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Exhibit 10.1

 
SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made effective as of
March 7, 2012, by and among Active Power, Inc. (the “Company”), a corporation
organized under the laws of the State of Delaware, with its principal offices at
2128 W. Braker Lane, BK12, Austin, Texas 78758, and the purchasers whose names
and addresses are set forth on the signature pages hereof (each a “Purchaser”
and collectively the “Purchasers”).
 
IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and agreed by the parties hereto, the Company and each of
the Purchasers, intending to be legally bound, agree as follows:
 
SECTION 1.      Authorization of Sale of the Shares.  Subject to the terms and
conditions of this Agreement, the Company has authorized the issuance and sale
of 14,336,912 shares (the “Shares”) of common stock, par value $0.001 per share
(the “Common Stock”), of the Company.
 
SECTION 2.      Agreement to Sell and Purchase the Shares.  At the Closing (as
defined in Section 3), the Company will, subject to the terms and conditions of
this Agreement, issue and sell to the Purchasers and the Purchasers will buy
from the Company, upon the terms and conditions hereinafter set forth, the
number of Shares at the purchase price per share and aggregate purchase prices
set forth on the signature pages hereto.  The obligation of each Purchaser to
buy Shares shall be a several, and not joint, obligation.
 
SECTION 3.      Delivery of the Shares at the Closing.  The completion of the
purchase and sale of the Shares (the “Closing”) shall occur at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, 900 South Capital of
Texas Highway, Las Cimas IV, Fifth Floor, Austin, TX 78746-5546, simultaneously
with the execution of this Agreement (the date of the execution of this
Agreement, the “Closing Date”).
 
At the Closing, each Purchaser shall deliver, in immediately available funds,
the full amount of the purchase price for the Shares being purchased by such
Purchaser hereunder by wire transfer to an account designated by the Company and
the Company shall deliver to each Purchaser one or more stock certificates
registered in the name of such Purchaser, or in such nominee name(s) as
designated by such Purchaser in writing, representing the number of Shares set
forth on such Purchaser’s signature page.  The name(s) in which the stock
certificates are to be registered are set forth in the Stock Certificate
Questionnaire attached hereto as part of Appendix I.

 
 
 

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The Company’s obligation to complete the purchase and sale of the Shares and
deliver such stock certificate(s) to each Purchaser at the Closing shall be
subject to the following conditions, any one or more of which may be waived by
the Company: (x) receipt by the Company of same-day funds in the full amount of
the purchase price for the Shares being purchased hereunder; (y) completion of
the purchases and sales under the Agreement with all Purchasers; and (z) the
accuracy in all material respects of the representations and warranties made by
the Purchasers and the fulfillment of those undertakings of the Purchasers to be
fulfilled prior to the Closing.  Each Purchaser’s obligation to accept delivery
of such stock certificate(s) and to pay for the Shares evidenced thereby shall
be subject to the following conditions, any one or more of which may be waived
by such Purchaser: (a) each of the representations and warranties of the Company
in this Agreement (disregarding, for this purpose, all exceptions in those
representations and warranties relating to materiality, Material Adverse Effect
(as defined below) or any similar standard or qualification) shall be true and
correct on and as of the date of this Agreement and as of the Closing Date
(except to the extent expressly made as of a specified date, in which case as of
such date); (b) receipt by the Purchaser of a certificate executed by the chief
executive officer and the chief financial or accounting officer of the Company,
dated as of the Closing Date, to the effect of (a) above, and to the effect that
the Company has complied in all material respects with the Agreement and
satisfied all the conditions herein on its part to be performed or satisfied on
or prior to such Closing Date; (c) the delivery to the Purchaser by counsel to
the Company of a legal opinion in a form reasonably acceptable to the Purchaser;
(d) the fulfillment in all material respects of those undertakings of the
Company to be fulfilled prior to the Closing; (e) the execution and delivery by
the Company to Kinderhook Partners, L.P. of a resale registration rights
agreement in a form reasonably acceptable to such Purchaser (the “Registration
Rights Agreement”); and (f) the purchase by each of the other Purchasers of the
Shares that they have agreed to purchase from the Company, for total proceeds of
$9,749,100.  For the purposes of this Agreement the term “Material Adverse
Effect” shall mean a material adverse effect on the condition, properties,
business or results of operations of the Company and its Subsidiaries, taken as
a whole; provided, however, in no event shall any of the following be taken into
account in determining whether there has been or will be a Material Adverse
Effect: (A) any effect resulting from changes or effects in general worldwide or
U.S. economic, capital market or political conditions, which changes or effects
do not disproportionately affect the Company, (B) any effect resulting from
changes or effects generally affecting the industries or markets in which the
Company operates, which changes or effects do not disproportionately affect the
Company, (C) any effect resulting from any act of war or terrorism (or, in each
case, any escalation thereof), which changes or effects do not
disproportionately affect the Company, (D) any changes in applicable laws or
regulations or accounting principles or (E) any change in and of itself in the
trading price or trading volume of the Company’s Common Stock.
 
SECTION 4.      Representations, Warranties and Covenants of the Company.  The
Company hereby represents and warrants to, and covenants with, the Purchasers,
as of the date of this Agreement and as of the Closing Date (except to the
extent expressly made as of a specified date, in which case as of such date), as
follows:
 
4.1      Organization and Qualification.  The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and the Company is qualified to do business as a
foreign corporation in each jurisdiction in which qualification is required,
except where failure to so qualify would not have a Material Adverse
Effect.  Each of the Company’s subsidiaries (each a “Subsidiary” and
collectively the “Subsidiaries”) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is qualified to
do business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify would not have a Material
Adverse Effect.

 
 
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4.2      Registration of Offering.  The Company’s Registration Statement on Form
S-3 (File No. 333-163301) (the “Registration Statement”) has been declared
effective by the Securities and Exchange Commission (the “Commission”) and no
stop orders have been issued or, to the knowledge of the Company, are
threatened.  The Shares are to be offered and sold pursuant to the Registration
Statement and a prospectus contained therein dated December 17, 2009, as
supplemented by a prospectus supplement dated March 7, 2012 (the “Prospectus
Supplement”) to be filed pursuant to Rule 424(b) under the Securities Act of
1933, as amended (the “Securities Act”).  The Prospectus Supplement will be
filed with the Commission in the manner and within the time period required
under Rule 424(b).  The Registration Statement and the Prospectus, as
supplemented by the Prospectus Supplement, each comply in all material respects
with the Securities Act, and each of the Registration Statement and the
Prospectus, as supplemented by the Prospectus Supplement, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  The documents incorporated by reference
in the Registration Statement and the Prospectus, as supplemented by the
Prospectus Supplement, when they were filed with the Commission and as of the
date hereof conformed in all material respects to the requirements of the
Exchange Act, and none of such documents contained or contains any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
 
4.3      Authorized Capital Stock.  The authorized capital stock of the Company
consists of (a) 150,000,000 shares of Common Stock, of which 81,090,323 shares
were issued and outstanding as of the close of business on February 28, 2012,
and (b) 10,000,000 shares of preferred stock, par value $0.001 per share, of
which no shares were issued and outstanding as of February 28, 2012.  The issued
and outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities.  Except as set forth in the Commission Documents (as defined in
Section 4.12), the Company does not have outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations.  With respect to each of the
Subsidiaries, (i) all the issued and outstanding shares of such Subsidiary’s
capital stock have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and (ii) there
are no outstanding options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of such Subsidiary’s
capital stock or any such options, rights, convertible securities or
obligations.
 
4.4      Issuance, Sale and Delivery of the Shares.  The Shares have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be validly issued, fully paid and nonassessable.  No
preemptive rights or other rights to subscribe for or purchase any shares of
Common Stock of the Company exist with respect to the issuance and sale of the
Shares by the Company pursuant to this Agreement.  Except as set forth in the
Commission Documents, no stockholder of the Company has any right to require the
Company to register the sale of any capital stock owned by such stockholder.  No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the issuance and sale of the Shares to be sold
by the Company as contemplated herein.

 
 
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4.5      Due Execution, Delivery and Performance of the Agreement.  The Company
has full legal right, corporate power and authority to enter into this Agreement
and the Registration Rights Agreement and perform the transactions contemplated
hereby and thereby.  Each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by the Company.  Each
of this Agreement and the Registration Rights Agreement constitutes a legal,
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws and judicial
decisions of general application relating to or affecting the enforcement of
creditors’ rights and the application of equitable principles relating to the
availability of remedies, and except as rights to indemnity or contribution,
including but not limited to, indemnification provisions set forth in Section 6
of the Registration Rights Agreement may be limited by federal or state
securities law or the public policy underlying such laws.  The execution and
performance of this Agreement and the Registration Rights Agreement by the
Company and the consummation of the transactions herein contemplated will not
violate any provision of the certificate of incorporation or bylaws of the
Company, the organizational documents of any Subsidiary or, to the Company’s
knowledge, any applicable law, rule or regulation.  No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental agency or body is required for the execution and
delivery of this Agreement or the Registration Rights Agreement by the Company
or the consummation by the Company of the transactions contemplated by this
Agreement, except for compliance with the Blue Sky laws and the rules and
regulations of the Financial Industry Regulatory Authority, Inc. applicable to
the offering of the Shares, or the Registration Rights Agreement, except for
compliance with the registration requirements of the Securities Act.
 
4.6      No Defaults or Consents.  Except as would not cause a Material Adverse
Effect, individually or in the aggregate, neither the execution, delivery and
performance of this Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the issuance
and sale by the Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or result in
the breach of any term or provision of, or constitute a default (or an event
that with notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or imposition of
any lien, charge or encumbrance upon any properties or assets of the Company or
its Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which either the Company or its Subsidiaries or
any of its or their properties or businesses is bound, or any franchise, lease,
license, permit, judgment, decree, order, statute, rule or regulation of any
court or any regulatory body, administrative agency or other governmental agency
or body applicable to the Company or any Subsidiary or any of their respective
assets or properties, except for such consents or waivers that have already been
obtained and are in full force and effect.

 
 
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4.7      No Material Adverse Change.  Except as disclosed in the Commission
Documents, since December 31, 2011, (i) neither the Company nor any of its
Subsidiaries have paid or declared any dividends or other distributions with
respect to their capital stock and neither the Company nor any Subsidiary is in
default in the payment of principal or interest on any material outstanding debt
obligations; (ii) there has not been any change in the capital stock of the
Company or its Subsidiaries other than the sale of the Shares hereunder and
shares or options issued pursuant to employee equity incentive plans or purchase
plans approved by the Company’s Board of Directors, or indebtedness material to
the Company and its Subsidiaries taken as a whole (other than in the ordinary
course of business and any required scheduled payments); and (iii) there has not
occurred any event that has caused or could reasonably be expected to cause a
Material Adverse Effect.
 
4.8      Compliance.  The Company and its Subsidiaries conduct their business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which each is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations, except
where failure to be so in compliance would not have a Material Adverse Effect.
 
4.9      Taxes.  The Company and each Subsidiary have filed all required
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and none of the Company or any
Subsidiary has knowledge of a tax deficiency that has been or might be asserted
or threatened against it that could have a Material Adverse Effect.
 
4.10    Transfer Taxes.  On the Closing Date, all stock transfer or other taxes
(other than income taxes) that are required to be paid in connection with the
sale and transfer of the Shares to be sold to the Purchaser hereunder will have
been fully paid or provided for by the Company.
 
4.11    Investment Company.  The Company is not, nor will be after giving effect
to the sale of the Shares, an “investment company” or an “affiliated person” of,
or “promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission promulgated thereunder.
 
4.12    Additional Information.  As of their respective filing dates, none of
the Commission Documents contained an untrue statement of a material fact or
omitted to state 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. As of the date hereof, the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2010, together with all other
documents filed by the Company with the Commission since January 1, 2011, do not
contain an untrue statement of a material fact or omit to state 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. The documents
incorporated by reference in the Commission Documents or attached as exhibits
thereto, at the time they became effective or were filed with the Commission, as
the case may be, complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as applicable,
and the rules and regulations of the Commission thereunder.  Since January 1,
2011, the Company has filed all documents required to be filed by with the
Commission pursuant to the reporting requirements of the Exchange Act.  All
materials filed or furnished by the Company with the Commission under the
Exchange Act or the Securities Act since January 1, 2011 and all amendments
thereto, exhibits included therein, financial statements and schedules thereto
and documents incorporated by reference therein, are referred to as the
“Commission Documents.”

 
 
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4.13    Price of Common Stock.  The Company has not taken, directly or
indirectly, any action designed to cause or result in, or that has constituted
or that might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of the Common Stock to facilitate the
sale or resale of the Shares.
 
4.14    Listing Compliance.  Except as set forth in the Commission Documents,
the Company is in compliance with the requirements of the Nasdaq Global Market
for continued listing of the Common Stock thereon.  The Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or the listing of the
Common Stock on the Nasdaq Global Market, nor has the Company received any
notification that the Commission or the Nasdaq Global Market is contemplating
terminating such registration or listing.  The transactions contemplated by this
Agreement will not contravene the rules and regulations of the Nasdaq Global
Market.  The Company will comply with all requirements of the Nasdaq Global
Market with respect to the issuance of the Shares and shall cause the Shares to
be listed on the Nasdaq Global Market.
 
4.15    Legal Proceedings.  There are no current or pending legal, governmental
or regulatory actions, suits or proceedings that are required under the
Securities Act to be described in the Registration Statement or the Prospectus
that are not so described in the Registration Statement and the Prospectus; and
there are no contracts or other documents that are required under the Securities
Act to be filed as exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus that are not so filed as exhibits to
the Registration Statement or described in the Registration Statement and the
Prospectus.
 
4.16    Section 203 of the DGCL.  The Board of Directors of the Company has
approved for the purposes of Section 203(a)(1) of the Delaware General
Corporation Law (the “DGCL”) Kinderhook Partners, LP becoming an “interested
stockholder” (as defined in Section 203(c)(5) of the DGCL) and taken all other
actions necessary so that the restrictions contained in Section 203(a)
applicable to a “business combination” (as defined in Section 203(c)(3) of the
DGCL) shall not apply to the execution, delivery or performance of this
Agreement, the Registration Rights Agreement or the issuance of the Shares or
the other transactions contemplated by this Agreement or the Registration Rights
Agreement.
 
SECTION 5.      Representations, Warranties and Covenants of the
Purchaser.  Each Purchaser represents and warrants to, and covenants with, the
Company, as of the date of this Agreement (except to the extent expressly made
as of a specified date, in which case as of such date), that:
 
5.1      Confidentiality.  The Purchaser understands that the federal securities
laws impose restrictions on trading based on information regarding this
offering.  The Purchaser further acknowledges that (i) the Purchaser may have
received material, non-public information about the Company in connection with
this offering, (ii) the United States securities laws prohibit any person who
has received such information from purchasing or selling securities of the
subject issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person may
purchase or sell such securities, and (iii) the Purchaser shall not directly or
indirectly, offer, sell, assign, transfer, pledge, contract to sell or otherwise
dispose of any Common Stock or other securities of the Company while in
possession of such material, non-public information.  The Purchaser’s
confidentiality obligation hereunder will terminate upon the issuance by the
Company of a press release announcing the offering contemplated hereby as
provided in Section 19.  The foregoing agreements shall not apply to any
information that is or becomes publicly available through no fault of the
Purchaser, or that the Purchaser is legally required to disclose; provided,
however, that if the Purchaser is requested or ordered to disclose any such
information pursuant to any court or other government order or any other
applicable legal or regulatory procedure, it shall provide the Company with
prompt notice of any such request or order in time sufficient to enable the
Company to seek an appropriate protective order.

 
 
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5.2      Authorization; Validity; Enforcement.  The Purchaser has full right,
power, authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement.  The making and
performance of this Agreement by the Purchaser and the consummation of the
transactions herein contemplated will not violate any provision of the
organizational documents of the Purchaser or conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any material agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party or, any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental agency or body applicable to the Purchaser.  No
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental agency or body is required on the
part of the Purchaser for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement.  Upon the
execution and delivery of this Agreement, this Agreement shall constitute a
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or the enforcement of creditor’s rights and the
application of equitable principles relating to the availability of remedies,
and except as rights to indemnity or contribution may be limited by federal or
state securities laws or the public policy underlying such laws.  There is not
in effect any order enjoining or restraining the Purchaser from entering into or
engaging in any of the transactions contemplated by this Agreement.
 
5.3      Short Sales.  Since the date the Purchaser first discussed with the
Company the sale of the Shares contemplated by this Agreement, the Purchaser has
not taken, and prior to the public announcement of the transaction the Purchaser
shall not take, any action that has caused or will cause the Purchaser to have,
directly or indirectly, sold or agreed to sell any shares of Common Stock,
effected any short sale, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with
respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derives any significant
part of its value from the Common Stock.

 
 
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SECTION 6.      Closing Conditions.  The obligations of the Purchasers
hereunder, as to the purchase of the Shares at the Closing shall be subject to
the conditions set forth in Section 3 and the following additional conditions:
 
6.1      Prospectus Supplement; Registration Statement.  The Company shall have
filed the Prospectus Supplement with the Commission in the manner and within the
time period required by Rule 424(b) promulgated under the Securities Act; the
Registration Statement shall remain effective; no stop order suspending the
effectiveness of the Registration Statement or any part thereof or any amendment
thereto shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and
 
6.2      No Trading Suspension.  There shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the NASDAQ Global Select Market, the
NASDAQ Global Market, the NASDAQ Capital Market or the NYSE Amex; (ii) a
suspension or material limitation in trading in the Company’s securities on the
NASDAQ Global Market.
 
SECTION 7.      Broker’s Fee.  Each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchasers.
 
SECTION 8.      Independent Nature of Purchasers’ Obligations and Rights.  The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Agreement.  The decision of each Purchaser to purchase the
Shares pursuant to the Agreement has been made by such Purchaser independently
of any other Purchaser.  Nothing contained in the Agreement, and no action taken
by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Purchasers are in any way acting in concert or
as a group with respect to such obligations or the transactions contemplated by
the Agreement.  Each Purchaser acknowledges that no other Purchaser has acted as
agent for such Purchaser in connection with making its investment hereunder and
that no Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Shares or enforcing its rights under this
Agreement.  Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
 
SECTION 9.      Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, e-mail, confirmed facsimile or nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed and shall be delivered as addressed as follows:
 
if to the Company, to:

 
 
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Active Power, Inc.
2128 W. Braker Lane, BK12
Austin, Texas  78758
Attention: John K. Penver
Facsimile: (512) 836-4511
 
with a copy (which copy shall not constitute notice) to:
 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
or to such other person at such other place as the Company shall designate to
the Purchasers in writing; and
 
if to the Purchasers, at its address as set forth at the end of this Agreement,
or at such other address or addresses as may have been furnished to the Company
in writing.
 
SECTION 10.    Changes.  This Agreement may not be modified or amended, and no
provision may be waived, except pursuant to an instrument in writing signed by
the Company and each of the Purchasers.
 
SECTION 11.    Headings.  The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
 
SECTION 12.    Severability.  In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
 
SECTION 13.    Governing Law; Venue; Waiver of Jury Trial.  THIS AGREEMENT IS TO
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE FEDERAL LAW OF THE UNITED
STATES OF AMERICA AND THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE STATE OF DELAWARE TO THE
RIGHTS AND DUTIES OF THE PARTIES.  THE COMPANY AND EACH PURCHASER SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF DELAWARE AND OF ANY DELAWARE STATE COURT SITTING IN DELAWARE FOR PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.  THE COMPANY AND EACH PURCHASER IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW.  THE COMPANY AND EACH PURCHASER HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.

 
 
9

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

 
 
SECTION 14.    Counterparts.  This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties.  Facsimile and PDF signatures shall be deemed original
signatures.
 
SECTION 15.    Entire Agreement.  This Agreement, the Registration Rights
Agreement, the Confidentiality Agreement between the Company and Kinderhook
Partners, L.P. dated as of January 18, 2012 (the “Kinderhook Confidentiality
Agreement”) the Confidentiality Agreement between the Company and Ardsley
Partners dated as of February 22, 2012 (the “Ardsley Confidentiality Agreement”
and, collectively with the Kinderhook Confidentiality Agreement, the
“Confidentiality Agreements”) and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither the
Company nor any Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters.  Each party expressly represents and
warrants that it is not relying on any oral or written representations,
warranties, covenants or agreements outside of this Agreement and the
Confidentiality Agreements.  The parties hereby confirm that each
Confidentiality Agreement shall be terminated and shall have no further force or
effect effective the third business day after the date of this Agreement.
 
SECTION 16.    Fees and Expenses.  On the Closing Date, the Company shall pay
the reasonable, documented fees and expenses of Latham & Watkins LLP, counsel to
one of the Purchasers, related to the transactions contemplated by this
Agreement.
 
SECTION 17.    Parties.  This Agreement is made solely for the benefit of and is
binding upon each Purchaser and the Company and no other person shall acquire or
have any right under or by virtue of this Agreement.  The term “successor and
assigns” shall include any subsequent purchaser, as such purchaser, of the
Shares sold to the Purchaser pursuant to this Agreement.
 
SECTION 18.    Further Assurances.  Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.

 
 
10

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

 
 
SECTION 19.    Securities Laws Disclosure; Publicity.  The Company shall, by
9:00 a.m. New York City time on the first day immediately following the date
hereof on which trading is scheduled to take place on the Nasdaq Global Market,
issue a press release disclosing all material terms of the transactions
contemplated hereby, and by 3:00 p.m. New York City time on the second day
following the date hereof on which trading is scheduled to take place on the
Nasdaq Global Market, the Company shall file a Current Report on Form 8-K,
disclosing the material terms of the transactions contemplated hereby and filing
the form of this Agreement as an exhibit in accordance with the applicable
Commission rules and regulations.  In addition, the Company will make such other
filings and notices in the manner and time required by the Commission and the
Nasdaq Global Market or any other trading market on which the Common Stock is
listed or quoted.  The Company may publicly disclose the name of the Purchasers
and include the names of the Purchasers in any filing with the Commission or any
regulatory agency or the Nasdaq Global Market or other trading.
 
SECTION 20.    Survival.  Except as otherwise provided herein, all covenants and
agreements made by the Company and the Purchasers herein or in the certificates
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchasers of the Shares being purchased and the payment
therefor.  Notwithstanding any investigation made by any party to this
Agreement, all representations and warranties made by the Company and the
Purchasers herein or in the certificates delivered pursuant hereto shall survive
the execution of this Agreement, the delivery to the Purchasers of the Shares
being purchased and the payment therefor.
 
[Remainder of Page Left Intentionally Blank]

 
 
11

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

 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

 
Active Power, Inc.
     
By:
/s/ J. Douglas Milner
   
J. Douglas Milner,
   
President and Chief Executive Officer

 
 
  [Signature Page to Securities Purchase Agreement]
 

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

 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

 
Purchaser
     
Ardsley Renewable Energy Offshore Fund, Ltd.
 
Name of Purchaser
 
(Individual or Institution)
     
British Virgin Islands
 
Jurisdiction of Purchaser’s Executive Offices
     
Steve Napoli
 
Name and Title of Individual representing
 
Purchaser (if an Institution)
     
/s/ Steve Napoli
 
Signature of Individual Purchaser or Individual representing Purchaser (if an
Institution)
     
Address: C/O Ardsley Partner
     
262 Harbor Drive, 4th fl Stamford CT 06902
     
Telephone: 203-355-0700
     
Facsimile: 203-355-0715
     
E-mail: steve@ardsley.com
     
Number of Shares:     164,705
 
Purchase Price per Share: $    0.68
 
Aggregate Purchase Price: $   111,999.40

 
 
[Signature Page to Securities Purchase Agreement]
 
 

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

 

APPENDIX I
 
ACTIVE POWER, INC.
 
SUMMARY INSTRUCTION SHEET FOR PURCHASER
 
(to be read in conjunction with the entire
Securities Purchase Agreement)
 
A.
Complete the following items on the Securities Purchase Agreement (Sign two
originals):

 
1.       Signature Page:
 
  (i)           Name of Purchaser (Individual or Institution)
 
  (ii)          Name of Individual representing Purchaser (if an Institution)
 
  (iii)         Title of Individual representing Purchaser (if an Institution)
 
  (iv)         Signature of Individual Purchaser or Individual representing
Purchaser
 
 
2.
Appendix I - Stock Certificate Questionnaire:

 
  Provide the information requested by the Stock Certificate Questionnaire.
 
 
3.
Return the properly completed and signed Securities Purchase Agreement including
the properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
B.
Instructions regarding the transfer of funds for the purchase of Shares will be
sent by facsimile to the Purchaser by the Company at a later date.

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 
 
ACTIVE POWER, INC.

STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 

1. 
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
Ardsley Renewable Energy Offshore Fund, Ltd.
        2. 
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
Self
        3. 
The mailing address of the Registered Holder listed in response to item 1 above:
 
C/O Ardsley Partners
262 Harbor Drive, 4th fl Stamford CT 06902
                                        4. 
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 
N/A

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

 
Purchaser
     
Ardsley Offshore Fund, Ltd.
 
Name of Purchaser
 
(Individual or Institution)
     
British Virgin Islands
 
Jurisdiction of Purchaser’s Executive Offices
     
Steve Napoli
 
Name and Title of Individual representing
 
Purchaser (if an Institution)
     
/s/ Steve Napoli
 
Signature of Individual Purchaser or Individual representing Purchaser (if an
Institution)
     
Address: C/O Ardsley Partner
     
262 Harbor Drive, 4th fl Stamford CT 06902
     
Telephone: 203-355-0700
     
Facsimile: 203-355-0715
     
E-mail: steve@ardsley.com
     
Number of Shares:     386,911
 
Purchase Price per Share: $    0.68
 
Aggregate Purchase Price: $   263,099.48

[Signature Page to Securities Purchase Agreement]
 
 

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

 

APPENDIX I
 
ACTIVE POWER, INC.
 
SUMMARY INSTRUCTION SHEET FOR PURCHASER
 
(to be read in conjunction with the entire
Securities Purchase Agreement)
 
A.
Complete the following items on the Securities Purchase Agreement (Sign two
originals):

 
1.       Signature Page:
 
  (i)           Name of Purchaser (Individual or Institution)
 
  (ii)          Name of Individual representing Purchaser (if an Institution)
 
  (iii)         Title of Individual representing Purchaser (if an Institution)
 
  (iv)         Signature of Individual Purchaser or Individual representing
Purchaser
 
 
2.
Appendix I - Stock Certificate Questionnaire:

 
  Provide the information requested by the Stock Certificate Questionnaire.
 
 
3.
Return the properly completed and signed Securities Purchase Agreement including
the properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
B.
Instructions regarding the transfer of funds for the purchase of Shares will be
sent by facsimile to the Purchaser by the Company at a later date.

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 
 
ACTIVE POWER, INC.

STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 

1. 
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
Ardsley Offshore Fund, Ltd.
        2. 
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
Self
        3. 
The mailing address of the Registered Holder listed in response to item 1 above:
 
C/O Ardsley Partners
262 Harbor Drive, 4th fl Stamford CT 06902
                                        4. 
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 
N/A

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

 
Purchaser
     
Ardsley Partners Renewable Energy Fund, L.P.
 
Name of Purchaser
 
(Individual or Institution)
     
Stamford, Connecticut
 
Jurisdiction of Purchaser’s Executive Offices
     
Steve Napoli
 
Name and Title of Individual representing
 
Purchaser (if an Institution)
     
/s/ Steve Napoli
 
Signature of Individual Purchaser or Individual representing Purchaser (if an
Institution)
     
Address: 262 Harbor Drive, 4th fl Stamford CT 06902
     
Telephone: 203-355-0700
     
Facsimile: 203-355-0715
     
E-mail: steve@ardsley.com
     
Number of Shares:     1,673,529
 
Purchase Price per Share: $    0.68
 
Aggregate Purchase Price: $   1,137,999.72

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

APPENDIX I
 
ACTIVE POWER, INC.
 
SUMMARY INSTRUCTION SHEET FOR PURCHASER
 
(to be read in conjunction with the entire
Securities Purchase Agreement)
 
A.
Complete the following items on the Securities Purchase Agreement (Sign two
originals):

 
1.       Signature Page:
 
  (i)           Name of Purchaser (Individual or Institution)
 
  (ii)          Name of Individual representing Purchaser (if an Institution)
 
  (iii)         Title of Individual representing Purchaser (if an Institution)
 
  (iv)         Signature of Individual Purchaser or Individual representing
Purchaser
 
 
2.
Appendix I - Stock Certificate Questionnaire:

 
  Provide the information requested by the Stock Certificate Questionnaire.
 
 
3.
Return the properly completed and signed Securities Purchase Agreement including
the properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
B.
Instructions regarding the transfer of funds for the purchase of Shares will be
sent by facsimile to the Purchaser by the Company at a later date.

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

 
ACTIVE POWER, INC.

STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 

1. 
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
Ardsley Partners Renewable Energy Fund, L.P.
        2. 
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
Self
        3. 
The mailing address of the Registered Holder listed in response to item 1 above:
 
C/O Ardsley Partners
262 Harbor Drive, 4th fl Stamford CT 06902
                                        4. 
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 
11-3780097

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

 
Purchaser
     
Ardsley Partners Fund II, L.P.
 
Name of Purchaser
 
(Individual or Institution)
     
Stamford, Connecticut
 
Jurisdiction of Purchaser’s Executive Offices
     
Steve Napoli
 
Name and Title of Individual representing
 
Purchaser (if an Institution)
     
/s/ Steve Napoli
 
Signature of Individual Purchaser or Individual representing Purchaser (if an
Institution)
     
Address: 262 Harbor Drive, 4th fl Stamford CT 06902
     
Telephone: 203-355-0700
     
Facsimile: 203-355-0715
     
E-mail: steve@ardsley.com
     
Number of Shares:     3,288,235
 
Purchase Price per Share: $    0.68
 
Aggregate Purchase Price: $   2,235,999.80

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

APPENDIX I
 
ACTIVE POWER, INC.
 
SUMMARY INSTRUCTION SHEET FOR PURCHASER
 
(to be read in conjunction with the entire
Securities Purchase Agreement)
 
A.
Complete the following items on the Securities Purchase Agreement (Sign two
originals):

 
1.       Signature Page:
 
  (i)           Name of Purchaser (Individual or Institution)
 
  (ii)          Name of Individual representing Purchaser (if an Institution)
 
  (iii)         Title of Individual representing Purchaser (if an Institution)
 
  (iv)        Signature of Individual Purchaser or Individual representing
Purchaser
 
 
2.
Appendix I - Stock Certificate Questionnaire:

 
  Provide the information requested by the Stock Certificate Questionnaire.
 
 
3.
Return the properly completed and signed Securities Purchase Agreement including
the properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
B.
Instructions regarding the transfer of funds for the purchase of Shares will be
sent by facsimile to the Purchaser by the Company at a later date.

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 
 
ACTIVE POWER, INC.

STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 

1. 
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
Ardsley Partners Fund II, L.P.
        2. 
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
Self
        3. 
The mailing address of the Registered Holder listed in response to item 1 above:
 
C/O Ardsley Partners
262 Harbor Drive, 4th fl Stamford CT 06902
                                        4. 
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 
13-3476175

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.
 

  Purchaser       KINDERHOOK PARTNERS, LP   By: Kinderhook GP, LLC       By:
/s/ Tushar Shah
   
Name: Tushar Shah
   
Title: Managing Member
        Address:   2 Executive Drive, Suite 585   Fort Lee, New Jersey 07024    
    Telephone: (201) 461-0955   Facsimile: (201) 461-7793   E-mail:
tshah@kinderhookpartners.com         Number of Shares: 8,823,529   Purchase
Price per Share: $0.68   Aggregate Purchase Price: $5,999,999.72

 

[Signature Page to Securities Purchase Agreement]
 
 

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

 

APPENDIX I
 
ACTIVE POWER, INC.
 
SUMMARY INSTRUCTION SHEET FOR PURCHASER
 
(to be read in conjunction with the entire
Securities Purchase Agreement)
 
A.
Complete the following items on the Securities Purchase Agreement (Sign two
originals):

 
1.       Signature Page:
 
  (i)           Name of Purchaser (Individual or Institution)
 
  (ii)          Name of Individual representing Purchaser (if an Institution)
 
  (iii)         Title of Individual representing Purchaser (if an Institution)
 
  (iv)         Signature of Individual Purchaser or Individual representing
Purchaser
 
 
2.
Appendix I - Stock Certificate Questionnaire:

 
  Provide the information requested by the Stock Certificate Questionnaire.
 
 
3.
Return the properly completed and signed Securities Purchase Agreement including
the properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

 
Wilson Sonsini Goodrich & Rosati, Professional Corporation
900 South Capital of Texas Highway
Las Cimas IV, Fifth Floor
Austin, Texas 78746-5546
Attention:  Derek L. Willis, Esq.
Facsimile: (512) 338-5499
 
B.
Instructions regarding the transfer of funds for the purchase of Shares will be
sent by facsimile to the Purchaser by the Company at a later date.

 

 
 
 

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

 
 
ACTIVE POWER, INC.

STOCK CERTIFICATE QUESTIONNAIRE
 
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
 

1. 
The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)).  You may use a nominee name if
appropriate:
 
 
Kinderhook Partners, LP
        2. 
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
N/A
        3. 
The mailing address of the Registered Holder listed in response to item 1 above:
 
Kinderhook Partners,
LP                                                                     
2 Executive Drive, Suite
585                                                                     
Fort Lee, NJ  07024
                        4. 
The Social Security Number or Tax Identification Number of the Registered Holder
listed in response to item 1 above:
 
 
14-1870126

 
 

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