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Exclusive Patent License Agreement - Massachusetts Institute of Technology and A123 Systems Inc.

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

and

A123 Systems, Inc.

EXCLUSIVE PATENT LICENSE AGREEMENT

Offer to continue negotiations based upon this
agreement open until December 15, 2001

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TABLE OF CONTENTS

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MASSACHUSETTS INSTITUTE OF TECHNOLOGY
EXCLUSIVE PATENT LICENSE AGREEMENT

        This Agreement, effective as of the date set forth above the signatures of the parties below (the "EFFECTIVE DATE"), is between the Massachusetts Institute of Technology ("M.I.T."), a Massachusetts corporation, with a principal office at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 and A123 Systems, Inc. ("COMPANY"), a Massachusetts corporation, with a principal place of business at 1 Memorial Drive, 12^th Floor, Cambridge, MA 02142.

R E C I T A L S

        WHEREAS, M.I.T. is the owner of certain PATENT RIGHTS (as later defined herein) relating to M.I.T. Case No. 8700, "Design And Manufacturing Process For Batteries", by Yet-Ming Chiang and Benjamin Hellweg; M.I.T. Case No. 9101, "Self-assembled Electrochemical And Bipolar Electronic Devices", by Yet-Ming Chiang and W. Douglas Moorehead and M.I.T. Case No. 9541, "Conductive Lithium Storage Electrode and Method of Making Same" by Yet-Ming Chiang, Sung-Yoon Chung and Jason T. Bloking and has the right to grant licenses under said PATENT RIGHTS;

        WHEREAS, Yet Ming Chiang, an inventor of the PATENT RIGHTS and current employee of M.I.T., has or will shortly acquire equity in COMPANY, the Conflict Avoidance Statement of Yet-Ming Chiang is attached as Exhibit A hereto;

        WHEREAS, Yet-Ming Chiang, an inventor of the PATENT RIGHTS, has or will shortly acquire equity in COMPANY not resulting from this Agreement, the Inventor/Author Acknowledgment of No Equity Distribution in M.I.T.'s institutional equity share of Yet-Ming Chiang is attached as Exhibit B hereto;

        WHEREAS, M.I.T.'s Vice President for Research has approved that Yet-Ming Chiang, an inventor of the PATENT RIGHTS, now holds or shall shortly acquire equity in COMPANY and that M.I.T. is accepting equity as partial consideration for the rights and licenses granted under this Agreement;

        WHEREAS, M.I.T. desires to have the PATENT RIGHTS developed and commercialized to benefit the public and is willing to grant a license thereunder;

        WHEREAS, COMPANY has represented to M.I.T., to induce M.I.T. to enter into this Agreement, that COMPANY shall commit itself to a thorough, vigorous and diligent program of exploiting the PATENT RIGHTS so that public utilization shall result therefrom; and

        WHEREAS, COMPANY desires to obtain a license under the PATENT RIGHTS upon the terms and conditions hereinafter set forth.

        NOW, THEREFORE, M.I.T. and COMPANY hereby agree as follows:

1. DEFINITIONS.

        1.1   "AFFILIATE" shall mean any legal entity (such as a corporation, partnership, or limited liability company) that is controlled by COMPANY. For the purposes of this definition, the term "control" means (i) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities.

        1.2   "EXCLUSIVE PERIOD" shall mean the period of time set forth in Section 2.2.

        1.3   "FIELD" shall mean batteries and power supplies, and components thereof.

        1.4   "LICENSED PRODUCT" shall mean any product or part thereof that:

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        1.5   "LICENSED PROCESS" shall mean any process that, absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS or which uses a LICENSED PRODUCT.

        1.6   "NET SALES" shall mean the gross amount billed by COMPANY and its AFFILIATES for LICENSED PRODUCTS and LICENSED PROCESSES, less the following:

        1.7   "PATENT RIGHTS" shall mean:  

        1.8   "REPORTING PERIOD" shall begin on the first day of each calendar quarter and end on the last day of such calendar quarter.

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        1.9   "SUBLICENSE INCOME" shall mean any payments that COMPANY or an AFFILIATE receives from a SUBLICENSEE in consideration of the sublicense of the rights granted COMPANY and AFFILIATES under Section 2.1, including without limitation license fees, royalties, milestone payments, license maintenance fees, and other similar payments.

        1.10 "SUBLICENSEE" shall mean any non-AFFILIATE sublicensee of the rights granted COMPANY under Section 2.1.

        1.11 "TERM" shall mean the term of this Agreement, which shall commence on the EFFECTIVE DATE and shall remain in effect until the expiration or abandonment of all issued patents and filed patent applications within the PATENT RIGHTS, unless earlier terminated in accordance with the provisions of this Agreement.

        1.12 "TERRITORY" shall mean worldwide

2. GRANT OF RIGHTS.

        2.1    License Grants.    Subject to the terms of this Agreement, M.I.T. hereby grants to COMPANY and its AFFILIATES for the TERM a royalty-bearing license under the PATENT RIGHTS to develop, make, have made, use, sell, offer to sell, lease, and import LICENSED PRODUCTS in the FIELD in the TERRITORY and to develop and perform LICENSED PROCESSES in the FIELD in the TERRITORY.

        2.2    Exclusivity.    In order to establish an exclusive period for COMPANY, M.I.T. agrees that it shall not grant any other license to make, have made, use, sell, lease and import LICENSED PRODUCTS in the FIELD in the TERRITORY or to perform LICENSED PROCESSES in the FIELD in the TERRITORY during the period of time commencing on the EFFECTIVE DATE and extending to the end of the TERM.

        2.3    Sublicenses.    COMPANY shall have the right to grant sublicenses of its rights under Section 2.1. COMPANY shall incorporate terms and conditions into its sublicense agreements sufficient to enable COMPANY to comply with this Agreement. COMPANY shall promptly furnish M.I.T. with a fully signed photocopy of any sublicense agreement. Upon termination of this Agreement for any reason, any SUBLICENSEE not then in default shall have the right to seek a license from M.I.T. M.I.T. agrees to negotiate such licenses in good faith under terms and conditions which, when taken as a whole, shall be no more onerous than the terms and conditions of this Agreement.

        2.4    U.S. Manufacturing.    COMPANY agrees that any LICENSED PRODUCTS used or sold in the United States will be manufactured substantially in the United States unless all required waivers are obtained by COMPANY.

        2.5    Retained Rights.    

        2.6   M.I.T. further grants to COMPANY an option to add to the PATENT RIGHTS of this Agreement the patent rights of new inventions which:

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For each such invention, COMPANY's option period to elect the patent rights shall begin with M.I.T. notifying COMPANY of the invention (such notification to be held in confidence), and shall expire [**] days later unless COMPANY notifies M.I.T. in writing that it wishes to exercise its option. For each invention so elected, COMPANY shall pay a license addition fee of $[**]dollars;) the patent rights of that invention shall then be added to the PATENT RIGHTS of this Agreement by amendment.

        2.7    No Additional Rights.    Nothing in this Agreement shall be construed to confer any rights upon COMPANY by implication, estoppel, or otherwise as to any technology or patent rights of M.I.T. or any other entity other than the PATENT RIGHTS, regardless of whether such technology or patent rights shall be dominant or subordinate to any PATENT RIGHTS.

3. COMPANY DILIGENCE OBLIGATIONS.

        3.1    Diligence Requirements.    COMPANY shall use diligent efforts, or shall cause its AFFILIATES and SUBLICENSEES to use diligent efforts, to develop LICENSED PRODUCTS or LICENSED PROCESSES and to introduce LICENSED PRODUCTS or LICENSED PROCESSES into the commercial market; thereafter, COMPANY or its AFFILIATES or SUBLICENSEES shall make LICENSED PRODUCTS or LICENSED PROCESSES reasonably available to the public. Specifically, COMPANY or AFFILIATE or SUBLICENSEE shall fulfill the following obligations:

        In the event that the obligations under this Section 3.1 have not been fulfilled, then M.I.T. may treat such failure as a material breach in accordance with Section 12.3(b).

4. ROYALTIES AND PAYMENT TERMS.

        4.1    Consideration for Grant of Rights.    

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        4.2    Payments.    

5. REPORTS AND RECORDS.

        5.1    Frequency of Reports.    

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        5.2    Content of Reports and Payments.    Each report delivered by COMPANY to M.I.T. shall contain at least the following information for the immediately preceding REPORTING PERIOD:

        5.3    Financial Statements.    On or before the [**] day following the close of COMPANY's fiscal year, COMPANY shall provide M.I.T. with COMPANY's financial statements for the preceding fiscal year including, at a minimum, a balance sheet and an income statement, certified by COMPANY's treasurer or chief financial officer or by an independent auditor. M.I.T. shall maintain such financial statements as confidential information of the COMPANY.

        5.4    Records.    COMPANY shall maintain, and shall cause its AFFILIATES and SUBLICENSEES to maintain, complete and accurate records relating to the rights and obligations under this Agreement and any amounts payable to M.I.T. in relation to this Agreement, which records shall contain sufficient information to permit M.I.T. to confirm the accuracy of any reports delivered to M.I.T. and compliance in other respects with this Agreement. The relevant party shall retain such records for at least [**] years following the end of the calendar year to which they pertain, during which time M.I.T., or M.I.T.'s appointed agents, shall have the right, at M.I.T.'s expense, to inspect such records during normal business hours to verify any reports and payments made or compliance in other respects under this Agreement. In the event that any audit performed under this Section reveals an underpayment in excess of five percent (5%), COMPANY shall bear the full cost of such audit and shall remit any amounts due to M.I.T. within [**] days of receiving notice thereof from M.I.T.

6. PATENT PROSECUTION.

        6.1    Responsibility for PATENT RIGHTS.    COMPANY shall assume responsibility for preparation, filing, prosecution and maintenance of all of the PATENT RIGHTS in M.I.T.'s name using attorneys acceptable to M.I.T. Such activities shall be conducted in M.I.T.'s best interest and COMPANY shall not abandon any substantive claim of the PATENT RIGHTS without permission from M.I.T. M.I.T. shall be copied on all correspondence regarding patent filing, prosecution and maintenance and shall

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have reasonable opportunities to advise COMPANY and shall cooperate with COMPANY in such filing, prosecution and maintenance.

        6.2    International (non-United States) Filings.    Appendix B is a list of countries in which patent applications corresponding to the United States patent applications listed in Appendix A shall be filed, prosecuted, and maintained. Appendix B may be amended by mutual agreement of COMPANY and M.I.T.

        6.3    Payment of Expenses.    Payment of all fees and costs, including attorneys fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS shall be the responsibility of COMPANY, whether such amounts were incurred before or after the EFFECTIVE DATE. COMPANY shall reimburse all amounts incurred by M.I.T. within [**] days of invoicing; late payments shall accrue interest pursuant to Section 4.2(c).

7. INFRINGEMENT.

        7.1    Notification of Infringement.    Each party agrees to provide written notice to the other party promptly after becoming aware of any infringement of the PATENT RIGHTS.

        7.2    Right to Prosecute Infringements.    

        7.3    Declaratory Judgment Actions.    In the event that a declaratory judgment action is brought against M.I.T. or COMPANY by a third party alleging invalidity, unenforceability, or non-infringement of the PATENT RIGHTS, M.I.T., at its option, shall have the right within [**] days after commencement of such action to take over the sole defense of the action at its own expense. If M.I.T. does not exercise this right, COMPANY may take over the sole defense of the action at COMPANY's sole expense, subject to Sections 7.4 and 7.5.

        7.4    Offsets.    COMPANY may offset a total of [**] percent ([**]%) of any expenses incurred under Sections 7.2 and 7.3 against any payments due to M.I.T. under Article 4, provided that in no event shall such payments under Article 4, when aggregated with any other offsets and credits allowed under this Agreement, be reduced by more than [**] percent ([**]%) in any REPORTING PERIOD.

        7.5    Recovery.    Any recovery obtained in an action brought by COMPANY under Sections 7.2 or 7.3 shall be distributed as follows: (i) each party shall be reimbursed for any expenses incurred in the

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action (including the amount of any royalty or other payments withheld from M.I.T. as described in Section 7.4), (ii) as to ordinary damages, COMPANY shall receive an amount equal to its lost profits or a reasonable royalty on the infringing sales, or whichever measure of damages the court shall have applied, and COMPANY shall pay to M.I.T. based upon such amount a reasonable approximation of the royalties and other amounts that COMPANY would have paid to M.I.T. if COMPANY had sold the infringing products, processes and services rather than the infringer or had entered into a sublicense agreement with the infringer, and (iii) as to special or punitive damages, the parties shall share equally in any award.

        7.6    Cooperation.    Each party agrees to cooperate in any action under this Article which is controlled by the other party, provided that the controlling party reimburses the cooperating party promptly for any costs and expenses incurred by the cooperating party in connection with providing such assistance.

        7.7    Right to Sublicense.    So long as COMPANY remains the exclusive licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY shall have the sole right to sublicense any alleged infringer in the FIELD in the TERRITORY for future use of the PATENT RIGHTS in accordance with the terms and conditions of this Agreement relating to sublicenses. Any revenues to COMPANY pursuant to such sublicense shall be treated as set forth in Section 4.1(d).

8. INDEMNIFICATION AND INSURANCE

        8.1    Indemnification.    

        8.2    Insurance.    COMPANY shall obtain and carry in full force and effect commercial general liability insurance, including product liability and errors and omissions insurance which shall protect COMPANY and Indemnitees with respect to events covered by Section 8.1(a) above. Such insurance (i) shall be issued by an insurer licensed to practice in the Commonwealth of Massachusetts or an insurer pre-approved by M.I.T., such approval not to be unreasonably withheld, (ii) shall list M.I.T. as an additional insured thereunder, (iii) shall be endorsed to include product liability coverage, and (iv) shall require thirty (30) days written notice to be given to M.I.T. prior to any cancellation or

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material change thereof. The limits of such insurance shall not be less than One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for bodily injury including death; One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for property damage; and One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for errors and omissions. In the alternative, COMPANY may self-insure subject to prior approval of M.I.T. COMPANY shall provide M.I.T. with Certificates of Insurance evidencing compliance with this Section. COMPANY shall continue to maintain such insurance or self-insurance after the expiration or termination of this Agreement during any period in which COMPANY or any AFFILIATE or SUBLICENSEE continues (i) to make, use, or sell a product that was a LICENSED PRODUCT under this Agreement or (ii) to perform a service that was a LICENSED PROCESS under this Agreement, and thereafter for a period of five (5) years.

9. NO REPRESENTATIONS OR WARRANTIES

        EXCEPT AS MAY OTHERWISE BE EXPRESSLY SET FORTH IN THIS AGREEMENT, M.I.T. MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE PATENT RIGHTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. Specifically, and not to limit the foregoing, M.I.T. makes no warranty or representation (i) regarding the validity or scope of the PATENT RIGHTS, and (ii) that the exploitation of the PATENT RIGHTS or any LICENSED PRODUCT or LICENSED PROCESS will not infringe any patents or other intellectual property rights of M.I.T. or of a third party.

        IN NO EVENT SHALL M.I.T., ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES OR COMPANY, ITS DIRECTORS, OFFICERS, ADVISORS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER ANY SUCH ENTITY OR PERSON SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

10. ASSIGNMENT.

        This Agreement is personal to COMPANY and no rights or obligations may be assigned by COMPANY without the prior written consent of M.I.T. Notwithstanding the foregoing, COMPANY may assign this Agreement in connection with the sale or transfer of all or substantially all of COMPANY's business relating to the LICENSED PRODUCTS and LICENSED PROCESSES, whether by merger, consolidation, sale of assets or otherwise; provided that (a) the assignee shall agree in writing to be bound by the terms and conditions hereof prior to such assignment and (b) the total valuation of the COMPANY is at least [**] Dollars ($[**]). In the event that the total valuation of the COMPANY is less than $[**], then the assignment may be made only with M.I.T.'s written permission. Failure of such assignee to so agree to be bound by the terms and conditions hereof shall be grounds for termination by M.I.T. under Section 12.3.

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11. GENERAL COMPLIANCE WITH LAWS

        11.1    Compliance with Laws.    COMPANY shall use reasonable commercial efforts to comply with all commercially material local, state, federal, and international laws and regulations relating to the development, manufacture, use, and sale of LICENSED PRODUCTS and LICENSED PROCESSES.

        11.2    Export Control.    COMPANY and its AFFILIATES and SUBLICENSEES shall comply with all United States laws and regulations controlling the export of certain commodities and technical data, including without limitation all Export Administration Regulations of the United States Department of Commerce. Among other things, these laws and regulations prohibit or require a license for the export of certain types of commodities and technical data to specified countries. COMPANY hereby gives written assurance that it will comply with, and will cause its AFFILIATES and SUBLICENSEES to comply with, all United States export control laws and regulations, that it bears sole responsibility for any violation of such laws and regulations by itself or its AFFILIATES or SUBLICENSEES, and that it will indemnify, defend, and hold M.I.T. harmless (in accordance with Section 8.1) for the consequences of any such violation.

        11.3    Non-Use of M.I.T. Name.    COMPANY and its AFFILIATES and SUBLICENSEES shall not use the name of "Massachusetts Institute of Technology," "Lincoln Laboratory" or any variation, adaptation, or abbreviation thereof, or of any of its trustees, officers, faculty, students, employees, or agents, or any trademark owned by M.I.T., or any terms of this Agreement in any promotional material or other public announcement or disclosure without the prior written consent of M.I.T. The foregoing notwithstanding, without the consent of M.I.T., COMPANY may state that it is licensed by M.I.T. under one or more of the patents and/or patent applications comprising the PATENT RIGHTS.

        11.4    Marking of LICENSED PRODUCTS.    To the extent commercially feasible and consistent with prevailing business practices, COMPANY shall mark, and shall cause its AFFILIATES and SUBLICENSEES to mark, all LICENSED PRODUCTS that are manufactured or sold under this Agreement with the number of each issued patent under the PATENT RIGHTS that applies to such LICENSED PRODUCT.

12. TERMINATION

        12.1    Voluntary Termination by COMPANY.    COMPANY shall have the right to terminate this Agreement, for any reason, (i) upon at least six (6) months prior written notice to M.I.T., such notice to state the date at least six (6) months in the future upon which termination is to be effective, and (ii) upon payment of all amounts due to M.I.T. through such termination effective date.

        12.2    Cessation of Business.    If COMPANY ceases to carry on its business related to this Agreement, M.I.T. shall have the right to terminate this Agreement immediately upon written notice to COMPANY.

        12.3    Termination for Default.    

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        12.4    Effect of Termination.    

13. DISPUTE RESOLUTION.

        13.1    Mandatory Procedures.    The parties agree that any dispute arising out of or relating to this Agreement shall be resolved solely by means of the procedures set forth in this Article, and that such procedures constitute legally binding obligations that are an essential provision of this Agreement. If either party fails to observe the procedures of this Article, as may be modified by their written agreement, the other party may bring an action for specific performance of these procedures in any court of competent jurisdiction.

        13.2    Equitable Remedies.    Although the procedures specified in this Article are the sole and exclusive procedures for the resolution of disputes arising out of or relating to this Agreement, either party may seek a preliminary injunction or other provisional equitable relief if, in its reasonable judgment, such action is necessary to avoid irreparable harm to itself or to preserve its rights under this Agreement.

        13.3    Dispute Resolution Procedures.    

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        13.4    Performance to Continue.    Each party shall continue to perform its undisputed obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement; provided, however, that a party may suspend performance of its undisputed obligations during any period in which the other party fails or refuses to perform its undisputed obligations. Nothing in this Article is intended to relieve COMPANY from its obligation to make undisputed payments pursuant to Articles 4 and 6 of this Agreement.

        13.5    Statute of Limitations.    The parties agree that all applicable statutes of limitation and time-based defenses (such as estoppel and laches) shall be tolled while the procedures set forth in Sections 13.3(a) are pending. The parties shall cooperate in taking any actions necessary to achieve this result.

14. MISCELLANEOUS.

        14.1    Notice.    Any notices required or permitted under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be sent by hand, recognized national overnight courier, confirmed facsimile transmission, confirmed electronic mail, or registered or certified mail, postage prepaid, return receipt requested, to the following addresses or facsimile numbers of the parties:

        If to M.I.T., all matters relating to the license:

        If to M.I.T., relating to any equity action after the initial issuance of shares:

        If to COMPANY:

        14.2    Governing Law.    This Agreement and all disputes arising out of or related to this Agreement, or the performance, enforcement, breach or termination hereof, and any remedies relating thereto, shall be construed, governed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts, U.S.A., without regard to conflict of laws principles, except that

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questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted.

        14.3    Force Majeure.    Neither party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, flood, war, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.

        14.4    Amendment and Waiver.    This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both parties. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

        14.5    Severability.    In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect any other provision of this Agreement, and the parties shall negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent. If the parties fail to reach a modified agreement within thirty (30) days after the relevant provision is held invalid or unenforceable, then the dispute shall be resolved in accordance with the procedures set forth in Article 13. While the dispute is pending resolution, this Agreement shall be construed as if such provision were deleted by agreement of the parties.

        14.6    Binding Effect.    This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.

        14.7    Headings.    All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.

        14.8    Entire Agreement.    This Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements or understandings between the parties relating to its subject matter.

        IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

The EFFECTIVE DATE of this Agreement is December 4, 2001.

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APPENDIX A
List of Patent Applications, Patents and Invention Disclosure for MIT Case 9264

I.

United States Patents and Applications

II.

International (non-U.S.) Patents and Applications

III.

Invention Disclosure

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APPENDIX B
List of Countries (excluding United States) for which
PATENT RIGHTS Applications Will Be Filed, Prosecuted and Maintained

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EXHIBIT A

CONFLICT AVOIDANCE STATEMENT

Because of the M.I.T. license granted to the above company and my equity* position and continuing relationship with this company, I acknowledge the potential for a possible conflict of interest between the performance of research at M.I.T. and my contractual or other obligations to this company. Therefore, I will not:

In addition, in order to avoid the appearance of a conflict, I will attempt to differentiate clearly between the intellectual directions of my M.I.T. research and my contributions to the company. To that end, I will expressly inform my department head/laboratory director annually of the general nature of my activities on behalf of the company.

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*

"Equity" includes stock, options, warrants or other financial instruments convertible into stock, which are directly or indirectly controlled by the inventor.

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EXHIBIT B

INVENTOR/AUTHOR ACKNOWLEDGMENT
OF NO EQUITY DISTRIBUTION
Form Version 8/22/01

        In partial reliance on the undersigned's execution of this Acknowledgment, M.I.T. has entered into the license agreement to which this Acknowledgment is attached (the "LICENSE") in which COMPANY received certain licenses to the technology listed below, on some or all of which the undersigned is a listed inventor or author. The undersigned, independently of the LICENSE, has received or will soon acquire equity in A123 Systems, Inc. ("COMPANY"), and, in accordance with M.I.T.'s licensing policies contained in M.I.T.'s Guide to the Ownership, Distribution and Commercial Development of M.I.T. Technology, as that policy may be amended from time to time (specifically §4.2.5 as of this Form Version date), the undersigned, on his/her own behalf and on behalf of his/her heirs and assigns, acknowledges and agrees that he/she has no right to receive any share of equity income received by M.I.T. in consideration for the LICENSE.

        Technology Licensed as of the EFFECTIVE DATE of the LICENSE:

        M.I.T. Case No. 8700, "Design And Manufacturing Process For Batteries", by Yet-ming Chiang And Benjamin Hellweg;

        M.I.T. Case No. 9101, "Self-assembled Electrochemical And Bipolar Electronic Devices", by Yet-Ming Chiang and W. Douglas Moorehead

        M.I.T. Case No.9541, Conductive Lithium Storage Electrode and Method of Making Same" by Yet-Ming Chiang, Sung-Yoon Chung and Jason T. Bloking

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FIRST AMENDMENT

        This First Amendment is made as of the date set forth above the signatures of the parties below, by and between the Massachusetts Institute of Technology ("M.I.T."), a Massachusetts corporation, with a principal office at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 and AI23 Systems, Inc. ("COMPANY"), a Massachusetts corporation, with a principal place of business at 1 Memorial Drive, 12^th Floor, Cambridge, MA 02421-1313.

        WHEREAS, on December 4, 2001, M.I.T. and COMPANY executed an Exclusive Patent License Agreement ("LICENSE AGREEMENT") relating to: M.I.T. Case No. 8700, "Design And Manufacturing Process For Batteries", by Yet-Ming Chiang and Benjamin Hellweg; M.I.T. Case No. 9101, "Self-assembled Electrochemical And Bipolar Electronic Devices", by Yet-Ming Chiang and W. Douglas Moorehead and M.I.T. Case No. 9541, "Conductive Lithium Storage Electrode and Method of Making Same" by Yet-Ming Chiang, Sung-Yoon Chung and Jason T. Bloking (collectively the "PATENT RIGHTS"); and

        WHEREAS, M.I.T. and COMPANY now wish to modify, without changing the original intent of, the LICENSE AGREEMENT;

        NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

        1.     The phrase "excluding running royalties on NET SALES of SUBLICENCEES" shall be stricken from Section 4.1(d) of the LICENSE AGREEMENT. Therefore, Section 4.1(d) shall now read as follows:

        2.     The remaining terms and conditions of the LICENSEE AGREEMENT remain in effect.

        IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed under seal by their duly authorized representatives.

The Effective Date of this First Amendment is February 1, 2003.

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SECOND AMENDMENT

        This Second Amendment is entered into this 25th day of July, 2008 (the "Effective Date") and amends the Exclusive Patent License Agreement dated December 4, 2001 (the "2001 License Agreement") by and between the Massachusetts Institute of Technology, a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having its principal office at 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, U.S.A. ("M.I.T."), and A123 Systems, Inc., a Delaware corporation having its principal office at 321 Arsenal Street, Watertown, MA 02472 ("COMPANY").

        WHEREAS, M.I.T. and COMPANY wish to amend the 2001 License Agreement in order to redefine the royalty terms;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree to amend the 2001 License Agreement as follows:

1.     Establish a new definition as follows and add as a new Section 1.13:

2.     The present Section 4.1(c) shall be deleted in its entirety and replaced with the following new Section 4.1(c):

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3.     The present Section 5.2 shall be deleted and replaced with the following new Section 5.2:

4.    COMPANY'S notice address in the present Section 14.1 shall be deleted in its entirety and replaced with the following:

5. On or before [**], COMPANY shall make a [**] payment of [**] Dollars ($[**]) to M.I.T. in consideration of redefining the royalty terms under this Second Amendment.

6.    The remaining terms and conditions of the 2001 License Agreement remain in effect.

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IN WITNESS WHEREOF, the parties have duly executed this Amendment the day and year set forth below.

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