

6.6. EXEMPT TRANSFERS. The provisions of this Section 6 shall not apply (a) a
sale of any stock to the Company including pursuant to the exercise by the
Company of its purchase right under Section 5.1 hereof or (b) any transfer by a
Selling Major

                                       20
<PAGE>

Stockholder to (i) the ancestors, descendants, siblings or spouse of the Selling
Major Stockholder or to trusts for the benefit of such persons or the Selling
Major Stockholder, (ii) to such Selling Major Stockholder's Affiliates, or (iii)
in the case of a Selling Major Stockholder that is a private investment company,
to the partners, members, stockholders or other investors of such Selling Major
Stockholders as a distribution or similar transfer from such Selling Major
Stockholder; provided that in each of the foregoing cases in this clause (b),
the transferee shall furnish the Stockholders and the Company with a written
agreement to be bound by and comply with all provisions of this Agreement. Such
transferred stock shall remain subject to the provisions of this Agreement, and
such transferee shall be treated as a "Stockholder" (and a transferee of a
Schedule A Stockholder shall be treated as a "Schedule A Stockholder") for the
purposes of this Agreement.

7.       LEGEND REQUIREMENTS

7.1. LEGEND. Each certificate representing the shares of capital stock (or
securities convertible into or exercisable for shares of capital stock) of the
Company owned by the Stockholders shall be endorsed with the following legend:

           "THE SALE OR TRANSFER, THE VOTING AND CERTAIN OTHER RIGHTS RELATING
           TO THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
           TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND
           AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF
           SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."

           7.2. REMOVAL. The legend set forth in Section 7.1 hereof shall be
           removed upon termination of this Agreement in accordance with the
           provisions of Section 8.1.

8.       MISCELLANEOUS PROVISIONS

8.1. TERMINATION. Except as otherwise provided herein, the rights and
obligations of the Company and the Stockholder under this Agreement (other than
Section 2 hereof) shall terminate as to any specific Stockholder at such time as
such Stockholder shall no longer own shares of Common Stock or securities of the
Company convertible or exercisable for shares of Common Stock that equal or
represent the right to acquire, in the aggregate, at least 500,000 shares of
Common Stock (subject to appropriate adjustment in the case of any stock
dividend, stock split or other recapitalization or similar transaction). Unless
sooner terminated in accordance with the preceding sentence, this Agreement
(other than Section 2 hereof) shall terminate immediately upon the earlier of
(a) the closing of a Qualified Initial Public Offering, (b) the closing of the
Company's sale of all or substantially all of its assets for a purchase price of
at least $200 million or the acquisition of the Company by another entity by
means of a merger or consolidation resulting in the exchange of the outstanding
shares of

                                       21
<PAGE>

the Company's outstanding stock for securities or consideration issued, or
caused to be issued, by the acquiring entity or its subsidiary, or (c) the
execution by the Company of a general assignment for the benefit of creditors or
the appointment of a receiver or trustee to take possession of the property and
assets of the Company.

8.2. NOTICES. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been duly given at the time of receipt if
delivered by hand or by facsimile transmission or three days after being mailed,
registered or certified mail, return receipt requested, with postage prepaid, to
the following address or facsimile number (as the case may be): for the Company,
the address or facsimile number listed below the signature of the Company on the
Company's signature page hereto for each Stockholder, the address or facsimile
number specified for such Stockholder on SCHEDULE A or B hereto if any Party
shall have designated a different address or facsimile number by notice to the
other Parties given as provided above, then to the last address or facsimile
number so designated.

8.3. SEVERABILITY. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.

8.4. WAIVER OR MODIFICATION. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by the
Company and by Investors that hold a two-thirds majority of the total Common
Share Equivalents held by all of the Investors; provided, that to the extent any
such amendment or modification would adversely affect any class of securities
issued by the Company, such amendment or modification shall only be effective
upon the affirmative vote of a majority of such class, voting as a class.

8.5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws thereof. Each of the parties hereto hereby
waives any right to trial by jury in any action, suit or proceeding that may
arise out of or relate to this Agreement, any Related Agreement or any of the
transactions contemplated by this Agreement or any Related Agreement, whether
the matter asserted in such action, suit or proceeding is grounded in tort,
contract or otherwise.

8.6. ATTORNEYS' FEES. In the event of any dispute involving the terms hereof,
the prevailing parties shall be entitled to collect legal fees and expenses from
the other party to the dispute.

8.7. FURTHER ASSURANCES. Each Party agrees to act in accordance herewith and not
to take any action that is designed to avoid the intention hereof.

8.8. PERMITTED TRANSFEREES. Nothing in this Agreement shall be deemed to
prohibit an Investor from transferring any of its Registrable Securities to its
affiliates,

                                       22
<PAGE>

partners, members or stockholders provided that such transfers are made in
accordance with the securities registration requirements of the Securities Act
and any applicable state securities laws, or pursuant to an exemption from such
registration requirements.

8.9. SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations of
the Parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives. Each Stockholder may
assign its rights hereunder to (i) any transferee of Shares held by such
Stockholder that holds, in the aggregate, at least 500,000 Common Share
Equivalents after such transfer, (ii) the ancestors, descendants, siblings or
spouse of such Stockholder or to trusts for the benefit of such persons or such
Stockholder, (iii) to such Stockholder's Affiliates, or (iv) in the case of a
Stockholder that is a private investment company, to the partners, members,
stockholders or other investors of such Selling Major Stockholders as a
distribution or similar transfer from such Selling Major Stockholder; provided
that in each of the foregoing cases, the transferee shall furnish the other
Stockholders and the Company with a written agreement to be bound by and comply
with all provisions of this Agreement. Such transferee shall be treated as a
"Stockholder" (and a transferee of a Schedule A Stockholder shall be treated as
a "Schedule A Stockholder") for the purposes of this Agreement.

8.10. AGGREGATION OF STOCK. For purposes of determining the availability of any
rights under this Agreement, the number of shares of Common Stock or other
securities of the Company deemed to be owned by a Stockholder or other Person
shall include all such shares or other securities owned by such Stockholder or
other Person, such Stockholder's (or other Person's) Affiliates and their
respective partners, members, or shareholders, and any other person or entity
that acquires any such shares or other securities from any of the foregoing by
gift, will or intestate succession.

8.11. NONSOLICITATION. During the period beginning on the date hereof and ending
on the third anniversary hereof (the "NONSOLICITATION PERIOD") the Company shall
not, nor shall the Company permit any of its officers, directors, employees,
agents or other representatives to, directly or indirectly, without prior
written consent of GE, (i) actively solicit any employee of, or (ii) actively
solicit any employee who, within the six months prior to the date of such
solicitation or hiring, had been an employee of, GE, GE Capital Equity Capital
Group, Inc. or GE Capital Structured Finance Group, Inc. It is understood that
generic advertising shall not constitute "active solicitation" for purposes of
this Section 8.11. GE may seek injunctive relief to prevent any such violations
during the Nonsolicitation Period and also may seek monetary damages in respect
of any violations of this Section 8.11.

8.12 TERMINATION OF CERTAIN OTHER RIGHTS. Upon the execution and delivery of
this Agreement, the Stockholders and the Company shall waive and forever release
all rights they may have under the following provisions of certain prior
agreements regarding the Company: (a) Sections 7.1, 7.3, 7.4, 7.5 and 7.6 of the
Securities Purchase Agreement, dated October 23, 1998, by and among the Company
and certain of the Purchasers (the "CLASS D AGREEMENT"), (b) all prior
registration rights granted by the Company under any previous agreement with the
Company (including without limitation

                                       23
<PAGE>

Exhibit F to the Class D Agreement and the Registration Rights Agreement dated
as of April 7, 2000 by and among the Company, Perseus, Duquesne, Micro and
SatCon), (c) Sections 6.1, 6.2, 6.3 and 6.4 of the Securities Purchase
Agreement, dated April 7, 2000, relating to the Class E Preferred Stock and (d)
Sections 1 through 4, 5.1, 5.2 and 6 the Shareholders Agreement dated as of
October 23, 1998 by and among the Company, Perseus, Duquesne, Micro and SatCon.

                            [Company Signature page]

IN WITNESS WHEREOF, the undersigned Stockholder has executed this Agreement as
of the day and year first above written.

                            BEACON POWER CORPORATION

                           By: /s/ William E. Stanton
                           --------------------------

                           Name: William E. Stanton
                           ------------------------

                           Title: President
                           ----------------

                               ADDRESS FOR NOTICE:

                           Beacon Power Corporation
                           ------------------------

                           6D Gill Street
                           --------------

                           Woburn, MA 01801
                           ----------------

                           Facsimile No.: (781) 938-9401
                           -----------------------------

                           Attn: Chief Executive Officer
                           -----------------------------
                                          With a copy to:

                           Edwards & Angell, LLP
                           ---------------------

                           101 Federal Street
                           ------------------

                           Boston, MA 02110
                           ----------------

                           Facsimile No.: (617) 439-4170
                           -----------------------------

                           Attn: Albert L. Sokol, Esq.
                           ---------------------------

                                       24
<PAGE>

                     [Schedule A Stockholder Signature page]

IN WITNESS WHEREOF, the undersigned Schedule A Stockholder has executed this
Agreement as of the day and year first above written.

                           Signature:

                           /s/ James S. Bezreh
                           ---------------------------
                           James S. Bezreh

                           Signature:

                           /s/ Russel S. Jackson
                           ---------------------------
                           Russel S. Jackson

                           Signature:

                           /s/ Russell A. Kelley
                           ---------------------------
                           Russell A. Kelley

                           Signature:

                           /s/ Stephen J. O'Connor
                           ---------------------------
                           Stephen J. O'Connor

                           Signature

                           /s/ Jane E. O'Sullivan
                           ---------------------------
                           Jane E. O'Sullivan

                           Signature:

                           /s/ Robert G. Wilkinson
                           ---------------------------
                           Robert G. Wilkinson

                             SATCON TECHNOLOGY CORP.

                           By: /s/ Sean F. Moran
                           ---------------------------
                           Name: Sean F. Moran
                           ---------------------------

                           Title: Vice President of Finance,
                                       Chief Financial Officer and Treasurer
                                       -------------------------------------

                                       25
<PAGE>

IN WITNESS WHEREOF, the undersigned Investor has executed this Agreement as of
the date and year first written above.

                             PERSEUS CAPITAL, L.L.C.

                           By: /s/ Philip J. Deutch
                           ------------------------
                           Name: Philip J. Deutch
                           ----------------------
                           Title: Managing Director
                           ------------------------

                              DQE ENTERPRISES, INC.

                           By: /S/ Eric R. Stoltz
                           ----------------------
                           Name: Eric R. Stoltz
                           --------------------
                           Title: Vice President and Treasurer
                           -----------------------------------

                                MICRO-GENERATION
                             TECHNOLOGY FUND, L.L.C.

                        BY ARETE CORPORATION, ITS MANAGER

                           By: /s/ Robert W. Shaw, Jr.
                           ---------------------------
                               Robert W. Shaw, Jr.
                               President

<PAGE>

                       GE CAPITAL EQUITY INVESTMENTS, INC.

                           By:       /s/ Hans Kobler
                           -------------------------
                           Name:          Hans Kobler
                           --------------------------
                           Title:         Vice President
                           -----------------------------

                           MECHANICAL TECHNOLOGY, INC.

                           By: /s/ Catherine S. Hill
                           -------------------------
                           Name: Catherine S. Hill
                           -----------------------
                           Title: Vice President
                           ---------------------

                           PENSKE CORPORATION

                           By: /S/ Peter E. Mogk
                           ---------------------
                           Name: Peter E. Mogk
                           -------------------
                           Title: Vice President and Treasurer
                           -----------------------------------

                             THE BEACON GROUP ENERGY
                            INVESTMENT FUND II, L.P.

                                 By: Beacon Energy Investors II, L.P.,
                                            its general partner,

                           BY: /s/ Richard Aube
                           --------------------

                                  Authorized Signatory

                                        2
<PAGE>

                             SATCON TECHNOLOGY CORP.

                           By: /s/ Sean F. Moran
                           --------------------
                           Name: Sean F. Moran
                           --------------------
                           Title: Vice President of Finance,
                                      Chief Financial Officer and Treasurer
                                      -------------------------------------

                                        3
<PAGE>

                                    EXHIBIT A

                               CERTAIN DEFINITIONS

For purposes of the Agreement to which this Exhibit A is attached, the following
terms have the following meanings:

"Affiliate" of any Person (the "Subject Person") means any Person that Controls,
is Controlled by or is under common Control with the Subject Person.

"Business Day" means any day other than a Saturday, Sunday or other day on which
the national or state banks located in the District of Columbia, State of New
York or the State of Massachusetts are authorized to be closed.

"Common Share Equivalents" means all shares of Common Stock that are issued and
outstanding or are issuable upon the exchange, exercise or conversion of any
other security of the Company. The number of Common Share Equivalents owned by a
Person shall equal the sum of the number of shares of Common Stock owned by such
Person plus the number of shares of Common Stock issuable upon the exchange,
exercise or conversion of any other security of the Company owned by such
Person.

"Common Stock" means the common stock, par value $0.01 per share, of the
Company.

"Control" and derivatives thereof mean the power to control the management and
policies of the Controlled Person where by ownership of voting securities,
contract or otherwise.

"Family Members" means, as applied to any individual, such individual's spouse,
children (including stepchildren or adopted children), grandchildren, parents,
siblings, nieces, nephews or any spouse of any of the foregoing, and any trust
created solely for estate planning purposes for the exclusive benefit of any one
or more of them.

"GAAP" means United States generally accepted accounting principles consistently
applied.

           "Person" means any individual, entity or governmental body.

           "Qualified Initial Public Offering" means a public offering of Common
           Stock pursuant to an effective registration statement under the
           Securities Act of 1933, as amended, that is underwritten by one or
           more nationally recognized investment banking firms or a syndicate
           managed or co-managed by one or more nationally recognized investment
           banking firms that results in the Company receiving at least $30
           million in gross proceeds and the Common Stock being traded on the
           New York Stock Exchange or the Nasdaq National Market and that is
           made at an initial public offering price that reflects a market
           capitalization value of at least $200 million.

<PAGE>

                                   SCHEDULE A

                          SatCon Technology Corporation

                                 James S. Bezreh

                                Russel S. Jackson

                                Russell A. Kelley

                               Stephen J. O'Connor

                               Jane E. O'Sullivan

                               Robert G. Wilkinson

                                        2
<PAGE>

                                   SCHEDULE B

                             Perseus Capital, L.L.C.

                              DQE Enterprises, Inc.

                    Micro-Generation Technology Fund, L.L.C.

                       GE Capital Equity Investments, Inc.

                           Mechanical Technology, Inc.

                               Penske Corporation

                The Beacon Group Energy Investment Fund II, L.P.

                             SatCon Technology Corp.

                                        3<PAGE>

                                                                 Exhibit 10.1.7

THE SECURITIES EVIDENCED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE SOLD, TRANSFERRED, OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

No.:  ______

                                     WARRANT
                            TO PURCHASE COMMON STOCK
                                       OF
                            BEACON POWER CORPORATION

                         (void after December 31, 2004)

         1. ISSUANCE OF WARRANT. FOR VALUE RECEIVED, on and after the date of
issuance of this Warrant, and subject to the terms and conditions herein set
forth, the Holder (as defined below) is entitled to purchase from Beacon Power
Corporation, a Delaware corporation (the "Company"), at any time before 5:00
p.m. New York time on December 31, 2004 ("Termination Date"), at a price per
share equal to the Warrant Price (as defined below and subject to adjustment as
described below), the Warrant Stock (as defined below and subject to adjustment
as described below) upon exercise of this warrant (this "Warrant") pursuant to
Section 6 hereof.

         2. DEFINITIONS. As used in this Warrant, the following terms have the
definitions ascribed to them below:

                  (a) "Adjusted Class D Conversion Price" means at any time the
then effective Conversion Price of the Company's Class D Preferred Stock
computed without regard to the provisions of clauses 5(i) and 5(j) of Section E
of Article FOURTH of the Company's Second Amended and Restated Certificate of
Incorporation as in effect on the Commencement Date; such Adjusted Class D
Conversion Price shall be computed for purposes of this Warrant whether or not
any shares of Class D Preferred Stock are outstanding at the time of such
computation.

                  (b) "Business Day" means any day other than a Saturday, Sunday
or other day on which the national or state banks located in the State of
Massachusetts or the State of New York or the District of Columbia are
authorized to be closed.

                  (c) "Change-In-Control Event" means the occurrence after the
Commencement Date of any of the following: (i) the acquisition of voting
securities of the Company by any person or group of persons that results in such
person or group, together with

<PAGE>

its affiliates, becoming, directly or indirectly, the beneficial owner of in
excess of 50% of the outstanding voting securities of the Company; (ii) a merger
or consolidation of the Company with any other corporation or legal entity
regardless of which entity is the survivor, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the surviving entity)
in excess of 50% of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or (iii) the
sale or disposition of all or substantially all of the Company's assets other
than in a transaction in which holders of the voting securities of the Company
immediately prior to such transaction receive voting securities of the acquiror
of such assets or its affiliate that represent in excess of 50% of the voting
securities of such entity after consummation of such transaction.

                  (d) "Commencement Date" means October 31, 1998.

                  (e) "Common Stock" means the common stock, par value $0.01 per
share, of the Company.

                  (f) "Holder" means _________________ or its assigns.

                  (g) "Securities Purchase Agreement" means the Securities
Purchase Agreement dated as of October 23, 1998 by and among the Company, SatCon
Technology Corporation, Duquesne Enterprises, Perseus Capital, L.L.C. and
Micro-Generation Technology Fund, L.L.C.

                  (h) "Warrant Price" means $_______ per share, subject to
adjustment as described in Section 3 below.

                  (i) "Warrant Stock" means the shares of Common Stock (or other
securities) purchasable upon exercise of this Warrant or issuable upon
conversion of this Warrant. The total number of shares to be issued upon the
exercise of this Warrant shall be __________ subject to adjustment as described
in Section 3 below.

         3. ADJUSTMENTS AND NOTICES. The Warrant Price and the number of shares
of Warrant Stock shall be subject to adjustment from time to time in accordance
with this Section 3.

                  (a) SUBDIVISION, STOCK DIVIDENDS OR COMBINATIONS. In case the
Company shall at any time subdivide the outstanding shares of Common Stock or
shall issue a stock dividend with respect to the Common Stock, the Warrant Price
in effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in case the Company shall at any time
combine the outstanding shares of the Common Stock, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased, in
each case effective at the close of business on the date of such subdivision,
dividend or combination, as the case may be.

                                      -2-
<PAGE>

                  (b) RECLASSIFICATION, EXCHANGE, SUBSTITUTION, IN-KIND
DISTRIBUTION. Upon any reclassifications, exchange, substitution or other event
that results in a change of the number and/or class of the securities issuable
upon exercise or conversion of this Warrant or upon the payment of a dividend in
securities or property other than shares of Common Stock, the Holder shall be
entitled to receive, upon exercise or conversion of this Warrant, the number and
kind of securities and property that Holder would have received if this Warrant
had been exercised or converted immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The new
warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise or conversion of the new warrant.
The provisions of this Section 3(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive
dividends.

                  (c) REORGANIZATION, MERGER ETC. In case of any (i) merger or
consolidation of the Company into or with another corporation where the Company
is not the surviving corporation, (ii) sale, transfer or lease (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company or (iii) sale by the
Company's shareholders of 50% or more of the Company's outstanding securities in
one or more related transactions, the Company, or such successor or purchasing
corporation, as the case may be, shall, as a condition to closing any such
reorganization, merger or sale, duly execute and deliver to the Holder hereof a
new warrant so that the Holder shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise or conversion of the
unexercised or unconverted portion of this Warrant, and in lieu of the shares of
the Common Stock theretofore issuable upon exercise or conversion of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reorganization, merger or sale by the Holder of
the number of shares of Common Stock then purchasable under this Warrant. Such
new warrant shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3. The
provisions of this subparagraph (c) shall similarly apply to successive
reorganizations, mergers and sales.

                  (d) DILUTIVE ISSUANCES. (i) If the Company, at any time or
from time to time after the Commencement Date, shall issue any Additional Stock
(as defined below) without consideration or for a consideration per Common Stock
Equivalent Share less than the Adjusted Class D Conversion Price in effect
immediately prior to the issuance of such Additional Stock, then the Warrant
Price in effect immediately prior to each such issuance shall forthwith be
adjusted to a price determined by multiplying such Warrant Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
that the aggregate consideration received by the Company for such issuance would
purchase at such Warrant Price; and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of such Additional Stock. For purposes of this clause (i),
the number of shares of Common Stock outstanding at a given time shall be deemed
to be the

                                      -3-
<PAGE>

number of shares of Common Stock that are then issued and outstanding plus the
number of shares of Common Stock then issuable upon exercise of all then
outstanding warrants, options or similar rights to purchase Common Stock or
securities convertible into Common Stock plus the number of shares of Common
Stock then issuable upon conversion of such convertible securities and all other
convertible securities of the Company then outstanding.

                           (ii) In the case of the issuance of Common Stock for
cash, the consideration received therefor shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the company for any underwriting or
otherwise in connection with the issuance and sale thereof.

                           (iii) In the case of the issuance of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash received therefor shall be deemed to be the fair value thereof as
reasonably determined by the Board of Directors of the Company in its good faith
judgment irrespective of any accounting treatment.

                           (iv) In the case of the issuance, whether before, on
or after the Commencement Date, of options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:

                                    (A) The aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in clauses (ii) or (iii)), if
any, received by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights (without taking
into account potential anti-dilution adjustments) for the Common Stock covered
thereby.

                                    (B) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in clauses (ii) or (iii)).

                                    (C) In the event of any change in the number
of shares of Common Stock deliverable or any increase in the consideration
payable to this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution

                                      -4-
<PAGE>

provisions thereof, the Warrant Price obtained with respect to the adjustment
that was made upon the issuance of such options, rights or securities, and any
subsequent adjustments based thereon, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.

                                    (D) Upon the expiration of any such options
or rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Warrant Price obtained with respect to the adjustment which was
made upon the issuance of such options, rights or securities or options or
rights related to such securities, and any subsequent adjustments based thereon,
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options or rights, upon
the conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities. Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities shall continue to be deemed to be issued.

                                    (E) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to clauses
(iv)(A) and (iv)(B) of this Section 3(d) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in either
clause (iv)(C) or (iv)(D) of this Section 3(d).

                           (v) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to clause (iv) of
this Section 3(d)) by the Company after the Commencement Date other than shares
of Common Stock issued or issuable:

                                    (A) to officers, directors, employees and
consultants of the Company directly or pursuant to a stock option plan or
restricted stock plan approved by the Board of Directors of the Company;

                                    (B) upon conversion of the Class A, B, C or
D Preferred Stock of the Company or the exercise of the Warrants issued under
the Securities Purchase Agreement;

                                    (C) to persons or entities with which the
Company has business relationships provided such issuances are for other than
primarily equity financing purposes and provided that at the time of any such
issuance, the aggregate of such issuance and similar issuances in the preceding
twelve-month period do not exceed 2% of the then outstanding Common Stock of the
Company (assuming full conversion and exercise of all convertible and
exercisable securities then outstanding) or such issuance is expressly approved
by a majority of the director representatives of the holders of Class D
Preferred Stock on the Company's Board of Directors.

                                      -5-
<PAGE>

                           (vi) "Common Stock Equivalent Share" means with
respect to any security that is ultimately convertible into shares of Common
Stock or ultimately exercisable for shares of Common Stock, the total number of
shares of Common Stock that may be acquired upon full exercise of all such
rights.

                  (e) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the Warrant Price, the Corporation, at its own expense, shall
cause its Chief Financial Officer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Holder. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. No adjustment of the Warrant Price shall be
required to be made unless it would result in an increase or decrease of at
least one cent, but any adjustments not made because of this sentence shall be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.

                  (f) ADJUSTMENT TO NUMBER OF SHARES OF WARRANT STOCK. In the
event the Warrant Price is adjusted under any provision of this Section 3, the
number of shares of Warrant Stock shall be simultaneously adjusted by
multiplying the number of shares of Warrant Stock by a fraction, the numerator
of which is the Warrant Price in effect immediately prior to such adjustment and
the denominator of which is the Warrant Price in effect immediately after such
adjustment.

                  (g) NO IMPAIRMENT. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all of the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Common Stock other than as described
above that adversely affects the Holder's rights under this Warrant, the Warrant
Price shall be adjusted downward.

                  (h) FRACTIONAL SHARES. No fractional shares shall be issuable
upon exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.

         4. NO SHAREHOLDER RIGHTS. This Warrant, by itself, as distinguished
from any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.

         5. RESERVATION OF STOCK. On and after the Commencement Date, the
Company will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Warrant Stock upon the exercise
or conversion of this Warrant. Issuance of

                                      -6-
<PAGE>

this Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.

         6. EXERCISE OF WARRANT. This Warrant may be exercised as a whole or
part by the Holder, at any time after the date hereof prior to the termination
of this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
ATTACHMENTS 1 AND 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled to
receive the shares of Warrant Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. As promptly as practicable after such date, the Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Warrant Stock
issuable upon such exercise. If this Warrant shall be exercised for less than
the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of this Warrant upon such exercise, the Company will
execute and deliver a new warrant, dated the date hereof, evidencing the right
of the Holder to the balance of this Warrant Stock purchasable hereunder upon
the same terms and conditions set forth herein.

         7. CONVERSION. In lieu of exercising this Warrant or any portion
hereof, at any time after the occurrence of a Change-In-Control Event or the
filing of a registration statement for an initial underwritten public offering
of securities by the Company, the Holder hereof shall have the right to convert
this Warrant or any portion hereof into Warrant Stock by executing and
delivering to the Company at its principal office the written Notice of
Conversion and Investment Representation Statement in the forms attached hereto
as ATTACHMENTS 2 AND 3, specifying the portion of the Warrant to be converted,
and accompanied by this Warrant. The number of shares of Warrant Stock to be
issued to Holder upon such conversion shall be computed using the following
formula:

                                 X=(P)(Y)(A-B)/A

         where   X = the number of shares of Common Stock to be issued to the
                     Holder for the portion of the Warrant being converted.

                 P = the portion of the Warrant being converted expressed as a
                     decimal fraction.

                 Y = the total number of shares of Common Stock issuable upon
                     exercise of the Warrant in full.

                 A = the fair market value of one share of Warrant Stock
                     which means (i) the fair market value of the Warrant Stock
                     as of the last Business Day immediately prior to the date
                     the notice of conversion is received by the Company, as
                     reported in the principal market for such securities or, if
                     no such market

                                      -7-
<PAGE>

                     exists, as determined in good faith by the Company's Board
                     of Directors, or (ii) if this Warrant is being converted in
                     conjunction with a public offering of stock the price to
                     the public per share pursuant to the offering.

                 B = the Warrant Price on the date of conversion.

Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full shares of Warrant Stock issuable upon such conversion. If
the Warrant shall be converted for less than the total number of shares of
Warrant Stock then issuable upon conversion, promptly after surrender of the
Warrant upon such conversion, the Company will execute and deliver a new
warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein. If this Warrant is converted, as a whole or in
part, after the occurrence of a Change-In-Control Event as to which Section 3(c)
is applicable, the Holder shall receive the consideration contemplated by
Section 3(c) in lieu of Common Stock of the Company.

         8. TRANSFER OF WARRANT. This Warrant may be transferred or assigned by
the Holder hereof in whole or in part, provided that the transferor provides, at
the Company's request, an opinion of counsel satisfactory to the Company that
such transfer does not require registration under the Securities Act and the
securities law applicable with respect to any other applicable jurisdiction.

         9. TERMINATION. This Warrant shall terminate on 5:00 p.m. New York time
on the Termination Date.

         10. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of New York, as such laws are applied to contracts to be entered into and
performed entirely in New York by New York residents. In the event of any
dispute among the Holder and the Company arising out of the terms of this
Warrant, the parties hereby consent to the exclusive jurisdiction of the federal
and state courts located in the State of New York for resolution of such
dispute, and agree not to contest such exclusive jurisdiction or seek to
transfer any action relating to such dispute to any other jurisdiction. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed or waived orally, but only by an instrument in
writing signed by the Company and the Holder of this Warrant. All notices and
other communications from the Company to the Holder of this Warrant shall be
delivered personally or by facsimile transmission or mailed by first class mail,
postage prepaid, to the address or facsimile number furnished to the Company in
writing by the last Holder of this Warrant who shall have furnished an address
or

                                      -8-
<PAGE>

facsimile number to the Company in writing, and if mailed shall be deemed given
three days after deposit in the United States mail.

                                      -9-
<PAGE>

ISSUED:  _______________

                                         BEACON POWER CORPORATION

                                         By:
                                            --------------------------------
                                              Name:  William E. Stanton
                                              Title:  President

                                      -10-
<PAGE>

                                  ATTACHMENT 1

NOTICE OF EXERCISE

TO:      BEACON POWER CORPORATION

         1. The undersigned hereby elects to purchase __________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.

         2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:

                         ------------------------------
                                     (Name)

                         ------------------------------
                                    (Address)

------------------------                       ---------------------------------
(Date)                                         (Name of Warrant Holder)

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

<PAGE>

                                  ATTACHMENT 2

                       INVESTMENT REPRESENTATION STATEMENT

                           Shares of the Common Stock
                     (as defined in the attached Warrant) of
                            BEACON POWER CORPORATION

         In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Beacon Power Corporation (the "Company") as
follows:

         (a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.

         (b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and applicable state
securities laws, on the ground that the issuance of such securities is exempt
pursuant to Section 4(2) of the Securities Act and state law exemptions relating
to offers and sales not by means of a public offering, and that the Company's
reliance on such exemptions is predicated on the undersigned's representations
set forth herein.

         (c) The undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Securities
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Securities Act and such laws is available,
and (B) the proposed transfer will not violate any of said laws.

         (d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the

<PAGE>

accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by it satisfactorily answered by the Company

         (e) The undersigned acknowledges that the Securities issuable upon
exercise or conversion of the Warrant must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. The undersigned is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold from the Company or any affiliate of the
Company, the sale being through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the number of
shares being sold during any three month period not exceeding specified
limitations.

Dated:____________________

                                            ---------------------------------
                                            (Typed or Printed Name)

                                            By:
                                               ------------------------------
                                                 (Signature)

                                            ---------------------------------
                                            (Title)

                                      -2-
<PAGE>

                                  ATTACHMENT 3

NOTICE OF CONVERSION

TO:      BEACON POWER CORPORATION

         1. The undersigned hereby elects to acquire __________ shares of the
Warrant Stock of Beacon Power Corporation pursuant to the terms of the attached
Warrant, by conversion of __________ percent (_____%) of the Warrant.

         2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:

                         ------------------------------
                                     (Name)

                         ------------------------------
                                    (Address)

--------------------------                      --------------------------------
(Date)                                          (Name of Warrant Holder)

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

<PAGE>

                      WARRANTS OF BEACON POWER CORPORATION
                      ISSUED PURSUANT TO CLASS D FINANCING

<TABLE>
<CAPTION>
------------------------------------- ------------------- ---------------------- ----------------------------
Name of Holder                        Issue Date          Exercise Price         Number of shares of
                                                                                 common stock underlying
                                                                                 warrant
------------------------------------- ------------------- ---------------------- ----------------------------
<S>                                   <C>                 <C>                    <C>
Perseus Capital, L.L.C.               October 23, 1999           $3.33                    255,000
------------------------------------- ------------------- ---------------------- ----------------------------
Perseus Capital, L.L.C.               October 23, 1999            4.50                    255,000
------------------------------------- ------------------- ---------------------- ----------------------------
Perseus Capital, L.L.C.               October 23, 1999            6.00                    255,000
------------------------------------- ------------------- ---------------------- ----------------------------
Perseus Capital, L.L.C.               April 23, 2000              3.33                    225,000
------------------------------------- ------------------- ---------------------- ----------------------------
Perseus Capital, L.L.C.               April 23, 2000              4.50                    225,000
------------------------------------- ------------------- ---------------------- ----------------------------
Perseus Capital, L.L.C.               April 23, 2000              6.00                    225,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            October 23, 1999            3.33                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            October 23, 1999            4.50                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            October 23, 1999            6.00                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            April 23, 2000              3.33                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            April 23, 2000              4.50                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Duqnesne Enterprises, Inc.            April 23, 2000              6.00                     75,000
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         October 23, 1999            3.33                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         October 23, 1999            4.50                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         October 23, 1999            6.00                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         April 23, 2000              3.33                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         April 23, 2000              4.50                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
Micro-Generation   Technology         April 23, 2000              6.00                     56,250
Fund, L.L.C.
------------------------------------- ------------------- ---------------------- ----------------------------
</TABLE>

                                      -2-

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