Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made effective as of
May 29, 2009, 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 up to 6,000,000 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, within three
(3) business days following the effective date of the Agreement, or on such
later date or at such different location as the parties shall agree in writing,
but not prior to the date that the conditions for Closing set forth below have
been satisfied or waived by the appropriate party (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 hereto and bearing an appropriate
legend referring to the fact that the Shares were sold in reliance upon the
exemption from registration under the Securities Act of 1933, as amended (the
“Securities Act”), provided by Section 4(2) thereof and Rule 506 thereunder. 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 the 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), except where such failure to be so true and correct on the date
hereof and on the Closing Date has not had or is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect; (b) the delivery to
the Purchaser by counsel to the Company of a legal opinion in the form of
Exhibit A hereto; (c) 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; and (d) the fulfillment in all material
respects of those undertakings of the Company to be fulfilled prior to the
Closing. Each Purchaser’s obligations hereunder are expressly not conditioned on
the purchase by any or all of the other Purchasers of the Shares that they have
agreed to purchase from the Company. 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, (E) any change in and
of itself in the trading price or trading volume of the Company’s Common Stock,
or (F) any failure, in and of itself, of the Company to meet any projections or
forecasts or revenue or earnings predictions.

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 (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

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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.

4.2 Reporting Company; Form S-3. As of the date of this Agreement, the Company
is not an “ineligible issuer” (as defined in Rule 405 promulgated under the
Securities Act) and is eligible to register the Shares for resale by the
Purchaser on a registration statement on Form S-3 under the Securities Act. The
Company is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and has filed all reports required
thereby. To the Company’s knowledge, there exist no facts or circumstances
(including without limitation any required approvals or waivers or any
circumstances that may delay or prevent the obtaining of accountant’s consents)
that reasonably could be expected to prohibit or delay the preparation and
filing of a registration statement on Form S-3 (or a prospectus supplement to an
effective shelf registration statement) under the Securities Act registering the
Shares for public resale as contemplated in Section 7.1 (the “Registration
Statement”) beyond the time for such Registration Statement to be filed and to
become effective, as specified therein.

4.3 Authorized Capital Stock. The authorized capital stock of the Company
consists of (a) 150,000,000 shares of Common Stock, of which 60,458,311 shares
were issued and outstanding as of the close of business on May 28, 2009, 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 May 28, 2009. 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,
except where failure of the following representation would not have a Material
Adverse Effect (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) except
as set forth in or contemplated by the Commission Documents, 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

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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. No
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following notification of the Company’s
intention to file the Registration Statement) to require the Company to register
the sale of any capital stock owned by such stockholder under the Registration
Statement. 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.

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
perform the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company. This 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 7.3 of this Agreement may be limited by federal or state securities
law or the public policy underlying such laws. The execution and performance of
this 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 or the organizational documents of any Subsidiary. 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 by the Company or the consummation by
the Company of the transactions contemplated by this Agreement, except for
compliance with the Blue Sky laws applicable to the offering of the Shares.

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.

4.7 No Material Adverse Change. Except as disclosed in the Commission Documents,
since December 31, 2008 (i) the Company and its Subsidiaries have not paid or
declared any dividends or other distributions with respect to their capital
stock and none of the Company or

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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 or its Subsidiaries (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 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 Securities and Exchange Commission
(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 for the fiscal
year ended December 31, 2007, together with all other documents filed by the
Company with the Commission since January 1, 2008, 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 Exchange Act,
as applicable, and the rules and regulations of the Commission thereunder. In
the past twelve (12) calendar months, the Company has filed all documents
required to be filed by it prior to the date hereof 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 for the twelve (12) calendar months preceding the date hereof 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 and listed on any other exchange on which the Company’s
Common Stock is listed on or before the Closing Date.

4.15 Integration; Other Issuances of Shares. Neither the Company nor the
Subsidiaries or any affiliates, nor any person or entity acting on its or their
behalf, has issued any shares of Common Stock or shares of any series of
preferred stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock that would be integrated with the sale of the Shares to such
Purchaser for purposes of the Securities Act or of any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or the
Subsidiaries or affiliates take any action or steps that would require
registration of any of the Shares under the Securities Act or cause the offering
of the Shares to be integrated with other offerings. Assuming the accuracy of
the representations and warranties of Purchasers set forth in this Agreement,
the offer and sale of the Shares by the Company to the Purchasers pursuant to
the Agreement will be exempt from the registration requirements of the
Securities Act.

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 Experience. (i) The Purchaser is knowledgeable, sophisticated and
experienced in financial and business matters, in making, and is qualified to
make, decisions with respect to investments in shares representing an investment
decision like that involved in the purchase of the Shares, including investments
in securities issued by the Company and comparable entities, has the ability to
bear the economic risks of an investment in the Shares and has requested,
received, reviewed and considered all information it deems relevant in making an
informed decision to purchase the Shares; (ii) the Purchaser is acquiring the
number of Shares set forth on the signature page hereto in the ordinary course
of its business and for its own account and with no present intention of
distributing any of such Shares or any arrangement or understanding with any
other persons regarding the distribution of such Shares (this representation and
warranty not limiting the Purchaser’s right to sell pursuant to the Registration
Statement or in compliance with the Securities

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Act and the rules and regulations promulgated thereunder (the “1933 Act Rules
and Regulations”), or, other than with respect to any claims arising out of a
breach of this representation and warranty, the Purchaser’s right to
indemnification under Section 7.3); (iii) the Purchaser will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of the Shares pursuant to the Registration Statement or
with the applicable requirements of any exemption from the Securities Act;
(iv) the Purchaser has completed or caused to be completed the Registration
Statement Questionnaire in the form attached hereto as part of Appendix I or
another form reasonably acceptable to the Company, for use in preparation of the
Registration Statement, and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the effective date of the
Registration Statement and the Purchaser will notify the Company immediately of
any material change in any such information provided in the Registration
Statement Questionnaire until such time as the Purchaser has sold all of its
Shares or until the Company is no longer required to keep the Registration
Statement effective; (v) the Purchaser has, in connection with its decision to
purchase the number of Shares set forth on the signature page hereto, relied
solely upon the representations and warranties of the Company contained herein;
(vi) the Purchaser has had an opportunity to discuss this investment with
representatives of the Company and ask questions of and receive answers from the
representatives; and (vii) the Purchaser is an “accredited investor” within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.

5.2 Reliance on Exemptions. The Purchaser understands that the Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of the Securities Act, the 1933 Act Rules and
Regulations and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares.

5.3 Confidentiality. The Purchaser agrees that it is prohibited from reproducing
or distributing this Agreement or any other offering materials or other
information provided by the Company in connection with the Purchaser’s
consideration of its investment in the Company, in whole or in part, or
divulging or discussing any of their contents, except to its financial,
investment or legal advisors in connection with its proposed investment in the
Shares. Further, the Purchaser understands that the existence and nature of all
conversations and presentations, if any, regarding the Company and this offering
must be kept strictly confidential. 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 has
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. In addition, the Purchaser
hereby acknowledges that unauthorized disclosure of information regarding this
offering may result in a violation of Regulation FD. The Purchaser’s
confidentiality obligation hereunder will terminate upon the issuance by the
Company of a press release or press releases announcing the offering
contemplated

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hereby as provided in Section 20. 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.

5.4 Investment Decision. The Purchaser understands that nothing in the Agreement
or any other materials presented to the Purchaser in connection with the
purchase and sale of the Shares constitutes legal, tax or investment advice. The
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Shares.

5.5 Risk of Loss. The Purchaser understands that its investment in the Shares
involves a significant degree of risk, including a risk of total loss of the
Purchaser’s investment, and the Purchaser has full cognizance of and understands
all of the risk factors related to the Purchaser’s purchase of the Shares. The
Purchaser understands that the market price of the Common Stock has been
volatile and that no representation is being made as to the future value of the
Common Stock.

5.6 Legend; Legend Removal; Damages. The Purchaser understands that, until such
time as the Registration Statement has been declared effective or the Shares may
be sold pursuant to Rule 144 under the Securities Act without any restriction as
to the number of securities as of a particular date that can then be immediately
sold, the Shares will bear a restrictive legend in substantially the following
form:

“THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION. THE SHARES MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER
JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND
SUCH OTHER APPLICABLE LAWS.”

The Company acknowledges and agrees that the Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Shares to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, the Purchaser may transfer
pledged or secured Shares to the pledgees or secured parties. Such a pledge or
transfer would not be subject

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to approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Purchaser’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of the Shares may reasonably request in connection with a pledge or
transfer of the Shares, including, if appropriate, the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the Securities Act
or other applicable provision of the Securities Act to appropriately amend the
list of selling stockholders thereunder.

5.7 Residency. The Purchaser’s principal executive offices are in the
jurisdiction set forth immediately below the Purchaser’s name on the signature
pages hereto.

5.8 Public Sale or Distribution. The Purchaser hereby covenants with the Company
not to make any sale of the Shares under the Registration Statement without
complying with the provisions of this Agreement and without effectively causing
the prospectus delivery requirement under the Securities Act to be satisfied
(whether physically or through compliance with Rule 172 under the Securities Act
or any similar rule). The Purchaser acknowledges that there may occasionally be
times when the Company must suspend the use of the prospectus forming a part of
the Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. Without the Company’s prior
written consent, which consent shall not unreasonably be withheld or delayed,
the Purchaser shall not use any written materials to offer the Shares for resale
other than the Prospectus (as defined in Section 7.2), including any “free
writing prospectus” as defined in Rule 405 under the Securities Act. The
Purchaser further covenants to notify the Company promptly of the sale of all of
its Shares.

5.9 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, including, but not limited
to, the indemnification provisions set forth in Section 7.3 of this Agreement,
may be limited by federal or

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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.

5.10 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.

SECTION 6. Survival. Except as otherwise provided herein and notwithstanding any
investigation made by any party to this Agreement, all covenants and agreements
made by the Company and the Purchasers herein and 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. All
representations and warranties made by the Company and the Purchasers herein and
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.

SECTION 7. Registration of the Shares; Compliance with the Securities Act.

7.1 Registration Procedures and Expenses. The Company shall:

(a) use its commercially reasonably efforts to prepare and file with the
Commission as soon as reasonably practicable the Registration Statement on
Form S-3 (or a prospectus supplement to an effective shelf registration
statement) relating to the resale of the Shares by the Purchasers from time to
time on the Nasdaq Global Market, or the facilities of any national securities
exchange on which the Common Stock is then traded or in privately-negotiated
transactions;

(b) use its commercially reasonable efforts, subject to receipt of necessary
information from the Purchasers, to cause the Registration Statement to become
automatically effective or the Commission to declare the Registration Statement
effective as soon as reasonably practicable, and in any event by 4:30 p.m.
Eastern time on the two hundred-and-tenth (210th) day following the Closing Date
(the “Effective Deadline”); and to file a prospectus (if required) with the
Commission by no later than 9:00 a.m. Eastern time on the business day
immediately following the Effective Date (for purposes herein, the “Effective
Date” shall mean the date on which the Registration Statement becomes or is
declared by the Commission to be effective);

(c) promptly prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective until
the earliest of (i) one year after the Closing Date, (ii) such time as all of
the Shares have been sold pursuant to the Registration

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Statement, or (iii) such time as the Shares become eligible for resale by
non-affiliates pursuant to Rule 144 under the Securities Act or any other rule
of similar effect without any volume or manner of sale restrictions or any need
for the Company to be current in its Exchange Act reporting obligations;

(d) furnish to the Purchaser with respect to the Shares registered under the
Registration Statement (and to each underwriter, if any, of such Shares) such
number of copies of prospectuses and such other documents as the Purchaser may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Shares by the Purchaser;

(e) file documents required of the Company for Blue Sky clearance in states
specified in writing by the Purchaser; provided, however, that the Company shall
not be required to qualify to do business or consent to general service of
process in any jurisdiction in which it is not now so qualified or has not so
consented;

(f) bear all reasonable expenses in connection with the procedures in paragraphs
(a) through (e) of this Section 7.1 and the registration of the Shares pursuant
to the Registration Statement, other than fees and expenses, if any, of counsel
or other advisers to the Purchasers or underwriting discounts, brokerage fees
and commissions incurred by the Purchasers, if any in connection with the
offering and sale of the Shares pursuant to the Registration Statement;

(g) file a Form D with respect to the Shares as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the Purchaser
upon request; and

(h) in order to enable the Purchasers to sell the Shares under Rule 144 to the
Securities Act, for a period of one (1) year from the Closing Date, use its
commercially reasonable efforts to comply with the requirements of Rule 144,
including without limitation, use its commercially reasonable efforts to comply
with the requirements of Rule 144 with respect to public information about the
Company and timely file all reports required to be filed by the Company under
the Exchange Act.

Notwithstanding the foregoing, upon the occurrence or existence of any material
event that, in the reasonable judgment of the Company, makes it appropriate to
suspend the availability of the prospectus (the “Prospectus”) forming a part of
the Registration Statement, the Company shall give notice (without notice of the
nature or details of such events) to the Purchaser that the availability of the
Prospectus is suspended (a “Suspension”) and the Purchaser agrees not to sell
any Shares pursuant to the Prospectus until the Purchaser is advised in writing
by the Company that the Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. The period during which the availability of the
Prospectus is suspended shall not exceed 45 days in any 90-day period or 90 days
in any 365-day period.

The Company understands that the Purchaser disclaims being an underwriter, but
the Purchaser being deemed an underwriter shall not relieve the Company of any
obligations it has hereunder.

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7.2 Transfer of Shares After Registration. From and after the effectiveness of
the Registration Statement, the Purchaser agrees that it will not effect any
disposition of the Shares except as contemplated in the Registration Statement
referred to in Section 7.1 or as otherwise permitted by law, and that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding the Purchaser or its plan of distribution.

7.3 Indemnification.

(a) For the purpose of this Section 7:

(i) the term “Purchaser/Affiliate” shall mean any affiliate of a Purchaser,
including a transferee who is an affiliate of a Purchaser, each officer,
director and member of such Purchaser and any person who controls such Purchaser
or any affiliate of such Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act; and

(ii) the term “Registration Statement” shall include the Registration Statement
referred to in Section 7.1, and any preliminary prospectus, final prospectus,
free writing prospectus, exhibit, supplement or amendment included therein or
relating thereto, and any document incorporated by reference therein, and shall
also include any prospectus supplement relating to an already effective shelf
registration statement to the extent that the Company is eligible to file such a
prospectus supplement with respect to the registration of the Shares and elects
to register the Shares by filing a prospectus supplement in lieu of filing a new
registration statement on Form S-3.

(b) The Company agrees to indemnify and hold harmless each Purchaser and each
Purchaser/Affiliate, against any losses, claims, damages, liabilities or
expenses, joint or several, to which the Purchasers or Purchaser/Affiliates may
become subject, under the Securities Act, the Exchange Act, or any other federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, financial statements and
schedules, and all other documents filed as a part thereof, or arise out of or
are based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements
in the Registration Statement not misleading in light of the circumstances under
which they were made, and will promptly reimburse each Purchaser and each
Purchaser/Affiliate for reasonable legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection
with investigating, defending or preparing to defend, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable for amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, and the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon (i) an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement in reliance upon and in conformity
with

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written information furnished to the Company by or on behalf of such Purchaser
expressly for use therein, or (ii) the failure of such Purchaser to comply with
the covenants and agreements contained in Sections 5.10 or 7.2 hereof respecting
the sale of the Shares, or (iii) the inaccuracy of any representation or
warranty made by such Purchaser herein, or (iv) any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
such Purchaser prior to the pertinent sale or sales by such Purchaser.

(c) Each Purchaser will severally, but not jointly with any of the other
Purchasers, indemnify and hold harmless the Company, each of its directors, each
of its officers who signed the Registration Statement and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, but only if such settlement is effected with the
written consent of such Purchaser) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (y) the Purchasers’ failure to comply with the
prospectus delivery requirements of the Securities Act or (z) any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements in the Registration Statement not misleading in the light of the
circumstances under which they were made, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement in reliance
upon and in conformity with written information, including the Registration
Statement Questionnaire, furnished to the Company by or on behalf of any
Purchaser expressly for use therein; and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for reasonable legal and other expenses reasonably incurred
by the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that each Purchaser’s aggregate
liability under this Section 7.3(c) shall not exceed the amount of the net
proceeds received by such Purchaser on the sale of the Shares pursuant to the
Registration Statement.

(d) Promptly after receipt by an indemnified party under this Section 7.3 of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 7.3 promptly notify the indemnifying party in writing thereof, but
the omission to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the indemnity
agreement contained in this Section 7.3 to the extent it is not prejudiced as a
result of such failure or for contribution contained in Section 7.3(e). In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party, and the indemnifying party and the
indemnified party

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shall have reasonably concluded that there may be a conflict of interest between
the positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 7.3 for reasonable
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, reasonably satisfactory to such indemnifying
party, representing all of the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party. In no event shall any indemnifying party be
liable in respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved in writing the terms of such settlement;
provided that such consent shall not be unreasonably withheld. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party unless such settlement releases
the indemnified party from all liability on claims that are the subject matter
of such proceeding.

(e) If the indemnification provided for in this Section 7.3 is required by its
terms but is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party under paragraphs (b), (c) or (d) of this
Section 7.3 in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and such Purchaser from the private placement of Common Stock hereunder
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but the relative fault of the
Company and such Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement and/or the
Registration Statement that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and such
Purchaser, on the other, shall be deemed to be in the same proportion as the
amount paid by the Purchaser to the Company pursuant to this Agreement for the
Shares purchased by the Purchaser that were sold pursuant to the Registration
Statement relative to the difference (the “Difference”) between the amount such
Purchaser paid for the Shares that were sold pursuant to the Registration
Statement and the net amount received by such Purchaser from such sale. The
relative fault of the Company on the one hand and each Purchaser on the other
shall be determined by reference to, among other things, whether the untrue or
alleged statement of a

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material fact or the omission or alleged omission to state a material fact or
the inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company or by such Purchaser and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (d) of this Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (d) of this
Section 7.3 with respect to the notice of the threat or commencement of any
threat or action shall apply if a claim for contribution is to be made under
this paragraph (e); provided, however, that no additional notice shall be
required with respect to any threat or action for which notice has been given
under paragraph (d) for purposes of indemnification. The Company and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7.3 were determined solely by pro rata allocation (even
if the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this
Section 7.3, each Purchaser shall not be required to contribute any amount in
excess of the amount by which the Difference exceeds the amount of any damages
that such Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Purchasers’ obligations to
contribute pursuant to this Section 7.3(e) are several and not joint.

7.4 Termination of Conditions and Obligations. The restrictions imposed by
Section 5.6 or Section 7.2 upon the transferability of the Shares shall cease
and terminate as to any particular number of the Shares upon the earlier of
(i) the passage of one (1) year from the Closing Date and (ii) at such time as
an opinion of counsel satisfactory in form and substance to the Company shall
have been rendered to the effect that such conditions are not necessary in order
to comply with the Securities Act.

7.5 Information Available. The Company, upon the reasonable request of the
Purchasers, shall make available for inspection by each Purchaser, any
underwriter participating in any disposition pursuant to the Registration
Statement and any attorney, accountant or other agent retained by the Purchasers
or any such underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company’s officers,
employees and independent accountants to supply all information reasonably
requested by the Purchasers or any such underwriter, attorney, accountant or
agent in connection with the Registration Statement.

7.6 Delay in Effectiveness of Registration Statement. If the Registration
Statement is not effective on or prior to the Effective Deadline, then for each
day following the Effective Deadline, until but excluding the date the
Registration Statement becomes effective, the Company shall, for each such day,
pay each Purchaser with respect to any such failure, as liquidated damages and
not as a penalty, an amount per 30-day period equal to 1.0% (accruing daily) of
the purchase price paid pursuant to this Agreement by such Purchaser for the
Shares owned by such Purchaser at such time; and for any such 30-day period (or
a portion thereof), such payment shall be made no later than three (3) business
days following such 30-day period (or the day the Registration

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Statement becomes effective). If such Purchaser shall be prohibited from selling
Shares under the Registration Statement as a result of a Suspension of more than
forty-five (45) consecutive days in any 90-day period or Suspensions on more
than two occasions of not more than forty-five (45) days each in any 365-day
period, then for each day on which a Suspension is in effect that exceeds the
maximum allowed period for a Suspension or Suspensions, but not including any
day on which a Suspension is lifted, the Company shall pay such Purchaser, as
liquidated damages and not as a penalty, an amount per 30-day period equal to
1.0% (accruing daily) of the purchase price paid pursuant to this Agreement by
such Purchaser for the Shares owned by such Purchaser at such time, and for any
such 30-day period (or a portion thereof), such payment shall be made no later
than three (3) business days following such 30-day period (or the day the
Suspension is lifted). For purposes of this Section 7.6, a Suspension shall be
deemed lifted on the date that notice that the Suspension has been lifted is
delivered to such Purchaser pursuant to Section 7.1 of this Agreement. Any
payments made pursuant to this Section 7.6 shall constitute such Purchaser’s
exclusive remedy for such events. Notwithstanding the foregoing provisions, the
liquidated damages payable to such Purchaser shall not exceed 12% of the
aggregate purchase price paid by such Purchaser for the Shares and in no event
shall the Company be obligated to pay any liquidated damages pursuant to this
Section 7.6 to more than one Purchaser in respect of the same Shares for the
same period of time. Such payments shall be made to the Purchasers in cash. If
the Company fails to pay any liquidated damages pursuant to this Section in full
within seven (7) days after the date of written demand therefor, the Company
will pay interest thereon at a rate of 10% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to such Purchaser,
accruing daily from the date such liquidated damages are due until such amounts,
plus all interest thereon, are paid in full.

SECTION 8. 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 9. 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.

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SECTION 10. 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:

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 11. 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 the Purchasers who hold at least a majority of the Shares sold
pursuant to the Agreement. Any amendment or waiver effected in accordance with
this Section 11 shall be binding upon the Purchasers and each holder of any
securities purchased under the Agreement at the time outstanding, each future
holder of all such securities, and the Company.

SECTION 12. 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 13. 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 14. 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

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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.

SECTION 15. 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 signatures shall be deemed original signatures.

SECTION 16. Entire Agreement. This Agreement, the Confidentiality Agreement
between the Company and Kinderhook Partners, L.P. dated as of April 28, 2009
(the “Confidentiality Agreement”) 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 Agreement.

SECTION 17. Fees and Expenses. Except as otherwise set forth herein, the Company
and each of the Purchasers shall pay their respective fees and expenses related
to the transactions contemplated by this Agreement.

SECTION 18. Parties. This Agreement is made solely for the benefit of and,
subject to Section 11, is binding upon each Purchaser and the Company and to the
extent provided in Section 7.3, any person controlling the Company or any
Purchaser, the officers and directors of the Company, and their respective
executors, administrators, successors and assigns and subject to the provisions
of Section 7.3, no other person shall acquire or have any right under or by
virtue of this Agreement. The term “successor and assigns” shall not include any
subsequent purchaser, as such purchaser, of the Shares sold to the Purchaser
pursuant to this Agreement.

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SECTION 19. 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.

SECTION 20. Securities Laws Disclosure; Publicity. The Company shall use its
commercially reasonable efforts, 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, to 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. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the Purchasers,
or include the name of the Purchasers in any filing with the Commission (other
than the Registration Statement and any exhibits to filings made in respect of
this transaction in accordance with periodic filing requirements under the
Exchange Act) or any regulatory agency or the Nasdaq Global Market or other
trading market, without the prior written consent of the Purchasers, except to
the extent such disclosure is required by law or the Nasdaq Global Market or
other trading market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.

[Remainder of Page Left Intentionally Blank]

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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/ John K. Penver

Name:  

John K. Penver

Title:  

Chief Financial Officer

[Signature Page to Securities Purchase Agreement]

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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, L.P.

Name of Purchaser   (Individual or Institution)  

New Jersey

Jurisdiction of Purchaser’s Executive Offices

Tushar Shah, Partner

Name and Title of Individual representing Purchaser (if an Institution)

/s/ Tushar Shah

Signature of Individual Purchaser or Individual representing Purchaser (if an
Institution) Address:  

 

Telephone:  

 

Facsimile:  

 

E-mail:  

 

Number of Shares:   

6,000,000

Purchase Price per Share:   

$0.50

Aggregate Purchase Price:   

$3,000,000.00

[Signature Page to Securities Purchase Agreement]