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                                                                    Exhibit 10.8

                                 IMPERIAL BANK


                          SECURITY AND LOAN AGREEMENT
                             (ACCOUNTS RECEIVABLE)

This Agreement is entered into between Active Power, Inc.

                              , a Texas Corporation

(herein called "Borrower") and IMPERIAL BANK (herein called  "Bank").

1.   Bank hereby commits, subject to all the terms and conditions of this
     Agreement and prior to the termination of its commitment as hereinafter
     provided, to make loans to Borrower from time to time in such amounts as
     may be determined by Bank up to, but not exceeding in the aggregate unpaid
     principal balance, the following Borrowing Base:

                            80 % of Eligible Accounts

and in no event more than $   1,000,000.00

2.   The amount of each loan made by Bank to Borrower hereunder shall be debited
     to the loan ledger account of Borrower maintained by Bank (herein called
     "Loan Account") and Bank shall credit the Loan Account with all loan
     repayments made by Borrower. Borrower promises to pay Bank (a) the unpaid
     balance of Borrower's Loan Account on demand and (b) on or before the tenth
     day of each month, interest on the average daily unpaid balance of the Loan
     Account during the immediately preceding month at the rate of Zero percent
     ( 0.00 %) per annum in excess of the rate of interest which Bank has
     announced as its prime lending rate ("Prime Rate") which shall vary
     concurrently with any change in such Prime Rate. Interest shall be computed
     at the above rate on the basis of the actual number of days during which
     the principal balance of the loan account is outstanding divided by 360,
     which shall for interest computation purposes be considered one year. Bank
     at Its option may demand payment of any or all of the amount due under the
     Loan Account including accrued but unpaid Interest at any time. Such notice
     may be given verbally or in writing and should be effective upon receipt by
     Borrower. The amount of interest payable each month by Borrower shall not
     be less than a minimum monthly charge of $ 250.00 . Bank is hereby
     authorized to charge Borrower's deposit account(s) with Bank for all sums
     due Bank under this Agreement.

3.   Requests for loans hereunder shall be in writing duly executed by Borrower
     in a form satisfactory to Bank and shall contain a certification setting
     forth the matters referred to in Section 1, which shall disclose that
     Borrower is entitled to the amount of loan being requested.

4.   As used In this Agreement, the following terms shall have the following
     meanings:

     A.   "Accounts" means any right to payment for goods sold or leased, or to
          be sold or to be leased, or for services rendered or to be rendered no
          matter how evidenced, Including accounts receivable, contract rights,
          chattel paper, Instruments, purchase orders, notes, drafts,
          acceptances, general intangibles and other forms of obligations and
          receivables.

     B.   "Collateral" means any and all personal property of Borrower which is
          assigned or hereafter is assigned to Bank as security or in which Bank
          now has or hereafter acquires a security interest.

     C.   "Eligible Accounts" means all of Borrower's Accounts excluding,
          however, (1) all Accounts under which payment is not received within
          90 days from any invoice date, (2) all Accounts against which the
          account debtor or any other person obligated to make payment thereon
          asserts any defense, offset, counterclaim or other right to avoid or
          reduce the liability represented by the Account and (3) any Accounts
          if the account debtor or any other person liable in connection
          therewith is insolvent, subject to bankruptcy or receivership
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          proceedings or has made an assignment for the benefit of creditors or
          whose credit standing is unacceptable to Bank and Bank has so notified
          Borrower. Eligible Accounts shall only include such accounts as Bank
          in its sole discretion shall determine are eligible from time to time.

5.   Borrower hereby assigns to Bank all Borrower's present and future Accounts,
     including all proceeds due thereunder, all guaranties and security
     therefor, and hereby grants to Bank a continuing security interest in all
     moneys in the Collateral Account referred to in Section 6 hereof, as
     security for any and all obligations of Borrower to Bank, whether now owing
     or hereafter incurred and whether direct, indirect, absolute or contingent.
     So -long as Borrower is indebted to Bank or Bank is committed to extend
     credit to Borrower, Borrower will execute and deliver to Bank such
     assignments, including Bank's standard forms of Specific or General
     Assignment covering individual Accounts, notices, financing statements, and
     other documents and papers as Bank may require In order to affirm,
     effectuate or further assure the assignment to Bank of the Collateral or to
     give any third party, including the account debtors obligated on the
     Accounts, notice of Bank's interest in the Collateral.

6.   Until Bank exercises its rights to collect the Accounts pursuant to
     paragraph 10, Borrower will collect with reasonable diligence all
     Borrower's Accounts, provided that no legal action shall be maintained
     thereon or in connection therewith without Bank's prior written consent.
     Any collection of Accounts by Borrower, whether In the form of cash,
     checks, notes, or other instruments for the payment of money (properly
     endorsed or assigned where required to enable Bank to collect same), shall
     be in trust for Bank, and Borrower shall keep all such collections separate
     and apart from all other funds and property so as to be capable of
     identification as the property of Bank and deliver said collections daily
     to Bank in the identical form received. The proceeds of such collections
     when received by Bank may be applied by Bank directly to the payment of
     Borrower's Loan Account or any other obligation secured hereby. Any credit
     given by Bank upon receipt of said proceeds shall be conditional credit
     subject to collection. Returned items at Bank's option may be charged to
     Borrower's general account. All collections of the Accounts shall be set
     forth on an itemized schedule, showing the name of the account debtor, the
     amount of each payment and such other information as Bank may reasonably
     request.

7.   Until Bank exercises its rights to collect the Accounts pursuant to
     paragraph 10, Borrower may continue its present policies with respect to
     returned merchandise and adjustments. However, Borrower shall notify Bank
     within two (2) working days of all cases involving returns, repossessions,
     and loss or damage of or to merchandise represented by the Accounts and of
     any credits, adjustments or disputes arising in connection with the goods
     or services represented by the Accounts, and in any of such events,
     Borrower will immediately pay to Bank form its own funds (and not from the
     proceeds of Accounts or Inventory) for application to Borrower's Loan
     Account or any other obligation secured hereby the amount of any credit for
     such returned or repossessed merchandise and adjustments made to any of the
     Accounts.

8.   Borrower represents and warrants to Bank: (i) if Borrower is a corporation,
     that Borrower is duly organized and existing in the State of its
     incorporation and the execution, deliver, and performance hereof are within
     Borrower's corporate powers, have been duly authorized and are not in
     conflict with law or the terms of any charter, by-law or other
     incorporation papers, or of any indenture, agreement or undertaking to
     which Borrower is a party or by which Borrower is found or affected; (ii)
     Borrower is, or at the time the collateral becomes subject to Bank's
     security interest will be, the true and lawful owner of and has, or at the
     time the Collateral becomes subject to Bank's security interest will have,
     good and clear title to the Collateral, subject only to Bank's right
     therein; (iii) Each Account is, or at the time the Account comes into
     existence will be, a true and correct statement of a bona fide indebtedness
     incurred by the debtor named therein in the amount of the Account for
     either merchandise sold or delivered (or being held subject to Borrower's
     delivery instruction) to, or services rendered, performed and accepted by,
     the account debtor; (iv) That, to the best of Borrower's knowledge, there
     are or will be no defenses, counterclaims, or setoffs which may be asserted
     against the Accounts; and (v) to the best of Borrower's knowledge, any and
     all financial information, including

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     information relating to the Collateral, submitted by Borrower to Bank,
     whether previously or in the future, is or will be true and correct.

9.   Borrower will: (i) Furnish Bank from time to time such financial statements
     and information as Bank may reasonably request and inform Bank within two
     (2) working days the occurrence of a material adverse change therein; (ii)
     Furnish Bank periodically, in such form and detail and at such times as
     Bank may reasonably require, statements showing aging and reconciliation of
     the Accounts and collections thereon; (iii) Permit representatives of Bank
     to inspect the Borrower's books and records relating to the Collateral and
     make extracts therefrom at any reasonable time and upon giving reasonable
     notice to the Borrower to arrange for verification of the Accounts, under
     reasonable procedures, acceptable to Bank, directly with the account
     debtors or otherwise at Borrower's expense; (iv) Promptly notify Bank of
     any attachment or other legal process levied against any of the Collateral
     and any information received by Borrower relative to the Collateral,
     including the Accounts, the account debtors or other persons obligated in
     connection therewith, which may in any way affect the value of the
     Collateral or the rights and remedies of Bank in respect thereto; (v)
     Reimburse Bank upon demand for any and all reasonable legal costs,
     including reasonable attorneys' fees, and other expense incurred in
     collecting any sums payable by Borrower under Borrower's Loan Account or
     any other obligation secured hereby, enforcing any term or provision of
     this Security Agreement or otherwise or in the checking, handling and
     collection of the Collateral and the preparation and enforcement of any
     agreement relating thereto; (vi) Notify Bank of each location and of each
     office of Borrower at which records of Borrower relating to the Accounts
     are kept; (vii) Provide, maintain and deliver to Bank policies insuring the
     Collateral against loss or damage by such risks and in such amounts, forms
     and companies as Bank may reasonably require and with loss payable solely
     to Bank, and, in the event Bank takes possession of the Collateral, the
     insurance policy or policies and any unearned or returned premium thereon
     shall at the option of Bank become the sole property of Bank, such policies
     and the proceeds of any other insurance covering or in any way relating to
     the Collateral, whether now in existence or hereafter obtained, being
     hereby assigned to Bank; (viii) In the event the unpaid balance of
     Borrower's Loan Account shall exceed the maximum amount of outstanding
     loans to which Borrower is entitled under Section 1 hereof, Borrower shall,
     within two (2) working days, pay to Bank, from its own funds and not from
     the proceeds of Collateral, for credit to Borrower's Loan Account the
     amount of such excess.

10.  Bank may at any time, without prior notice to Borrower, collect the
     Accounts and may give notice of assignment to any and all account debtors,
     and Borrower does hereby make, constitute and appoint Bank its irrevocable,
     true and lawful attorney with power to receive, open and dispose of all
     mail addressed to Borrower, to endorse the name of Borrower upon any checks
     or other evidences of payment that may come into the possession of Bank
     upon the Accounts to endorse the name of the undersigned upon any document
     or instrument relating to the Collateral; in its name or otherwise, to
     demand, sue for, collect and give acquittances for any and all moneys due
     or to become due upon the Accounts; to compromise, prosecute or defend any
     action, claim or proceeding with respect thereto; and to do any and all
     things necessary and proper to carry out the purpose herein contemplated.

11.  Until Borrower's Loan Account and all other obligations secured hereby
     shall have been repaid in full, Borrower shall not sell, dispose of or
     grant a security interest in any of the Collateral other than to Bank, or
     execute any financing statements covering the Collateral in favor of any
     secured party or person other than Bank.

12.  Should: (i) Default be made in the payment of any obligation, or breach be
     made in any warranty, statement, promise, term or condition, contained
     herein or hereby secured; (ii) Any statement or representation made for the
     purpose of obtaining credit hereunder prove false; (iii) Bank reasonably
     deem the Collateral inadequate or unsafe or in danger of misuse; (iv)
     Borrower become insolvent or make an assignment for the benefit of
     creditors; or (v) Any proceeding be commenced by or against Borrower under
     any bankruptcy, reorganization, arrangement, readjustment of debt or
     moratorium law or statute; then in any such event, Bank may, at its option
     and without demand first made and without notice to Borrower, do any one or
     more of the following: (a) Terminate its obligation to make loans to
     Borrower as provided in Section 1 hereof; (b) Declare all

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     sums secured hereby immediately due and payable; (c) Immediately take
     possession of the Collateral wherever it may be found, using all necessary
     force so to do, or require Borrower to assemble the Collateral and make it
     available to Bank at a place designated by Bank which is reasonably
     convenient to Borrower and Bank, and Borrower waives all claims for damages
     due to or arising from or connected with any such taking; (d) Proceed in
     the foreclosure of Bank's security interest and sale of the Collateral in
     any manner permitted by law, or provided for herein; (e) Sell, lease or
     otherwise dispose of the Collateral at public or private sale, with or
     without having the Collateral at the place of sale, and upon terms and in
     such manner as Bank may determine, and Bank may purchase same at any such
     sale; (f) Retain the Collateral in full satisfaction of the obligations
     secured thereby; (g) Exercise any remedies of a secured party under the
     Uniform Commercial Code. Prior to any such disposition, Bank may, at as
     option, cause any of the Collateral to be repaired or reconditioned in such
     manner and to such extent as Bank may deem advisable, and any sums expended
     therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
     have the right to enforce one or more remedies hereunder successively or
     concurrently, and any such action shall not estop or prevent Bank from
     pursuing any further remedy which it may have hereunder or by law. If a
     sufficient sum is not realized from any such disposition of Collateral to
     pay all obligations secured by this Security Agreement, Borrower hereby
     promises and agrees to pay Bank any deficiency.

13.  If any writ of attachment, garnishment, execution or other legal process be
     issued against any property of Borrower, or if any assessment for taxes
     against Borrower, other than real property, is made by the Federal or State
     government or any department thereof, the obligation of Bank to make loans
     to Borrower as provided in Section 1 hereof shall immediately terminate and
     the unpaid balance of the Loan Account, all other obligations secured
     hereby and all other sums due hereunder shall immediately become due and
     payable without demand, presentment or notice.

14.  Borrower authorizes Bank to destroy all invoices, delivery receipts,
     reports and other types of documents and records submitted to Bank in
     connection with the transactions contemplated herein at any time subsequent
     to four months from the time such items are delivered to Bank.

15.  Nothing herein shall in any way limit the effect of the conditions set
     forth in any other security or other agreement executed by Borrower, but
     each and every condition hereof shall be in addition thereto.

16.  Should default be made in the payment of principal or interest when due, or
     in the performance or observance, when due, of any item, covenant or
     condition of this Agreement, any deed of trust, security agreement or other
     agreement (including amendments or extensions thereof) securing or
     pertaining to this Agreement, at the option of the holder hereof and
     without notice or demand, the entire balance of principal and accrued
     interest then remaining unpaid shall (a) become immediately due and
     payable, and (b) thereafter bear interest, until paid in full, at the
     increased rate of 5% per year in excess of the rate provided for above, as
     it may vary from time to time.

17.  If any installment payment, interest payment, principal payment or
     principal balance payment due hereunder is delinquent twenty (20) or more
     days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
     payment so due and unpaid, in addition to the payment; but nothing in this
     paragraph is to be construed as any obligation on the part of the Bank to
     accept payment of any payment past due or less than the total unpaid
     principal balance after maturity.

     All payments shall be applied first to any late charges owing,  then to
     interest and the remainder, if any, to principal.

18.  Reference Provision.

     A.   Other than (i) non-judicial foreclosure and all matters in connection
          therewith regarding security interests in real or personal property;
          or (ii) the appointment of a receiver, or the exercise of other
          provisional remedies (any and all of which may be initiated pursuant
          to applicable law), each controversy, dispute or claim

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          between the parties arising out of or relating to this document
          ("Agreement"), which controversy, dispute or claim is not settled in
          writing within thirty (30) days after the "Claim Date" (defined as the
          date on which a party subject to the Agreement gives written notice to
          all other parties that a controversy, dispute or claim exists), will
          be settled by a reference proceeding in California in accordance with
          the provisions of Section 638 et seq. of the California Code of Civil
          Procedure, or their successor section ("CCP"), which shall constitute
          the exclusive remedy for the settlement of any controversy, dispute or
          claim concerning this Agreement, including whether such controversy,
          dispute or claim is subject to the reference proceeding and except as
          set forth above, the parties waive their rights to initiate any legal
          proceedings against each other in any court or jurisdiction other than
          the Superior Court in the County where the Real Property, if any, is
          located or Los Angeles County if none (the "Court"). The referee shall
          be a retired Judge of the Court selected by mutual agreement of the
          parties, and if they cannot so agree within forty-five (45) days after
          the Claim Date, the referee shall be promptly selected by the
          Presiding Judge of the Court (or his representative). The referee
          shall be appointed to sit as a temporary judge, with all of the powers
          of a temporary judge, as authorized by law, and upon selection should
          take and subscribe to the oath of office as provided for in Rule 244
          of the California Rules of Court (or any subsequently enacted Rule).
          Each party shall have one peremptory challenge pursuant to CCP
          (S)170.6. The referee shall (a) be requested to set the matter for
          hearing within sixty (60) days after the Claim Date and (b) try any
          and all issues of law or fact and report a statement of decision upon
          them, if possible, within ninety (90) days of the Claim Date. Any
          decision rendered by the referees will be final, binding and
          conclusive and judgment shall be entered pursuant to CCP (S)644 in any
          court in the State of California having jurisdiction. Any party may
          apply for a reference proceeding at any time after thirty (30) days
          following notice to any other party of the nature of the controversy,
          dispute or claim, by filing a petition for a hearing and/or trial. All
          discovery permitted by this Agreement shall be completed no later than
          fifteen (15) days before the first hearing date established by the
          referee. The referee may extend such period in the event of a party's
          refusal to provide requested discovery for any reason whatsoever,
          including, without limitation, legal objections raised to such
          discovery or unavailability of a witness due to absence or illness. No
          party shall be entitled to "priority" in conducting discovery.
          Depositions may be taken by either party upon seven (7) days written
          notice, and request for production or inspection of documents shall be
          responded to within ten (10) days after service. All disputes relating
          to discovery which cannot be resolved by the parties shall be
          submitted to the referee whose decision shall be final and binding
          upon the parties. Pending appointment of the referee as provided
          herein, the Superior Court is empowered to issue temporary and or
          provisional remedies, as appropriate.

     B.   Except as expressly set forth in this Agreement and the riders
          attached hereto, the referee shall determine the manner in which the
          reference proceeding is conducted including the time and place of all
          hearings, the order of presentation of evidence, and all other
          questions that arise with respect to the course of the reference
          proceeding. All proceedings and hearings conducted before the referee,
          except for trial, shall be conducted without a court reporter, except
          that when any party so requests, a court reporter will be used at any
          hearing conducted before the referee. The party making such a request
          shall have the obligation to arrange for and pay for the court
          reporter. The costs of the court reporter at the trial shall be borne
          equally by the parties.

     C.   The referee shall be required to determine all issues in accordance
          with existing case law and the statutory laws of the State of
          California. The rules of evidence applicable to proceedings at law in
          the State of California will be applicable to the reference
          proceeding. The referee shall be empowered to enter equitable as well
          as legal relief, to provide all temporary and/or provisional remedies
          and to enter equitable orders that will be binding upon the parties.
          The referee shall Issue a single judgment at the close of the
          reference proceeding which shall dispose of all of the claims of the
          parties that are the subject of the reference. The

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          parties hereto expressly reserve the right to contest or appeal from
          the final judgment or any appealable order or appealable judgment
          entered by the referee. The parties hereto expressly reserve the right
          to findings of fact, conclusions of law, a written statement of
          decision, and the right to move for a new trial or a different
          judgment, which new trial, if granted, is also to be a reference
          proceeding under this provision.

     D.   In the event that the enabling legislation which provides for
          appointment of a referee is repealed (and no successor statute is
          enacted), any dispute between the parties that would otherwise be
          determined by the reference procedure herein described will be
          resolved and determined by arbitration. The arbitration will be
          conducted by a retired judge of the Court, in accordance with the
          California Arbitration Act, (S)1280 through (S)1294.2 of the CCP as
          amended from time to time. The limitations with respect to discovery
          as set forth hereinabove shall apply to any such arbitration
          proceeding.

19.  Additional Provisions: Subject to the provisions of the Credit Terms and
     Conditions Agreement dated August 3, 1999, and all amendments and riders
     thereto and replacements therefor.

     If checked, the Addendum or Exhibit 'A" attached (and all amendments
     thereto and replacements therefor) is incorporated herein by this
     reference.

By signing in the space below, each of the undersigned agrees that the foregoing
Riders are incorporated in and made a part of the Security and Loan Agreement
between Active Power, Inc. and Imperial Bank dated August ___, 1999.


     Executed this 3rd    day of August, 1999

                                        Active Power, Inc., a Texas corporation
                                        ---------------------------------------
                                                  (Name of Borrower)

IMPERIAL BANK                           By: /s/
                                           ------------------------------------
                                           (Authorized Signature and Title)

BY: /s/                                 BY: /s/
   ---------------------------------       ------------------------------------
     Title                                 (Authorized Signature and Title)

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