Document:

Loan and Security Agreement

 Exhibit 10.1 
 LOAN AND SECURITY AGREEMENT 
 THIS LOAN AND SECURITY AGREEMENT (this
“Agreement”) dated as of the Effective Date between SILICON VALLEY BANK, a California corporation (“Bank”), and ACTIVE POWER, INC., a Delaware corporation (“Borrower”), provides the terms on
which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows: 
  

	 	1	ACCOUNTING AND OTHER TERMS 

 Accounting terms
not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other
terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. 
  

	 	2	LOAN AND TERMS OF PAYMENT 

 2.1 Promise to
Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement. 
 2.1.1 Revolving Advances. 
 (a)
Availability. Subject to the terms and conditions of this Agreement, including the completion of the Initial Audit with results satisfactory to Bank in its sole and absolute discretion, Bank shall make Advances not exceeding the Availability
Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. 
 (b) Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable. 
 2.1.2 Letters
of Credit Sublimit. 
 (a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for Borrower’s account.
The face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed the Letter of Credit Sublimit. Such aggregate amounts utilized hereunder shall at all times reduce
the amount otherwise available for Advances under the Revolving Line. If, on the Revolving Line Maturity Date, there are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to 105%
of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to said Letters of
Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit Agreement (the “Letter of Credit
Application”). Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower further agrees to be bound by Bank’s interpretations of any Letter of Credit issued by
Bank for Borrower’s account, and Borrower understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower’s instructions or those contained in the Letters
of Credit or any modifications, amendments, or supplements thereto, except for Bank’s gross negligence or willful misconduct. 
 (b) The
obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit,
and the Letter of Credit Application. 

 2.1.3 Cash Management Services Sublimit. Borrower may use up to the amount of the Cash Management
Services Sublimit for Bank’s cash management services which may include merchant services, direct deposit of payroll, business credit cards, and check cashing services identified in Bank’s various cash management services agreements
(collectively, the “Cash Management Services”). Any amounts used by Borrower for any Cash Management Services will be treated as Advances under the Revolving Line, will accrue interest at the interest rate applicable to Advances,
and will reduce the amount otherwise available for Credit Extensions thereunder. 
 2.2 Overadvances. If, at any time, the Credit
Extensions under Sections 2.1.1, 2.1.2, and 2.1.3 exceed the lesser of either (a) the Revolving Line or (b) the Borrowing Base, Borrower shall immediately pay to Bank in cash such excess. 
 2.3 Payment of Interest on the Credit Extensions. 
 (a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to 0.25 percentage points above the Prime
Rate, which interest shall be payable monthly in accordance with Section 2.3(f) below. 
 (b) Default Rate. Immediately upon the
occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points above the rate that is otherwise applicable thereto (the “Default Rate”). Payment or
acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 (c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be
effective on the effective date of any change to the Prime Rate and to the extent of any such change. 
 (d) 360-Day Year. Interest
shall be computed on the basis of a 360-day year for the actual number of days elapsed. 
 (e) Debit of Accounts. Bank may debit any
of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off. 
 (f) Payments. Unless otherwise provided, interest is payable monthly on the first calendar day of each month. Payments of principal and/or
interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or
interest, as applicable, shall continue to accrue. 
 2.4 Fees. Borrower shall pay to Bank: 
 (a) Commitment Fee. A fully earned, non-refundable commitment fee of $10,000, on the Effective Date; 
 (b) Anniversary Fee. A fully-earned, non-refundable anniversary fee of $10,000 on the first anniversary of the Effective Date; 
 (c) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit, upon the issuance, each
anniversary of the issuance, and the renewal of such Letter of Credit by Bank; 
 (d) Unused Revolving Line Facility Fee. A fee (the
“Unused Revolving Line Facility Fee”), payable quarterly, in arrears, on a calendar year basis, in an amount equal to one quarter of one percent (0.25%) per annum of the average unused portion of the Revolving Line (with any
utilization of Letters of Credit counting as usage thereunder), as determined by Bank. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section

 
notwithstanding any termination of the Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder; and

 (e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses, plus expenses, for documentation and
negotiation of this Agreement) incurred through and after the Effective Date, when due. 
  

	 	3	CONDITIONS OF LOANS 

 3.1 Conditions
Precedent to Initial Advance. Bank’s obligation to make the initial Advance is subject to the condition precedent that Borrower shall consent to or shall have delivered, in form and substance satisfactory to Bank, such documents, and
completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation: 
 (a) duly executed
facsimile signatures to the Loan Documents to which it is a party, and within thirty (30) days of the Effective Date, duly executed original signatures to the Loan Documents to which it is a party; 
 (b) its Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the State of Delaware as of a date no
earlier than thirty (30) days prior to the Effective Date; 
 (c) duly executed original signatures to the completed Borrowing
Resolutions for Borrower; 
 (d) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request,
accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Advance, will be terminated or
released; 
 (e) the Perfection Certificate(s) executed by Borrower; 
 (f) within thirty (30) days of the Effective Date, a landlord’s consent executed by the landlord of Borrower’s premises identified in
Section 10 hereof, in favor of Bank; and 
 (g) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.

 3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following: 
 (a) except as otherwise provided in Section 3.4, receipt of an executed Payment/Advance
Form; 
 (b) the representations and warranties in Section 5 shall be true in all material respects on the date of the Payment/Advance
Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such specific date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 remain true in all material respects; provided, however, that
such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects as of such specific date; and 
 (c) in Bank’s sole
discretion, there has not been a Material Adverse Change. 

 3.3 Covenant to Deliver. 
 Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and any such extension in the absence of a required
item shall be in Bank’s sole discretion. 
 3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance (other than Advances under Sections 2.1.2 or 2.1.3), Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 12:00 p.m. Pacific time on the Funding Date of the Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances to the Designated Deposit Account. Bank may make Advances under
this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. 
  

	 	4	CREATION OF SECURITY INTEREST 

 4.1 Grant
of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior priority to Bank’s Lien under this Agreement and excluding the E*Trade Account and Borrower’s accounts at Foreign Institutions opened in the ordinary course of
Borrower’s business). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank. 
 If
this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as
Bank’s obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower. 
 4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the
Code. 
  

	 	5	REPRESENTATIONS AND WARRANTIES 

 Borrower
represents and warrants as follows: 
 5.1 Due Organization, Authorization; Power and Authority. Borrower is duly formed, validly
existing and in good standing in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified
except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled
“Perfection Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the
type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none;
(d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office);
(e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other

 
information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number. 
 The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents,
(ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or any its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect), or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound in which the default could have a material adverse effect on Borrower’s business. 
 5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except
Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice
and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors. 
 The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at
locations other than as provided in the Perfection Certificate or as Borrower has given Bank notice pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral
to a bailee, then Borrower will first receive the written consent of Bank and such bailee must execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion. 
 Except as disclosed on the Perfection Certificate, Borrower is the sole owner of its intellectual property, except for non-exclusive licenses granted to
its customers in the ordinary course of business. Each patent is valid and enforceable, and no part of the intellectual property has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim
has been made that any part of the intellectual property violates the rights of any third party except to the extent such claim could not reasonably be expected to have a material adverse effect on Borrower’s business. Except as noted on the
Perfection Certificate, Borrower is not a party to, nor is bound by, any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral. Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such license or agreement (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain the consent of,
or waiver by, any person whose consent or waiver is necessary for (x) all such licenses or agreements to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or
by the terms of any such license or agreement, whether now existing or entered into in the future, and (y) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s
rights and remedies under this Agreement and the other Loan Documents. 
 5.3 Accounts Receivable. For any Eligible Account and
Eligible Foreign Account in any Borrowing Base Certificate, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such Eligible Accounts and Eligible Foreign Accounts are and shall be true
and correct and all such invoices, instruments and other documents, and all of Borrower’s Books are genuine and in all respects what they purport to be. Whether or not an Event of Default has occurred and is continuing, Bank may notify any
Account Debtor owing Borrower money of Bank’s security interest in such funds and verify the amount of such Eligible Account and Eligible Foreign Account. All sales and other transactions underlying or giving rise to each Eligible Account and
Eligible Foreign Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are an
Eligible Account and Eligible Foreign Account in any Borrowing 

 
Base Certificate. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all
Eligible Accounts and Eligible Foreign Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms. 
 5.4 Litigation. Except as disclosed on the Perfection Certificate, there are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or
any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000). 
 5.5 No Material Deviation in Financial
Statements. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank. 
 5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its
liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 
 5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all
material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than in accordance with applicable laws. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all
notices to, all Government Authorities that are necessary to continue their respective businesses as currently conducted. 
 5.8
Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 
 5.9 Tax Returns and Payments; Pension Contributions. Except as otherwise disclosed on the Perfection Certificate, Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental
authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could
result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 
 5.10 Use of Proceeds.
Borrower shall use the proceeds of the Credit Extensions solely as working capital, and to fund its general business requirements and not for personal, family, household or agricultural purposes. 
 5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the 

 
certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon
reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results). 
  

	 	6	AFFIRMATIVE COVENANTS 

 Borrower shall do all
of the following: 
 6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply,
and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business. 
 6.2 Financial Statements, Reports, Certificates. 
 (a) Deliver to Bank: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement
covering Borrower’s consolidated and consolidating operations for such month certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than one hundred fifty (150) days after the last
day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable
to Bank in its reasonable discretion; (iii) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt, (iv) in the event
that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission or a
link thereto on Borrower’s or another website on the Internet; (v) a prompt report of any legal actions pending or threatened against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its
Subsidiaries of One Hundred Thousand Dollars ($100,000) or more; (v) prompt notice of an event that materially and adversely affects the value of the intellectual property; and (vi) budgets, sales projections, operating plans and
other financial information reasonably requested by Bank. 
 (b) Within thirty (30) days after the last day of each month, when Advances
have been requested and/or are outstanding, deliver to Bank a duly completed Borrowing Base Certificate signed by a Responsible Officer, with (i) aged listings of accounts receivable and accounts payable (by invoice date) and
(ii) perpetual inventory reports for the Inventory valued on a first-in, first-out basis at the lower of cost or market (in accordance with GAAP) or such other inventory reports as are requested by Bank in its good faith business judgment.

 (c) Within thirty (30) days after the last day of each month, when Advances have been requested and/or are outstanding, deliver to
Bank with the monthly financial statements, a duly completed Compliance Certificate signed by a Responsible Officer setting forth calculations showing compliance with the financial covenants set forth in this Agreement. 
 (d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. Such audits shall be conducted no more often than once every six
(6) months unless a Default or an Event of Default has occurred and is continuing.  
 6.3 Inventory; Returns. Keep all
Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly
notify Bank of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000). 
 6.4 Taxes;
Pensions. Make, and cause each of its Subsidiaries to make, timely payment of all foreign, federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting pursuant to the terms of Section 5.9
hereof) and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms. 

 6.5 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Bank. All property policies shall have a lender’s
loss payable endorsement showing Bank as lender loss payee and waive subrogation against Bank, and all liability policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or the loss payable and additional
insured endorsements) shall provide that the insurer must give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy. Within thirty (30) days of the Effective Date, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this
Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, to Agent and any Lender, Agent may make all or part of such payment or obtain such insurance policies required in this Section 6.5,
and take any action under the policies as Agent or any Lender deems prudent. 
 6.6 Operating Accounts. Except for (i) the
E*Trade Account, or (ii) accounts held at Foreign Institutions opened in the ordinary course of Borrower’s business, maintain all of its and all of its Subsidiaries’ operating and other deposit accounts with Bank and all of its
securities accounts with Bank and Bank’s Affiliates. 
 6.7 Financial Covenants. 
 Borrower shall maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to
Borrower and its Subsidiaries: 
 (a) Liquidity Ratio. At all times, a ratio of Borrower’s unrestricted cash maintained with Bank,
Cash Equivalents, plus the Eligible Accounts, to the outstanding Obligations (including the face amount of Letters of Credit) owing to Bank, of at least 1.35 to 1.00. 
 6.8 Protection and Registration of Intellectual Property Rights. Borrower shall: (a) protect, defend and maintain the validity and enforceability of its intellectual property; (b) promptly advise Bank
in writing of material infringements of its intellectual property; and (c) not allow any intellectual property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent. If
Borrower (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent
or the registration of any trademark or servicemark, then Borrower shall immediately provide written notice thereof to Bank and shall execute such intellectual property security agreements and other documents and take such other actions as Bank
shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in such property. If Borrower decides to register any copyrights or mask works in the United States Copyright
Office, Borrower shall: (x) provide Bank with at least fifteen (15) days prior written notice of Borrower’s intent to register such copyrights or mask works together with a copy of the application it intends to file with the United
States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other documents and take such other actions as Bank may request in its good faith business judgment to perfect and maintain a
first priority perfected security interest in favor of Bank in the copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States
Copyright Office contemporaneously with filing the copyright or mask work application(s) with the United States Copyright Office. Borrower shall promptly provide to Bank copies of all applications that it files for patents or for the registration of
trademarks, servicemarks, copyrights or mask works, together with evidence of the recording of the intellectual property security agreement necessary for Bank to perfect and maintain a first priority perfected security interest in such property.

 6.9 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank,
without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or
against Bank with respect to any Collateral or relating to Borrower. 
 6.10 Further Assurances. Execute any further instruments and
take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to 

 
Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any
of its Subsidiaries. 
  

	 	7	NEGATIVE COVENANTS 

 Borrower shall not do
any of the following without Bank’s prior written consent: 
 7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or
obsolete Equipment; and (c) in connection with Permitted Liens and Permitted Investments. 
 7.2 Changes in Business, Management,
Ownership, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related
thereto; (b) liquidate or dissolve; or (c) (i) if any Key Person ceases to hold such offices with Borrower or (ii) permit or suffer any Change in Control. Borrower shall not, without at least thirty (30) days prior written
notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than One Hundred Thousand Dollars ($100,000) in Borrower’s assets or property), (2) change
its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. 
 7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire,
or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower. 
 7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 7.5 Encumbrance. Create, incur, allow or suffer any Lien on any of the Collateral, or assign or convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest
in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien” herein. 
 7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6.(b) hereof. 

7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock
provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock;
and (iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such
repurchase, provided such repurchase does not exceed in the aggregate of One Hundred Thousand Dollars ($100,000) per fiscal year; or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its
Subsidiaries to do so. 
 7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person. 

 7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under
the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to Bank. 
 7.10 Compliance. Become an “investment company”
or a company controlled by an “investment company”, under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so;
withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which
could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 
  

	 	8	EVENTS OF DEFAULT 

 Any one of the following
shall constitute an event of default (an “Event of Default”) under this Agreement: 
 8.1 Payment Default. Borrower
fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) day grace
period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period); 
  

	 	8.2	Covenant Default. 

 (a) Borrower fails or neglects
to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6 or 6.7 or violates any covenant in Section 7; or 
 (b) Borrower fails or
neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term,
provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace periods
provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above; 
 8.3 Material Adverse Change. A Material Adverse Change occurs; 
 8.4 Attachment. (a) Any
material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver; (b) the service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity
under control of Borrower (including a Subsidiary) on deposit with Bank or any Bank Affiliate; (c) Borrower is enjoined, restrained, or prevented by court order from conducting any part of its business; or (d) a notice of lien, levy, or
assessment is filed against any of Borrower’s assets by any government agency, and the same under clauses (a) through (d) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through
the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; 
 8.5 Insolvency (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within forty five (45) days (but no Credit Extensions shall be 

 
made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed); 
 8.6 Other Agreements. There is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000) or that could reasonably be expected to have a Material Adverse Change; 
 8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One
Hundred Thousand Dollars ($100,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a
period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree); 
 8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made; 
 8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank related to Subordinated Debt, or any creditor that has signed such an agreement with Bank breaches any terms of such agreement; or 
  

	 	9	BANK’S RIGHTS AND REMEDIES 

 9.1
Rights and Remedies. While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: 
 (a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); 
 (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;

 (c) demand that Borrower (i) deposits cash with Bank in an amount equal to the aggregate amount of any Letters of Credit remaining
undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable
over the remaining term of any Letters of Credit; 
 (d) settle or adjust disputes and claims directly with Account Debtors for amounts on
terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s security interest in such funds, and verify the amount of such account; 
 (e) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.
Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or
remedies; 
 (f) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing
to or for the credit or the account of Borrower; 
 (g) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names,

 
trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit; 
 (h) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions
or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral; 
 (i) demand and receive
possession of Borrower’s Books; and 
 (j) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof). 
 9.2 Power
of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of
payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts
and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been
satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable
until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates. 
 9.3
Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest applicable rate, and secured by the Collateral. Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s
waiver of any Event of Default. 
 9.4 Application of Payments and Proceeds. Borrower shall have no right to specify the order or the
accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement. If an Event
of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or
otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its
good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by
the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor. 
 9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower
bears all risk of loss, damage or destruction of the Collateral. 
 9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any
time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, 

 
or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless
signed by Bank and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence. 
 9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of
any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 
  

	 	10	NOTICES 

 All notices, consents, requests,
approvals, demands, or other communication (collectively, “Communication”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered:
(a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by
electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address, facsimile number, or email address indicated below. Bank or Borrower may change its address or facsimile number by giving the other party written notice thereof in accordance with the terms of this
Section 10. 
  

			
	If to Borrower:	  	ACTIVE POWER, INC.
		  	2128 W Braker Lane BK 12
		  	Austin, TX 78758
		  	Attn: Chief Financial Officer
		  	Fax: (512) 836-4511
		  	Email: jpenver@activepower.com
		
	If to Bank:	  	Silicon Valley Bank
		  	7000 N. MoPac, Ste. 360
		  	Austin, TX 78731
		  	Attn: Phillip Wright
		  	Fax: (512) 794-0855
		  	Email: pwright@svbank.com

  

	 	11	CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE 

 California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10
of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. 
 TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL 

 
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above
waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by
the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law
if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If
during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior
Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall
be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings
in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The
private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph. 
  

	 	12	GENERAL PROVISIONS 

 12.1 Successors and
Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be
granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and
benefits under this Agreement and the other Loan Documents. 
 12.2 Indemnification. Borrower agrees to indemnify, defend and hold
Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (collectively, the “Indemnified Parties”) harmless against: (a) all obligations, demands, claims, and
liabilities (collectively, “Claims”) asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or arising
from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by the Indemnified Parties’ gross negligence or willful misconduct. 
 12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement. 
 12.4 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any
provision. 
 12.5 Amendments in Writing; Integration. All amendments to this Agreement must be in writing and signed by both Bank and
Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents. 

 12.6 Counterparts. This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 
 12.7 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and
any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such
claim or cause of action shall have run. 
 12.8 Confidentiality. In handling any confidential information, Bank shall exercise the
same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other
order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; and (e) as Bank considers appropriate in exercising remedies under this Agreement. Confidential information does not include
information that either: (i) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know
that the third party is prohibited from disclosing the information. 
 12.9 Attorneys’ Fees, Costs and Expenses. In any action or
proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to
which it may be entitled. 
  

	 	13	DEFINITIONS 

 13.1 Definitions. As
used in this Agreement, the following terms have the following meanings: 
 “Account” is any “account” as defined
in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower. 
 “Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made. 
 “Advance” or “Advances” means an advance (or advances) under the Revolving Line. 
 “Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled
by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members. 
 “Agreement” is defined in the preamble hereof. 
 “Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the Borrowing Base minus (b) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), minus (c) any amounts used for Cash Management Services, and minus (d) the outstanding principal balance of any Advances. 
 “Bank” is defined in the preamble hereof. 
 “Bank Expenses” are all
out-of-pocket audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those
incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower. 
 “Borrower”
is defined in the preamble hereof 

 “Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information. 
 “Borrowing Base” means (a) 80% of Eligible Accounts plus (b) the lesser of 30% of the value of Borrower’s Eligible
Inventory (valued at the lower of cost or wholesale fair market value) or $1,000,000, as determined by Bank from Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank may decrease the foregoing amount or percentages in
its good faith business judgment based on the results of Collateral Audits and/or events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral. 
 “Borrowing Base Certificate” is that certain certificate in the form attached hereto as Exhibit C. 
 “Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit
D. 
 “Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed. 
 “Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency
or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five
percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition. 
 “Cash Management Services” is defined in Section 2.1.3. 
 “Cash Management
Services Sublimit” means $2,500,000, minus all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit). 
 “Change in Control” means any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as an
amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of Borrower, representing twenty-five percent (25%) or more of the combined voting power of Borrower’s then outstanding securities; or (b) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors whose election by the Board of Directors of Borrower was approved by a vote of at least two-thirds of the
directors then still in office who either were directions at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the
directors then in office. 
 “Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term
contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any
Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely
for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions. 
 “Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A. 
 “Communication” is defined in Section 10. 
 “Compliance Certificate”
is that certain certificate in the form attached hereto as Exhibit E. 

 “Contingent Obligation” is, for any Person, any direct or indirect liability, contingent
or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or
for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate
cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the
ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement. 
 “Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at
which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account. 
 “Credit Extension” is any Advance, Letter of Credit, or amount utilized for Cash Management Services, or any other extension of credit
by Bank for Borrower’s benefit pursuant to this or any other Agreement. 
 “Default Rate” is defined in
Section 2.3(b). 
 “Deferred Revenue” is all amounts received or invoiced in advance of performance under contracts and
not yet recognized as revenue. 
 “Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made. 
 “Designated Deposit Account” is Borrower’s deposit account, account
number             , maintained with Bank. 
 “Dollars,” “dollars” and “$” each mean lawful money of the United States. 
 “Effective Date” is the date Bank executes this Agreement as indicated on the signature page hereof. 
 “Eligible Accounts” means Accounts which arise in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the
right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Eligible Accounts shall not include: 
 (a) Accounts for which the Account Debtor has not been invoiced; 
 (b) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date; 
 (c)
Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have not been paid within ninety (90) days of invoice date; 
 (d) Accounts with credit balances over ninety (90) days from invoice date; 
 (e) Accounts owing from an
Account Debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing; 
 (f) Accounts owing from an Account Debtor which does not have its principal place of business in the United States except for Eligible Foreign Accounts;

 (g) Accounts owing from an Account Debtor which is a federal, state or local government entity or any department, agency, or
instrumentality thereof except for Accounts of the United States if Borrower 

 
has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended; 

(h) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business; 
 (i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on
a “sale guaranteed”, “sale or return”, “sale on approval”, “bill and hold”, or other terms if Account Debtor’s payment may be conditional; 
 (j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent; 
 (k) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor
is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; 
 (l) Accounts owing from an Account Debtor with
respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred Revenue); and 
 (m) Accounts for which Bank
in its good faith business judgment determines collection to be doubtful. 
 “Eligible Foreign Accounts” are Accounts for
which the Account Debtor does not have its principal place of business in the United States but are otherwise Eligible Accounts that are (a) covered by credit insurance satisfactory to Bank, less any deductible; (b) supported by letter(s)
of credit acceptable to Bank; or (c) that Bank approves in writing. 
 “Eligible Inventory” means, at any time,
the aggregate of Borrower’s Inventory that (a) consists of finished goods, in good, new, and salable condition, which is not perishable, returned, consigned, obsolete, not sellable, damaged, or defective, and is not comprised of
demonstrative or custom inventory, works in progress, packaging or shipping materials, or supplies; (b) meets all applicable governmental standards; (c) has been manufactured in compliance with the Fair Labor Standards Act; (d) is not
subject to any Liens, except the first priority Liens granted or in favor of Bank under this Agreement or any of the other Loan Documents; (e) is located at Borrower’s main location; and (f) is otherwise acceptable to Bank in its good
faith business judgment. 
 “Equipment” is all “equipment” as defined in the Code with such additions to such term
as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing. 
 “ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations. 
 “E*Trade Account” means account number 621866, held by Borrower with E*Trade Financial, not to exceed $1,500,000 at any time.

 “Event of Default” is defined in Section 8. 
 “Foreign Institutions” means banks outside of the United States. 
 “Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

 “GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as 

 
may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. 

“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions
to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to
payment of any kind. 
 “Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority. 
 “Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization. 
 “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and
other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations. 
 “Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and Borrower’s Books. 
 “Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. 
 “Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above. 
 “Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person. 
 “IP Agreement” is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Bank dated as of
October 4, 2007. 
 “Key Person” is any of Borrower’s Chief Executive Officer or Chief Financial Officer.

 “Letter of Credit” means a standby letter of credit issued by Bank or another institution based upon an application,
guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.1.2. 
 “Letter of Credit
Application” is defined in Section 2.1.2(a). 
 “Letter of Credit Sublimit” means $2,500,000, minus any
amounts used for Cash Management Services. 
 “Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property. 

 “Loan Documents” are, collectively, this Agreement, the Perfection Certificate, the IP
Agreement, any note, or notes or guaranties executed by Borrower or any guarantor, and any other present or future agreement between Borrower any guarantor and/or for the benefit of Bank in connection with this Agreement, all as amended, restated,
or otherwise modified. 
 “Material Adverse Change” is (a) a material impairment in the perfection or priority of
Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of
any portion of the Obligations or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants
in Section 6 during the next succeeding financial reporting period. 
 “Obligations” are Borrower’s obligation to
pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents. 
 “Operating
Documents” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and,
(a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto. 
 “Payment/Advance Form” is that certain form attached hereto as Exhibit B. 
 “Perfection
Certificate” is defined in Section 5.1. 
 “Permitted Indebtedness” is: 
 (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents; 
 (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate; 
 (c) Subordinated Debt; 
 (d) unsecured
Indebtedness to trade creditors incurred in the ordinary course of business; 
 (e) Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business; 
 (f) Indebtedness in an aggregate principal amount not to exceed $100,000 secured
by Permitted Liens; 
 (g) Purchase money indebtedness incurred for Equipment financed in accordance with clause (c) of the definition
of Permitted Liens; 
 (h) Operating lease obligations arising in the ordinary course of Borrower’s business; 
 (i) Capitalized lease obligations not to exceed $100,000 in any fiscal year; and 
 (j) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided
that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. 

 “Permitted Investments” are: 
 (a) Investments shown on the Perfection Certificate and existing on the Effective Date; 
 (b) Cash Equivalents; 
 (c) Investments
consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; 
 (d) Investments accepted in connection with Transfers permitted by Section 7.1; 
 (e) Investments of Subsidiaries in or to
other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $1,000,000 in the aggregate in any fiscal year; 
 (f) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase
of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; 
 (g) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business; and 
 (h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary. 
 “Permitted Liens” are: 
 (a)
Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents; 
 (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such
Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder; 
 (c)
purchase money Liens (i) on Equipment (other than Financed Equipment) acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than $100,000 in the aggregate amount outstanding, or (ii) existing
on Equipment (other than Financed Equipment) when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; 
 (d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the
aggregate amount not to exceed $500,000 and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale
of the property subject thereto; 
 (e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social
security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA); 
 (f) Liens incurred in
the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal
amount of the indebtedness may not increase; 
 (g) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or intellectual property) 

 
granted in the ordinary course of Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a
security interest; 
 (h) non-exclusive license of intellectual property granted to third parties in the ordinary course of business, and
licenses of intellectual property that could not result in a legal transfer of title of the licensed property that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas
outside of the United States; and 
 (i) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an
Event of Default under Sections 8.4 and 8.7. 
 “Person” is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 
 “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate. 
 “Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may
hereafter be made 
 “Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and
any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of
its property is subject. 
 “Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer,
Finance Manager and Controller of Borrower. 
 “Revolving Line” is an Advance or Advances in an amount equal to Five Million
Dollars ($5,000,000). 
 “Revolving Line Maturity Date” is October 4, 2009. 
 “Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be
made. 
 “Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter
indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms reasonably acceptable to Bank. 
 “Subsidiary” means, with respect to any Person, any Person of which more than 50.0% of the voting stock or other equity interests (in
the case of Persons other than corporations) is owned or controlled directly or indirectly by such Person or one or more of Affiliates of such Person. 
 “Transfer” is defined in Section 7.1. 
 “Unused Revolving Line Facility
Fee” is defined in Section 2.4(c). 
 [Signature page follows.] 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date. 
  

			
	BORROWER:
	
	ACTIVE POWER, INC.
		
	By	 	 /s/ John K. Penver

	Name:	 	John K. Penver
	Title:	 	Chief Financial Officer
		
	BANK:	 	
	
	SILICON VALLEY BANK
		
	By	 	 /s/ Phillip A. Wright

	Name:	 	Phillip A. Wright
	Title:	 	Relationship Mgr.
	
	Effective Date: 10/5/2007

 [Signature page to Loan and Security Agreement] 

 EXHIBIT A 
 The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property: 
 All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort
claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities,
and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and 
 all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products,
proceeds and insurance proceeds of any or all of the foregoing. 
 Notwithstanding the foregoing, the Collateral shall not include more than
65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Subsidiary organized outside the United States. 

 EXHIBIT B 
 Loan Payment/Advance Request Form 
 DEADLINE FOR
SAME DAY PROCESSING IS NOON P.S.T.* 
  

			
	Fax To:	 	Date:
                                

  

			
	LOAN PAYMENT:	  	

							
			
		 		  	ACTIVE POWER, INC.
				
	From Account #	 	                                        
                                  
	  	To Account #	 	  

		 	(Deposit Account #)	  		 	(Loan Account #)

							
				
	Principal $	 	                                        
                                        
   
	  	and/or Interest $	 	  

							
				
	Authorized Signature:	 	                                        
                                      
	  	Phone Number:	  	  

							
	Print Name/Title:	 	                                        
                                        
        
	  		  	

			
		
	LOAN ADVANCE:	  	
	
	Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

							
				
	From Account #	 	                                        
                                  
	  	To Account #	 	  

		 	(Loan Account #)	  		 	(Deposit Account #)

					
			
	Amount of Advance $	 	                                        
                         
	 	

			
	
	All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an
advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date:

							
				
	Authorized Signature:	 	                                        
                                      
	  	Phone Number:	  	  

							
	Print Name/Title:	 	                                        
                                        
        
	  		  	

  

									
	OUTGOING WIRE REQUEST:
	Complete only if all or a portion of funds from the loan advance above is to be wired.
	Deadline for same day processing is noon, P.S.T.
					
	Beneficiary Name:	 	  
	  		  	Amount of Wire: $	 	  

	Beneficiary Bank:	 	  
	  		  	Account Number:	 	  

									
	City and State:	 	  
	  		  		 	

							
				
	Beneficiary Bank Transit (ABA) #:	 	  
	  	Beneficiary Bank Code (Swift, Sort, Chip, etc.):	 	  

		 		  	(For International Wire Only)	 	

							
				
	Intermediary Bank:	 	  
	  	Transit (ABA) #:	 	  

			
	For Further Credit to:	 	  

			
		
	Special Instruction:	 	  

	
	
	By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the
agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).

							
				
	Authorized Signature:	 	  
	  	2nd Signature (if required):	 	  

							
	Print Name/Title:	  	  
	  	Print Name/Title:	  	  

										
	 Telephone #:
	 	  
	  	Telephone 	#:            	 		  	

	*	Unless otherwise provided for an Advance bearing interest at LIBOR. 

 EXHIBIT C 
 BORROWING BASE CERTIFICATE 
  

 Borrower: ACTIVE POWER, INC. 
 Lender: Silicon Valley Bank 
 Commitment Amount: $5,000,000 
  

				
	 ACCOUNTS RECEIVABLE
	  		
	 1. Accounts Receivable (invoiced) Book Value as of
                    
	  	$	                    
	 2. Additions (please explain on reverse)
	  	$	                    
	 3. TOTAL ACCOUNTS RECEIVABLE
	  	$	                    
		
	 ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	  		
	 4. Un-invoiced Accounts
	  	$	                    
	 5. Amounts over 90 days due
	  	$	                    
	 6. Balance of 50% over 90 day accounts
	  	$	                    
	 7. Credit balances over 90 days
	  	$	                    
	 8. Concentration Limits
	  	$	                    
	 9. Foreign Accounts
	  	$	                    
	 10. Governmental Accounts
	  	$	                    
	 11. Contra Accounts
	  	$	                    
	 12. Promotion or Demo Accounts
	  	$	                    
	 13. Intercompany/Employee Accounts
	  	$	                    
	 14. Disputed Accounts
	  	$	                    
	 15. Deferred Revenue
	  	$	                    
	 16. Other (please explain on reverse)
	  	$	                    
	 17. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	  	$	                    
	 18. Eligible Accounts (#3 minus #17)
	  	$	                    
	 19. ELIGIBLE AMOUNT OF ACCOUNTS ( 80% of #18)
	  	$	                    
		
	 INVENTORY
	  		
	 20. Eligible Inventory Value as of
                    
	  	$	                    
	 21. ELIGIBLE AMOUNT OF INVENTORY ( 30% of #20)
	  	$	                    
		
	 BALANCES
	  		
	 22. Maximum Loan Amount
	  	$	5,000,000
	 23. Total Funds Available Lesser of #22 or (#19 plus #21)
	  	$	                    
	 24. Present balance owing on Line of Credit
	  	$	                    
	 25. Outstanding under Sublimits
	  	$	                    
	 26. RESERVE POSITION (#23 minus #24 and #25)
	  	$	                    

 The undersigned represents and warrants that this is true, complete and correct, and that the information in
this Borrowing Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank. 
  

															
	 	 	 	 	 	 	 	 	BANK USE ONLY
					
	COMMENTS:	 		 		 	Received by:	 	  

		 		 		 		 	 AUTHORIZED SIGNER

						
		 		 		 		 	Date:	 	  

	By:	 	  
	 		 		 	Verified:	 	  

		 	 Authorized Signer
	 		 		 		 	 AUTHORIZED SIGNER

						
	Date:	 	  
	 		 		 	Date:	 	  

		 		 		 		 	Compliance Status:	 	                Yes	 	                No

 EXHIBIT D 
 BORROWING RESOLUTIONS 
 

 
 CORPORATE BORROWING CERTIFICATE 
  

							
	BORROWER:	 	ACTIVE POWER, INC.	  	DATE:	  	  

	BANK:	 	Silicon Valley Bank	  		  	

 I hereby certify as follows, as of the date set forth above: 
 1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set forth below. 
 2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of 

					
	                                      
                          .	 		  	
	 Delaware
	 		  	

 3. Attached hereto are true, correct and complete copies of Borrower’s Articles/Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above. Such Articles/Certificate of Incorporation have not been amended, annulled, rescinded, revoked or
supplemented, and remain in full force and effect as of the date hereof. 
 4. The following resolutions were duly and validly adopted by Borrower’s
Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified,
repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Borrower. 
 RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower: 
  

							
	Name	  	Title	  	Signature	  	 Authorized to
 Add or Remove
 Signatories

				
	  
	  	  
	  	  
	  	 ̈
				
	  
	  	  
	  	  
	  	 ̈
				
	  
	  	  
	  	  
	  	 ̈
				
	  
	  	  
	  	  
	  	 ̈

 RESOLVED FURTHER, that any one of the persons
designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower. 
 RESOLVED FURTHER, that such individuals may, on behalf of Borrower: 
 Borrow Money. Borrow money from Silicon Valley Bank (“Bank”). 
 Execute Loan Documents. Execute any loan documents Bank requires. 
 Grant Security. Grant Bank a security interest in any of Borrower’s assets. 

 Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other
indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds. 
 Letters of Credit. Apply for letters
of credit from Bank. 
 Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts. 
 Issue Warrants. Issue warrants for Borrower’s capital stock. 
 Further Acts. Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury trial) they
believe to be necessary to effectuate such resolutions. 
 RESOLVED FURTHER, that all acts authorized by
the above resolutions and any prior acts relating thereto are ratified. 
 5. The persons listed above are Borrower’s officers or employees with their
titles and signatures shown next to their names. 
  

			
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

 *** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower. 
 I, the
                                        
of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above. 
             [print title] 

			
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

 EXHIBIT E 
 COMPLIANCE CERTIFICATE 
  

					
	 TO:
	  	 SILICON VALLEY BANK
	  	Date:                     
	 FROM:
	  	 ACTIVE POWER, INC.
	  	

 The undersigned authorized officer of ACTIVE POWER, INC. (“Borrower”) certifies that
under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the period ending
                     with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations
and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date,
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as
otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has
not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except
as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. 
 Please indicate compliance status by circling Yes/No under “Complies” column. 
  

					
	 Reporting Covenant
	  	 Required
	  	 Complies

	Monthly financial statements	  	Monthly within 30 days	  	Yes    No
	Annual financial statement (CPA Audited)	  	FYE within 150 days	  	Yes    No
	10-Q, 10-K and 8-K	  	Within 5 days after filing with SEC	  	Yes    No
	Borrowing Base Certificate A/R & A/P Agings; Compliance Certificate	  	Monthly within 30 days when Advances are requested and/or are outstanding	  	Yes    No
	
	The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”)
		
	  
	  	

  

							
	 Financial Covenant
	  	Required	  	Actual	  	Complies
	 Maintain on a Monthly Basis:
	  		  		  	
	 Minimum Liquidity Ratio
	  	1.35:1.0	  	        :1.0	  	Yes    No

 The following financial covenant analys[is][es] and information set forth in Schedule 1 attached
hereto are true and accurate as of the date of this Certificate. 

 The following are the exceptions with respect to the certification above: (If no exceptions exist, state
“No exceptions to note.”) 
  

  

  

  

									
	ACTIVE POWER, INC.	 		 	BANK USE ONLY
					
		 		 		 	Received by:	 	  

	By:	 	  
	 		 		 	AUTHORIZED SIGNER
	Name:	 	  
	 		 	Date:	 	  

	Title:	 	  
	 		 		 	
		 		 		 	Verified:	 	  

		 		 		 		 	AUTHORIZED SIGNER
		 		 		 	Date:	 	  

				
		 		 		 	Compliance Status:            Yes    No

 Schedule 1 to Compliance Certificate 
 Financial Covenants of Borrower 
 Dated:
                         
 In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern. 
  

												
	I.	 		 		 	Liquidity Ratio (Section 6.7(b))	 		  		
						
	Required:	 		 		 	1.35:1.00	 		  		
					
	Actual:	 		 		 		  		
						
	A.	 		 		 	Unrestricted cash maintained with Bank	 		  	$	            
						
	B.	 		 		 	Cash Equivalents	 		  	$	            
						
	C.	 		 		 	Eligible Accounts	 		  	$	            
						
	D.	 		 		 	Liquidity (line A plus line B plus line C)	 		  	$	            
						
	E.	 		 		 	Outstanding Obligations owing Bank	 		  	$	            
						
	F.	 		 		 	Liquidity Ratio (line D divided by line E)	 		  		
		 		 		 		 		  	 	 
	
	Is line F equal to or greater than 1.35:1.00
						
		 		 		 	             No, not in compliance	 	             Yes, in compliance	  		

 

 
 SILICON VALLEY BANK 
 PRO FORMA INVOICE FOR LOAN CHARGES 
  

					
	BORROWER:	 	ACTIVE POWER, INC.	 	
			
	LOAN OFFICER:	 	Phillip Wright	 	
			
	DATE:	 		 	
			
		 	Loan Fee	 	$10,000
			
		 	Bank Expenses	 	$
			
		 	TOTAL FEES DUE	 	$

 {    } A check for the total amount is attached. 
 {    } Debit DDA #
                                     for the total amount.

  

			
	BORROWER:
	
	  

	Authorized Signer	 	(Date)
	
	SILICON VALLEY BANK
	
	  

	Loan Officer Signature	 	(Date)2007 Equity Incentive Plan

 EXHIBIT 10.1 
 APPALACHIAN BANCSHARES, INC. 
 2007 EQUITY INCENTIVE PLAN 
 (As Amended) 
 1. Objectives. The
Appalachian Bancshares, Inc. (the “Company”) 2007 Equity Incentive Plan (the “Plan”) is designed to attract and retain certain selected officers, key employees, non-employee directors and consultants whose skills and talents are
important to the Company’s operations, and reward them for making major contributions to the success of the Company. These objectives are accomplished by making awards under the Plan, thereby providing Participants with a proprietary interest
in the growth and performance of the Company. 
 2. Definitions. 
 (a) “Award” means an Option, share of Restricted Stock, Restricted Stock Unit or SAR (stock appreciation right) awarded to a Participant,
pursuant to such terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan. 
 (b)
“Award Agreement” means the agreement that sets forth the terms, conditions and limitations applicable to an Award. 
 (c)
“Board” means the Board of Directors of Appalachian Bancshares, Inc. 
 (d) “Cause” means, with respect to termination of
a Participant’s employment or service (including status as a non-employee director), the occurrence of any one or more of the following, as determined by the Committee, in the exercise of good faith and reasonable judgment: 
 (i) In the case where there is no employment, change in control, or similar, agreement in effect between the Participant and the Company
or any subsidiary, at the time of the grant of the Award, or where there is such an agreement but the agreement does not define “cause” (or similar words), or where a “cause” termination would not be permitted under such
agreement at that time, because other conditions were not satisfied, the termination of employment or service due to the (a) willful and continued failure or refusal by the Participant to substantially perform assigned duties (other than any
such failure resulting from the Participant’s disability), (b) the Participant’s dishonesty or theft, (c) the Participant’s violation of any obligations or duties under any employment agreement or arrangement, (d) the
Participant’s gross negligence or willful misconduct, or (e) the Participant’s suspension or termination due to the direction of any authorized bank regulatory agency that the Participant be relieved of his or her duties and
responsibilities to the Company or any subsidiary. 
 (ii) In the case where there is an employment, change in control, or
similar agreement, in effect between the Participant and the Company or any subsidiary, at the 
  

 time of the grant of the Award, that defines “cause” (or similar words) and a “cause”
termination would be permitted under such agreement at that time, the termination of employment or service arrangement that is, or would be, deemed to be for “cause” (or similar words), as defined in such agreement. 
 (iii) In the case of a non-employee director, the removal of the non-employee director pursuant to a vote of the shareholders of the
Company or the removal of the non-employee director pursuant to a direction received from any authorized bank regulatory agency. 
 No act or
failure to act on a Participant’s part shall be considered willful, unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.

 (e) “Change in Control” means the occurrence of any one or more of the following events: 
 (i) The Company is merged or consolidated or reorganized into or with another corporation or other legal entity or person (an
“Acquiror”) and, as a result of such merger, consolidation or reorganization, less than 50% of the outstanding voting securities, or other capital interests, of the surviving, resulting or acquiring corporation or other legal person are
owned, in the aggregate, by persons who were shareholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization, other than by the Acquiror or any corporation or other legal entity or person
controlling, controlled by or under common control with the Acquiror; 
 (ii) The Company sells all or substantially all of
its business and/ or assets to an Acquiror, of which less than 50% of the outstanding voting securities, or other capital interests, are owned, in the aggregate, by persons who were shareholders of the Company, directly or indirectly, immediately
prior to such sale, other than by any corporation or other legal entity or person controlling, controlled by or under common control with the Acquiror; 
 (iii) Any person or group [as the terms “person” and “group” are used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), and
the rules and regulations promulgated thereunder] other than the Company or its wholly-owned subsidiaries, has become the Beneficial Owner (as defined in the Exchange Act) of more than 25% of the issued and outstanding shares of voting securities of
Company, other than (a) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any subsidiary or (b) a corporation or other legal entity owned directly or indirectly by the shareholders of the
Company, in substantially the same proportion as their ownership of stock in the Company; 
  

 2 

 (iv) Individuals who are members of the Incumbent Board cease to constitute a majority of
the Board. For this purpose, “Incumbent Board” means (a) the members of the Board of Directors of the Company for the previous two consecutive years and (b) any individual who becomes a member of the Board, if such
individual’s election or nomination for election as a Director was approved by the affirmative vote of the then Incumbent Board; or 
 (v) The shareholders of the Company approve a plan of complete liquidation or dissolution of the Company. 
 The Board has final authority to determine the exact date on which a Change in Control has been deemed to have occurred under paragraphs (i), (ii), (iii), (iv) and (v) above. 
 (f) “Common Stock” or “stock” means the authorized and issued, or unissued, $0.01 par-value common stock of the Company. 

(g) “Code” means the Internal Revenue Code of 1986, as amended from time to time. 
 (h) “Committee” means a committee of the Board composed of two or more independent directors. The Committee shall be the Corporate Governance
and Executive Compensation Committee of the Board, unless the Board designates a different qualifying Committee. Except as otherwise determined by the Board, the Committee shall be so constituted as to permit grants to be exempt from
Section 16(b) of the Exchange Act, as amended, by virtue of Rule 16b-3 thereunder, as such rule is currently in effect or as hereafter modified or amended, and to permit the Plan to comply with Section 162(m) of the Code and any
regulations promulgated thereunder, or any other statutory rule or regulatory requirements. 
 (i) “Company” means Appalachian
Bancshares, Inc., and any and all successors to it. 
 (j) “Disability” means the disability of a Participant, as contemplated under
the provisions of Section 12(c) of the Plan. 
 (k) “Fair Market Value” means, as of the indicated date, the closing sale price
of Common Stock as reported on the NASDAQ Global Market, or on such other exchange or system on which the Common Stock is then traded and reported. If no sales of Common Stock were reported on that date, “Fair Market Value” shall mean the
closing sale price of Common Stock, as reported for the most recent preceding day on which sales of Common Stock were reported, or, failing any such sales, or if the Common Stock is not then listed or traded on exchange or other system, such other
market price as the Board or the Committee may determine in conformity with pertinent law and regulations of the Treasury Department. 
 (l)
“Incentive Stock Option” means an option to purchase shares of Common Stock, which complies with the provisions of Section 422 of the Code. 
  

 3 

 (m) “Nonstatutory Stock Option” means an option to purchase shares of Common Stock, which does
not comply with the provisions of Section 422 of the Code or which is designated as such, pursuant to Section 7 of the Plan. 
 (n)
“Option” means (1) with respect to an employee, an Incentive Stock Option or Nonstatutory Stock Option granted by the Committee, pursuant to Section 7 hereof and (2) with respect to any non-employee, a Nonstatutory Stock
Option granted by the Committee, pursuant to Section 7 hereof. 
 (o) “Participant” means a current, prospective or former
employee of the Company, or a subsidiary (including any executive officer or employee director of the Company or a subsidiary) and any non-employee director, consultant, or other person, who provides services to the Company, or a subsidiary, to whom
an Award has been made under the Plan. 
 (p) “Plan” means the Appalachian Bancshares, Inc. 2007 Equity Incentive Plan. 

(q) “Restricted Stock” means shares of Common Stock granted to a Participant by the Committee, pursuant to Section 7 hereof, which are
subject to restrictions set forth in an Award Agreement. 
 (r) “Restricted Stock Unit” means a right to receive one share of Common
Stock granted to a Participant, pursuant to Section 7, hereof, subject to the restrictions set forth in the Award Agreement. 
 (s)
“SAR” means a stock appreciation right, with respect to one share of Common Stock, granted to a Participant pursuant to Section 7 hereof, subject to the restrictions set forth in the Award Agreement. 
 (t) “Retirement” means the termination of a Participant’s employment or service, on or after age 62, or as otherwise provided in the
policies or agreements of the Company or its subsidiaries. 
 (u) “Subsidiary” means any corporation or other legal entity
(collectively, “legal entities”), in an unbroken chain of legal entities, beginning with the Company, if each of such legal entities (other than the last legal entity in the unbroken chain) owns stock, or other voting interest, possessing
more than fifty percent (50%) of the total, combined voting power of all classes of voting interest in one of the other legal entities in the chain. 
 3. Eligibility. Current and prospective employees of the Company and its subsidiaries (including any executive officer or employee director of the Company or a subsidiary), and the non-employee directors,
consultants, or other persons, who provide services to the Company or a subsidiary, are eligible for an Award under the Plan, it being anticipated that Awards will be granted to those persons who hold, or will hold, positions of responsibility, or
whose performance, in the judgment of the Committee or the management of the Company (if such responsibility is delegated pursuant to Section 6 hereof), can have a significant effect on the success of the Company or its subsidiaries.

  

 4 

 4. Common Stock Available for Awards. 
 (a) Number of Shares. Subject to the provisions of Section 14 of the Plan, the maximum number of Shares that the Company may issue, for all
Awards, including all Awards of Incentive Stock Options, is 300,000 shares of Common Stock. For all Awards, the shares of Common Stock issued, upon grant or exercise, pursuant to the Plan may be authorized-but-unissued shares, or shares that the
Company has reacquired or otherwise holds in treasury. 
 (b) Determination of Available Shares. For purposes of determining the
maximum number of shares of Common Stock available at any time for Awards and for issuance under the Plan, (1) any shares covered by existing Options or which have been issued as Restricted Stock, or which are covered by existing Restricted
Stock Units or SARs, which Options, shares, Restricted Stock Units or SARs are forfeited by a Participant, shall be treated, following such forfeiture, as shares which have not been awarded or issued under the Plan; (2) upon the exercise of a
SAR granted under the Plan, the full number of SARs granted by the Award shall be treated as shares of Common Stock previously issued (and not forfeited) under the Plan, notwithstanding that a lesser amount of shares of Common Stock, or cash
representing shares of Common Stock, may have been actually issued or paid upon such exercise; and (3) shares of Common Stock withheld to satisfy taxes and shares of Common Stock used to exercise an Option or SAR, either directly or by
attestation, shall be treated as issued hereunder. 
 (c) Securities Law Filings. The Company shall take whatever actions are necessary
to file required documents with the U.S. Securities and Exchange Commission and any other appropriate governmental authorities and stock exchanges to make shares of Common Stock available for issuance pursuant to Awards. 
 5. Administration. The Plan shall be administered by the Committee, which shall have full and exclusive power to interpret the Plan, to determine
which persons shall be Participants, to grant waivers of Award restrictions, and to adopt such rules, regulations and guidelines for carrying out the Plan, as it may deem necessary or proper, all of which powers shall be executed in the best
interests of the Company and in keeping with the objectives of the Plan. All determinations made by the Committee regarding the Plan or an Award shall be binding and conclusive as regards the Company, the Participants, and any other interested
persons. 
 6. Delegation of Authority. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange
on which the Common Stock is listed, the Committee may delegate, to the chief executive officer and to other senior officers of the Company, its duties under the Plan, pursuant to such conditions or limitations as the Committee may establish. Any
such delegation may be revoked by the Committee at any time. 
  

 5 

 7. Awards. The Committee shall determine the type or types of Award(s) to be made to each
Participant and shall set forth in the related Award Agreement the terms, conditions and limitations applicable to each Award, including any vesting requirements. In all events, upon the occurrence of a Change in Control, all Awards will become
fully vested and immediately exercisable, and all restrictions thereon shall lapse. The type of Awards available under the Plan are those listed in this Section 7. 
 (a) Options. Options awarded under the Plan shall have the following characteristics: 
 (i) An Option, shall include the right to purchase a specified number of shares of Common Stock, the purchase price of which shall not be less than 100% of the Fair Market Value on the date of grant and shall be established by the Committee
in the Award Agreement on the date of grant. 
 (ii) In addition, the Committee may not reduce the purchase price for Common
Stock, pursuant to the Award of an Option, after the date of grant, except in accordance with adjustments pursuant to Section 14 hereof. 
 (iii) Further, an Option may not be exercisable for a period in excess of ten years. 
 (iv)
An Option, shall be subject to the applicable terms, conditions and limitations set forth by the Committee in the Award Agreement and shall be designated by the Committee in the Award Agreement as, either, a Nonstatutory Stock Option, for any
Participant, or as an Incentive Stock Option, for Participants who are current employees of the Company, or any of its subsidiaries. 
 (v) An Incentive Stock Option shall comply with the applicable provisions of Section 422 of the Code, which, among other limitations, provides, and it being hereby, also, provided, that (a) the aggregate Fair Market Value
(determined at the time the Option is granted) of Common Stock for which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000, (b) Incentive Stock Options, in the case of
a Participant who is a 10% shareholder of the Company within the meaning of Section 422 of the Code, shall be priced at not less than 110% of the Fair Market Value on the date of the grant and (c) Incentive Stock Options, in the case of a
Participant who is a 10% shareholder of the Company from the date of the Award, shall be exercisable for a period of not more than five years. 
 (b) Restricted Stock or Restricted Stock Unit Awards. An Award of shares of Common Stock or, in the case of a Restricted Stock Unit (which shall constitute a bookkeeping entry on the books and records of the Company) an Award which
provides a Participant with the right to acquire a share of Common Stock in the future, may be granted by the Committee, for some or no monetary consideration and, further, may contain such transferability, vesting or forfeiture provisions,
including a requirement of future services, and including such other restrictions and conditions, all as shall comply with Section 409A of the Code, and may be established by the Committee and set forth in the Award Agreement. 
  

 6 

 (c) SARs. The Committee may grant to a Participant a “SAR”, which is the right to
receive, upon the exercise of the Award, the difference between the Fair Market Value of a share of Common stock on the date of exercise, and the “Grant Value” of the SAR. The Grant Value shall be not less than 100% of Fair Market Value on
the date of grant, as set forth in the Award Agreement. The Committee may not reduce the Grant Value after the date of grant, without the consent of the Company’s shareholders, except in accordance with adjustments pursuant to Section 14
hereof. The difference between the Fair Market Value on the date of exercise and the Grant Value, multiplied by the number of SARs exercised (the “Spread”), shall be paid in shares of Common Stock which have a Fair Market Value equal to
the Spread, provided , however , that any fractional share shall be paid in cash. Notwithstanding the foregoing, the Company, as determined in the sole discretion of the Committee, shall be entitled to elect to settle its obligation
arising out of the exercise of a SAR by the payment of cash equal to the Spread, or by the issuance of a combination of shares of Common Stock and cash, in the proportions determined by the Committee, which proportions shall have an aggregate value
equal to the Spread. The other restrictions and conditions of the SARs will be established by the Committee and set forth in the Award Agreement, provided that the period for which a SAR may be exercisable shall not exceed ten years. 
 8. Exercise of Awards. Except as may be provided under Section 9 below, the price at which shares of Common Stock may be purchased by a
Participant, upon the exercise of an Award, shall be paid in full at the time of the exercise, in cash or by means of tendering Common Stock, either directly or by attestation, valued at Fair Market Value on the date of exercise, or any combination
thereof. 
 9. Deferred Payment of Awards. The Committee may permit selected Participants to elect to defer payments under some, or
all, types of Awards, in accordance with procedures established by the Committee, which deferrals are intended to permit such payments to comply with applicable requirements of the Code, including Section 409A of the Code. Dividends or dividend
equivalent rights may be extended to, and made part of, any Award, subject to such terms, conditions and restrictions as shall comply with Section 409A of the Code, and as the Committee may establish. The Committee may also establish rules and
procedures, in compliance with Section 409A of the Code, for the crediting of dividend equivalents for deferred payments of Awards. 
 10. Tax Withholding. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of shares under the Plan, an appropriate number of shares for payment of
applicable taxes or to take such other action as may be necessary, in the opinion of the Company, to satisfy all obligations for withholding of such taxes, but in no event in excess of the minimum withholding required by law. The Company may defer
making delivery with respect to Common Stock obtained pursuant to an Award hereunder until arrangements satisfactory to it have been made with respect to any such withholding obligation. If Common Stock is used to satisfy tax withholding, such stock
shall be valued based on the Fair Market Value when the Nonstatutory Stock Option or SAR is exercised or the Restricted Stock vests. In the case of Restricted Stock Units, such stock will be valued when the Restricted Stock Units are paid to a
Participant, in the case of income tax 

  

 7 

 
withholding, or when the Restricted Stock Units vest, in the case of employment tax withholding, unless applicable law requires a different time for
withholding. Shares of Common Stock used to satisfy tax withholding obligations shall be treated as issued for purposes of determining the number of shares remaining for grant of Awards pursuant to Section 4 hereof. 
 11. Amendment, Modification, and Termination. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan,
in whole or in part, for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law. 
 (a) Shareholder Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent the Board deems necessary or desirable or to comply with applicable laws or the rules of any exchange or other system on which
the Common Stock is then listed or quoted. Notwithstanding the foregoing, the Board shall obtain shareholder approval to amend the Plan to (i) materially increase the maximum number of shares of Common Stock issuable under the Plan (except for
permissible adjustments under Section 14 hereof); (ii) materially increase the benefits accruing to Participants; or (iii) materially modify the eligibility requirements for participation in the Plan. 
 (b) Effect of Amendment or Termination. No amendment or termination may, in the absence of written consent to the change by the affected
Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board, except
(i) to the extent necessary for Participants to avoid becoming subject to penalties and/or interest under Section 409A of the Code or (ii) for adjustments permitted under Section 14 hereof. 
 12. Termination of Employment or Service. If the employment or service of a Participant terminates, other than pursuant to paragraphs
(a) through (c) of this Section 12, all unexercised, deferred and unpaid Awards shall terminate 90 days after such termination of employment or service, unless the Award Agreement provides otherwise, and, during such 90-day period (or
such other period, if provided in the Award Agreement), shall be exercisable only to the extent provided in the Award Agreement. Notwithstanding the foregoing, (i) if a Participant’s employment or service is terminated for Cause, to the
extent the Award is not effectively exercised or has not vested prior to such termination, it shall lapse or be forfeited to the Company immediately upon termination, and (ii) a non-employee director’s Option shall terminate upon the
earlier of the tenth anniversary of the date of grant or the third anniversary of the termination of the Participant’s service as a non-employee director. In all events, an Award will not be exercisable after the end of its term, as set forth
in the Award Agreement. 
 (a) Retirement. When a Participant’s employment or service terminates as a result of Retirement, the
Committee (in the form of an Award Agreement or otherwise) may permit Awards to continue in effect beyond the date of Retirement, and the exercisability and vesting of any Award may be accelerated. 
  

 8 

 (b) Resignation in the Best Interests of the Company. When a Participant resigns from employment
or service with the Company or any of its subsidiaries and, in the judgment of the Committee, the acceleration and/or continuation of outstanding Awards would be in the best interests of the Company, the Committee may authorize, where appropriate,
taking into account any regulatory, tax or accounting implications of such action, the acceleration and/or continuation of all or any part of Awards granted to such Participant prior to such termination. 
 (c) Death or Disability of a Participant. 
 (i) In the event of a Participant’s death, and subject to the provisions of paragraph (c) (iii) below, the Participant’s estate or representatives or beneficiaries (as applicable) shall have a
period specified in the Award Agreement within which to receive or exercise any outstanding Awards held by the Participant, under such terms, and to the extent, specified in the applicable Award Agreement. Rights to any such outstanding Awards shall
pass by will or the laws of descent and distribution, in the following order: (a) to beneficiaries so designated by the Participant or Participant’s estate; if none, then (b) to a legal representative of the Participant; if none, then
(c) to the persons entitled thereto as determined by applicable law or, absent applicable law, a court of competent jurisdiction. 
 (ii) In the event a Participant is deemed by the Company to be disabled within the meaning of the Award Agreement, or, absent a definition (or definitional reference) therein, the Company’s long-term disability
plan, the Award shall be exercisable for the period, and to the extent, specified in the Award Agreement; provided that, if the Award Agreement does not contain a definition of “disability”, or if the Company does not then maintain a
long-term disability plan, “disability” shall mean “permanent and total disability” as defined in Section 22(e)(3) of the Code, and the date of any such disability shall be deemed to be the day following the last day the
Participant performed services for the Company. Awards and rights to any such Awards may be paid to, or exercised by, the Participant, if legally competent, or a legally designated guardian or representative, if the Participant is legally
incompetent by virtue of such disability. 
 (iii) After the death or disability of a Participant, the Committee may, in its
sole discretion, at any time (1) terminate restrictions in Award Agreements; (2) accelerate any or all installments and rights; and (3) instruct the Company to pay the total of any accelerated payments in a lump sum to the
Participant, the Participant’s estate, beneficiaries or representative, notwithstanding that, in the absence of such termination of restrictions or acceleration of payments, any or all of the payments due under the Awards might ultimately have
become payable to other beneficiaries. 
 (iv) In the event of uncertainty as to interpretation of or controversies concerning
this paragraph (c) of Section 12, the Committee’s determinations shall be binding and conclusive on all interested parties. 
 (d) “Specified Employee” Delay. Notwithstanding anything in the Plan to the contrary, if, at the time of Participant’s termination of employment, Participant is a “specified 

  

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employee”, as defined in Section 409A of the Code, and the Committee determines that the deferral of the commencement of any of the payments or
benefits otherwise payable to Participant under an Award, as a result of such termination of employment, is necessary to prevent any accelerated or additional tax under Section 409A of the Code, then the Committee shall defer the commencement
of the payment of any such payments or benefits (without any reduction in such payment or benefits), until the date that is six (6) months following the date of the Participant’s termination of employment (or, otherwise, the earliest date
that is permitted under Section 409A of the Code). 
 (e) No Employment or Service Rights. The Plan shall not confer upon any
Participant any right with respect to continuation of employment or service by the Company or any of its subsidiaries, or service as a director, nor shall it interfere in any way with the right of the Company to terminate any Participant’s
employment or service at any time. 
 13. Restrictions on Transferability. Except as provided in subsection (c) of Section 12
and in this Section 13, no Award or any other benefit under the Plan shall be assignable or transferable to, or payable to, or exercisable by, anyone other than the Participant to whom it was granted. Notwithstanding the foregoing, the
Committee (in the form of an Award Agreement or otherwise) may permit Awards, other than Incentive Stock Options (which may be transferred or assigned only as permitted under the provisions of Section 422 of the Code), to be transferred
to members of the Participant’s immediate family, to trusts for the benefit of the Participant and/or such immediate family members, and to partnerships or other entities in which the Participant and/or such immediate family members own all the
equity interests. For purposes of the preceding sentence, “immediate family” shall mean a Participant’s spouse, issue and spouses of his issue. 
 14. Adjustments. In the event of any corporate event or transaction, such as a merger, consolidation, share exchange, recapitalization, reorganization, separation, stock dividend, stock split, split-up,
spin-off or other distribution of stock or property of the Company, combination of shares, exchange of shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the
Company, the Committee, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, in an equitable manner (including adjustments to avoid fractional shares), (a) the number of Common
Shares (i) reserved under the Plan, (ii) available for Incentive Stock Options, Restricted Stock, Restricted Stock Units and SARs, (iii) for which Awards may be granted to an individual Participant, and (iv) covered by
outstanding Awards denominated in stock; (b) the stock prices related to outstanding Awards; and (c) the appropriate Fair Market Value and other price determinations for such Awards. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume Awards, whether or not in a transaction to which Section 424(a) of the Code applies, by means of substitution of
new Awards for previously issued Awards or an assumption of previously issued Awards. All adjustments under this Section 14 shall be made in a manner such that they will not result in a penalty under Section 409A of the Code. Any
adjustment, waiver, conversion, or other action, taken by the Committee under this Section 14 shall be conclusive and binding on all Participants, the Company and their successors, assigns and beneficiaries. 
  

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 15. Notice. Any notice to the Company required by any of the provisions of the Plan shall be
addressed to the director of human resources or to the chief executive officer of the Company, in writing, and shall become effective when it is received by the office of either of them. Any notice to a Participant shall be addressed to the
Participant at his last known address, as it appears on the Company’s records. 
 16. Unfunded Plan. The Plan shall be unfunded.
Although bookkeeping accounts may be established on the books and records of the Company, with respect to Participants who are entitled to Common Stock under the Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company
shall not be required to segregate any Common Stock, nor shall the Plan be construed as providing for such segregation, nor shall the Company, the Board, or the Committee, be deemed to be a trustee of any Common Stock to be granted under the Plan.
Any liability of the Company to any Participant with respect to a grant of Common Stock, or rights thereto, under the Plan shall be based solely upon any contractual obligations that may be created by the Plan and any Award Agreement; no such
obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company, nor the Board, nor the Committee, shall be required to give any security or bond for the performance of
any obligation that may be created by the Plan. 
 17. Governing Law. The terms of the Plan, and all determinations made and actions
taken pursuant to the Plan, shall be governed by the laws of the State of Georgia, without giving effect to its conflicts of law provisions. 
 18. Compliance with Internal Revenue Code and Other Applicable Law and Regulations. 
 (a) The Plan, and all Awards granted
hereunder, shall comply, at all times, with the applicable provisions of the Internal Revenue Code (including Section 409A of the Code), and with all other applicable laws and regulations. To the extent that an Award granted under the Plan is
designated as an Incentive Stock Option, the provisions of the Award shall comply with Section 422 of the Code, and, further, all provisions of the Plan and of the Award Agreement for such Incentive Stock Option shall be construed in a manner
that effectuates such compliance. 
 (b) The provisions of the Plan or of any Award Agreement notwithstanding, the Participant shall not be
entitled to receive the payments or benefits under any Award, and the Company shall not be obligated to provide such payments or benefits, if such provision of payments or benefits by the Company, or the receipt of such payments or benefits by the
Participant, would constitute a violation by the Company, or by the Participant, of any provision of such applicable law or regulation. 
 (c)
Any reference in the Plan or in any Award Agreement to “compliance with the requirements of “Section 409A of the Code” (or words of similar import) shall be interpreted to mean, and to require, the application of the terms of the Plan
and of any Award Agreement, for the administration of the Plan and any Award, as the case may be, in a manner that permits no 

  

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additional income tax to be imposed on a Participant, pursuant to Section 409A of the Code; provided, however, that no provision of the
Plan (including this Section 18(c)) shall be construed to limit the grant of Incentive Stock Options under the Plan, including any limitation otherwise resulting from the application of the $100,000.00 limit on Incentive Stock Options set forth
in the Plan, or any recharacterization or reclassification of any Incentive Stock Options (i.e., to Nonstatutory Stock Options) resulting from any Award that would exceed the $100,000.00 limit, or otherwise. 
 (d) If additional guidance is issued under, or if modifications are made to, the applicable provisions of the Internal Revenue Code (including Sections
409A and 422 of the Code), or to any other applicable law or regulations affecting the Plan, or to the Awards issued under the Plan, the Committee shall take such actions, including amendments of the Plan or of any Award Agreement (without the
necessity of obtaining any consent of the Participant, which, otherwise, would be required under the terms of the Plan), as the Committee shall deem necessary, in its sole discretion, to insure continued compliance with the applicable provisions of
the Internal Revenue Code (including Sections 409A and 422 of the Code) and with other applicable laws and regulations. 
 (e) If a
Participant’s termination of employment or service is used to determine the date of payments or benefits to be received by Participant under an Award Agreement, and if such provision of payments or benefits under the Award Agreement is subject
to Section 409A of the Code, such Participant’s “termination of employment or service” shall have the same meaning as “separation from service”, as defined in Section 409A of the Code. 
 19. Effective Date; Termination. The terms of the Plan, shall become effective on May 22, 2007, but no Awards shall be granted unless, and
until, the Plan has been approved by the shareholders of the Company, which approval shall be within twelve months before, or after, the date the Plan is adopted by the Board. The Plan shall terminate on May 22, 2017, subject to earlier
termination by the Board pursuant to Section 11, after which no Awards may be made under the Plan, but any such termination shall not affect Awards then outstanding or the authority of the Committee to continue to administer the Plan.

 20. Other Benefit and Compensation Programs. Payments and other benefits received by a Participant, pursuant to an Award, shall not
be deemed a part of such Participant’s regular, recurring compensation for purposes of the termination or severance plans of the Company and shall not be included in, nor have any effect on, the determination of benefits under any other
employee benefit plan, contract or similar arrangement, unless the Committee expressly determines otherwise. 
  

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