Document:

Active Power, Inc. Employee Stock Purchase Plan

 Exhibit 10.3 
  
 ACTIVE POWER, INC. 
 EMPLOYEE STOCK PURCHASE PLAN 
 (As Amended and Restated Effective February 1, 2005) 
  
 I. PURPOSE OF THE PLAN 
  
 This Employee Stock Purchase Plan is intended to promote the interests of
Active Power, Inc., a Delaware corporation, by providing eligible employees with the opportunity to acquire a proprietary interest in the Corporation through participation in a payroll-deduction based employee stock purchase plan designed to qualify
under Section 423 of the Code. 
  
 Capitalized terms herein shall
have the meanings assigned to such terms in the attached Appendix. 
  
 II. ADMINISTRATION OF THE PLAN 
  
 The Plan
Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of Section 423 of the
Code. Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan. 
  
 III. STOCK SUBJECT TO PLAN 
  
 A. The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased
on the open market. The maximum number of shares of Common Stock which may be issued in the aggregate under the Plan shall not exceed Five Hundred Thousand (500,000) shares. 
  
 B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first
trading day of January each calendar year during the term of the Plan, beginning with calendar year 2001, by an amount equal to one half of one percent (0.5%) of the total number of shares of Common Stock outstanding on the last trading day in
December of the immediately preceding calendar year, but in no event shall any such annual increase exceed One Hundred Fifty Thousand (150,000) shares. 
  
 C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares
or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to the maximum number and class of securities issuable in the aggregate under the Plan,
(ii) the maximum number and class of securities by which the share reserve is to increase automatically each calendar year, (iii) the maximum number and class of securities purchasable per Participant and in the aggregate on any 

 one Purchase Date and (iv) the number and class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits thereunder. 
  
 IV. OFFERING PERIODS 
  
 A. Shares of Common Stock shall be offered for purchase under the Plan through a series of successive offering periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated. 
  
 B. Each offering period shall be of such duration (not to exceed twelve (12) months) as determined by the Plan Administrator prior to the start date of such offering period. Offering periods shall commence as designated by the Plan
Administrator. 
  
 C. Each offering period shall be comprised of a
series of successive Purchase Intervals. Purchase Intervals shall run from the first business day in February each year to the last business day in July of the same year and from the first business day in August each year to the last business day in
January of the following year. 
  
 D. Should the Fair Market Value
per share of Common Stock on any Purchase Date within an offering period be less than the Fair Market Value per share of Common Stock on the start date of that offering period, then that offering period shall automatically terminate immediately
after the purchase of shares of Common Stock on such Purchase Date, and a new offering period shall commence on the next business day following such Purchase Date. The new offering period shall have a duration of twelve (12) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days following the start date of that offering period. 
  
 V. ELIGIBILITY 
  
 A. Each individual who is an Eligible Employee on the start date of an offering period under the Plan may enter that offering period on such start date or
on any subsequent Semi-Annual Entry Date within that offering period, provided he or she remains an Eligible Employee. 
  
 B. Each individual who first becomes an Eligible Employee after the start date of an offering period may enter that offering period on any subsequent
Semi-Annual Entry Date within that offering period on which he or she is an Eligible Employee. 
  
 C. The date an individual enters an offering period shall be designated his or her Entry Date for purposes of that offering period. 
  
 D. To participate in the Plan for a particular offering period, the Eligible Employee must complete the enrollment forms
prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date. 

 VI. PAYROLL DEDUCTIONS 
  
 A. The payroll deduction authorized by the Participant for purposes of acquiring shares of Common Stock during an offering
period may be any multiple of one percent (1%) of the Base Salary paid to the Participant during each Purchase Interval within that offering period, up to a maximum of fifteen percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in accordance with the following guidelines: 
  
 (i) The Participant may, at any time during the offering period, reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Purchase Interval. 
  
 (ii) The Participant may, prior to the commencement of any new Purchase Interval within the offering period,
increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the fifteen percent (15%) maximum) shall become effective on the start date of the first Purchase
Interval following the filing of such form. 
  
 B. Payroll
deductions shall begin on the first pay day administratively feasible following the Participant’s Entry Date into the offering period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so collected shall be credited to the Participant’s book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account.
The amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Corporation and used for general corporate purposes. 
  
 C. Payroll deductions shall automatically cease upon the termination of the
Participant’s purchase right in accordance with the provisions of the Plan. 
  
 D. The Participant’s acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participant’s acquisition of Common Stock on any subsequent Purchase Date, whether
within the same or a different offering period. 
  
 VII.
PURCHASE RIGHTS 
  
 A. Grant of Purchase Right.
A Participant shall be granted a separate purchase right for each offering period in which he or she participates. The purchase right shall be granted on the Participant’s Entry Date into the offering period and shall provide the Participant
with the right to purchase shares of Common Stock, in a series of successive installments over the remainder of such offering period, upon the terms set forth below. The Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable. 

 Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such
individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Corporation or any Corporate Affiliate. 
  
 B. Exercise of the Purchase Right. Each purchase right shall be automatically exercised in installments on each successive Purchase Date within the offering period, and shares of Common Stock shall accordingly be purchased on
behalf of each Participant (other than Participants whose payroll deductions have previously been refunded pursuant to the Termination of Purchase Right provisions below) on each such Purchase Date. The purchase shall be effected by applying the
Participant’s payroll deductions for the Purchase Interval ending on such Purchase Date to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date. 
  
 C. Purchase Price. The purchase price per share at which Common
Stock will be purchased on the Participant’s behalf on each Purchase Date within the offering period shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the
Participant’s Entry Date into that offering period or (ii) the Fair Market Value per share of Common Stock on that Purchase Date. 
  
 D. Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount collected from the Participant through payroll deductions during the Purchase Interval ending with that Purchase Date by the purchase price in effect for the Participant for
that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall not exceed Four Thousand (4,000) shares, subject to periodic adjustments in the event of certain changes in the
Corporation’s capitalization. In addition, the maximum number of shares of Common Stock purchasable in the aggregate by all Participants on any one Purchase Date shall not exceed Two Hundred Seventy Thousand (270,000) shares, subject to
periodic adjustments in the event of certain changes in the corporation’s capitalization. 
  
 E. Excess Payroll Deductions. Any payroll deductions not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock
shall be held for the purchase of Common Stock on the next Purchase Date. However, any payroll deductions not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable on the Purchase Date shall
be promptly refunded. 
  
 F. Termination of Purchase
Right. The following provisions shall govern the termination of outstanding purchase rights: 
  
 (i) A Participant may, at any time prior to the next scheduled Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions shall be collected from the Participant with 

 respect to the terminated purchase right. Any payroll deductions collected during the Purchase Interval
in which such termination occurs shall, at the Participant’s election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time such purchase right is terminated, then the
payroll deductions collected with respect to the terminated right shall be refunded as soon as possible. 
  
 (ii) The termination of such purchase right shall be irrevocable, and the Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume participation in any subsequent offering period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her
scheduled Entry Date into that offering period. 
  
 (iii) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate,
and all of the Participant’s payroll deductions for the Purchase Interval in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid
leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Interval in which such leave commences, to (a) withdraw all the payroll deductions collected to date on his or her behalf for
that Purchase Interval or (b) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. In no event, however, shall any further payroll deductions be collected on the Participant’s behalf during
such leave. Upon the Participant’s return to active service (i) within ninety (90) days following the commencement of such leave or, (ii) prior to the expiration of any longer period for which such Participant’s right to reemployment with
the Corporation is guaranteed by either statute or contract, his or her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began. However, should the Participant’s leave of absence exceed
ninety (90) days and his or her re-employment rights not be guaranteed by either statute or contract, then the Participant shall be treated as a new Employee for purposes of the Plan and must, in order to resume participation in the Plan, re-enroll
in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into the offering period. 
  
 G. Change in Control. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for the Purchase Interval in which such Change in Control occurs to the purchase of whole shares of Common Stock at a purchase price per share equal to eighty-five percent
(85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant’s Entry Date into the offering period in which such Change in Control occurs or (ii) the Fair Market Value per share of Common Stock immediately
prior to the effective date of such Change in Control. However, the applicable limitation on the number of shares of Common Stock purchasable by all Participants in the aggregate shall not apply to any such purchase. 

 The Corporation shall use its best efforts to provide at least ten (10)-days prior written notice of the
occurrence of any Change in Control, and Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control. 
  
 H. Proration of Purchase Rights. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available
shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded. 
  
 I. Assignability. The purchase right shall be exercisable only
by the Participant and shall not be assignable or transferable by the Participant. 
  
 J. Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant’s
behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares. 
  
 VIII. ACCRUAL LIMITATIONS 
  
 A. No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code
Section 423) of the Corporation or any Corporate Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate Affiliate (determined on the basis of
the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding. 
  
 B. For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect:

  
 (i) The right to acquire Common Stock under
each outstanding purchase right shall accrue in a series of installments on each successive Purchase Date during the offering period on which such right remains outstanding. 
  
 (ii) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the
Participant has already accrued in the same calendar year the right to acquire Common Stock under one (1) or more other purchase rights at a rate equal to Twenty Thousand Dollars ($20,000) worth of Common Stock (determined on the basis of the Fair
Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding. 
  

 6 

 C. If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a
particular Purchase Interval, then the payroll deductions which the Participant made during that Purchase Interval with respect to such purchase right shall be promptly refunded. 
  
 D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any
instrument issued thereunder, the provisions of this Article shall be controlling. 
  
 IX. EFFECTIVE DATE AND TERM OF THE PLAN 
  
 A. The Plan was adopted by the Board on June 8, 2000 and became effective at the Effective Time, subject to the prior conditions that no purchase rights granted under the Plan were to be exercised, and no shares of
Common Stock were to be issued hereunder, until (i) the Plan had been approved by the stockholders of the Corporation and (ii) the Corporation had complied with all applicable requirements of the 1933 Act (including the registration of the shares of
Common Stock issuable under the Plan on a Form S-8 registration statement filed with the Securities and Exchange Commission), all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements established by law or regulation. Such stockholder approval was obtained, and such compliance was effected within twelve (12) months after the date on which the Plan was
adopted by the Board. This amended and restated Plan shall be effective as of the first day of the offering period that begins on February 1, 2005. 
  
 B. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) the last business day in July 2010, (ii) the date on
which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Corporate Transaction. No further
purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination. 
  
 X. AMENDMENT/TERMINATION OF THE PLAN 
  
 A. The Board may alter, amend, suspend or terminate the Plan at any time to become effective immediately following the close of any Purchase Interval.
However, the Plan may be amended or terminated immediately upon Board action, if and to the extent necessary to assure that the Corporation will not recognize, for financial reporting purposes, any compensation expense in connection with the shares
of Common Stock offered for purchase under the Plan, should the financial accounting rules applicable to the Plan at the Effective Time be subsequently revised so as to require the recognition of compensation expense in the absence of such amendment
or termination. 
  
 B. In no event may the Board effect any of the
following amendments or revisions to the Plan without the approval of the Corporation’s stockholders: (i) increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments 

 in the event of certain changes in the Corporation’s capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable under the Plan or (iii) modify eligibility requirements for participation in the Plan. 
  
 XI. GENERAL PROVISIONS 
  
 A. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Corporation or any Corporate Affiliate for any period
of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Corporate Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such
person’s employment at any time for any reason, with or without cause. 
  
 B. All costs and expenses incurred in the administration of the Plan shall be paid by the Corporation; however, each Plan Participant shall bear all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan. 
  
 C. The
provisions of the Plan shall be governed by the laws of the State of Texas without regard to that State’s conflict-of-laws rules. 

 Schedule A 
  
 Corporations Participating in 
 Employee Stock Purchase Plan 
 As of the Effective Time 
  
 Active Power, Inc. 

 APPENDIX 
  
 The following definitions shall be in effect under the Plan: 
  
 A. Base Salary shall mean the base salary payable to a Participant by one or more Participating Corporations
during such individual’s period of participation in one or more offering periods under the Plan. Such Base Salary shall be calculated before deduction of (A) any income or employment tax withholdings or (B) any actual or deemed pre-tax
contributions made by the Participant to any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or hereafter established by the Corporation or any Corporate Affiliate. However, Base Salary shall not
include any overtime payments, bonuses, commissions, current profit-sharing distributions and other incentive-type payments or contributions (other than Code Section 401(k) or Code Section 125 contributions) made on the Participant’s behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare plan now or hereafter established. 
  
 B. Board shall mean the Corporation’s Board of Directors. 
  
 C. Change in Control shall mean a change in ownership of the Corporation pursuant to any of the following
transactions: 
  
 (i) a merger or consolidation
in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately
prior to such transaction, or 
  
 (ii) the sale,
transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or 
  
 (iii) the acquisition, directly or indirectly, by a person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common control with the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders. 
  
 D. Code shall mean the Internal Revenue Code of 1986, as amended. 
  
 E. Common Stock shall mean the Corporation’s common stock.

  
 F. Corporate Affiliate shall mean any parent or
subsidiary corporation of the Corporation (as determined in accordance with Code Section 424), whether now existing or subsequently established. 

 G. Corporation shall mean Active Power, Inc., a Delaware corporation, and any corporate
successor to all or substantially all of the assets or voting stock of Active Power, Inc. which shall by appropriate action adopt the Plan. 
  
 H. Effective Time shall mean the time at which the Underwriting Agreement is executed. Any Corporate Affiliate which becomes a Participating
Corporation after such Effective Time shall designate a subsequent Effective Time with respect to its employee-Participants. 
  
 I. Eligible Employee shall mean any person who is employed by a Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings considered wages under Code Section 3401(a). 
  
 J. Entry Date shall mean the date an Eligible Employee first commences participation in the offering period in
effect under the Plan. 
  
 K. Fair Market Value per
share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 
  
 (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 
  
 (iii) For purposes of the initial offering period which
began at the Effective Time, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock was sold in the initial public offering pursuant to the Underwriting Agreement. 
  
 L. 1933 Act shall mean the Securities Act of 1933, as amended.

  
 M. Participant shall mean any Eligible Employee
of a Participating Corporation who is actively participating in the Plan. 

 N. Participating Corporation shall mean the Corporation and such Corporate Affiliate or
Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. The Participating Corporations in the Plan are listed in attached Schedule A. 
  
 O. Plan shall mean the Corporation’s Employee Stock
Purchase Plan, as set forth in this document and as amended from time to time. 
  
 P. Plan Administrator shall mean the committee of two (2) or more Board members appointed by the Board to administer the Plan. 
  
 Q. Purchase Date shall mean the last business day of each Purchase Interval. 
  
 R. Purchase Interval shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant. 
  
 S. Semi-Annual Entry Date shall mean the first business day in February and August each year on which an Eligible Employee may first enter
an offering period. 
  
 T. Stock Exchange shall mean
either the American Stock Exchange or the New York Stock Exchange. 
  
 U. Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters managing the Corporation’s initial public offering of its Common Stock.Mutual Release and Settlement Agreement

 Exhibit 10.26 
  
 STATE OF MICHIGAN 
 IN THE CIRCUIT COURT FOR THE COUNTY OF WAYNE 
  

					
	Magnex Corporation, a Delaware corporation, White Enigma, LLC, a Michigan limited liability company, Paul E. Hodges, Randy M. Bergeron and Fundamental Research Company, a Michigan
Partnership,	  	)
)
)
)	  	 
	 Plaintiffs,
	  	)
)	  	 
	 v.
	  	)
)	  	 
	 	  	)	  	 Case No. 02-210028 CZ

	 Joseph Pinkerton, Active Power, Inc.,
 a Delaware corporation, Magnetic Bearing
 Technologies, Inc., Pinkerton Generator,
Inc.,
 a Michigan corporation and Caterpillar Inc.
	  	)
)
)
)	  	 Hon. Robert J. Colombo, Jr.

	 	  	)	  	 
	 Defendants.
	  	)	  	 

  
 MUTUAL RELEASE
AND SETTLEMENT AGREEMENT 
  
 This Mutual Release and
Settlement Agreement (the “Agreement”) is made this 15th day of October, 2004 by Magnex Corporation, White
Enigma LLC, Paul E. Hodges, Randy M. Bergeron, and Fundamental Research Company (hereinafter collectively referred to as “Plaintiffs”), and Active Power, Inc. f/k/a Magnetic Bearing Technologies, Inc. (“Active Power”).

  
 Whereas on March 14, 1995, a judgment was entered
against Paul E. Hodges and in favor of Comerica Bank (“the Oakland County Judgment”) by the Michigan Circuit Court for the County of Oakland, Case No. 94-483246-CK (“the Oakland County Action”), and Active Power later acquired an
interest in the Oakland County Judgment; 
  
 Whereas on
March 25, 2002 Plaintiffs filed civil action No. 02-210028 CZ (the “Action”) against Active Power and other defendants in the Michigan Circuit Court for the County of Wayne (“the Wayne County Court”); and 
  
 Whereas Active Power has filed against Plaintiffs certain
counterclaims in the Action; 
  
 Whereas the parties wish
to amicably settle all differences between them; 
  
 IN
CONSIDERATION OF THE MUTUAL PROMISES MADE HEREIN, IT IS HEREBY AGREED: 
  
 1. The above recitals are incorporated herein as part of this Agreement. 

 2. On August 27, 2004, the Wayne County Court entered an order stipulated to by Plaintiffs, Active Power
and other defendants. Said order required Active Power and other defendants to pay to Plaintiffs one million dollars ($1,000,000) by the close of business on August 31, 2004, and five-million-two-hundred-twenty-thousand dollars ($5,220,000) by 5:00
p.m. EDST on October 15, 2004. Pursuant to that order, Active Power did pay to Plaintiffs a total of $806,859 on August 31, 2004. 
  
 3. Active Power and other defendants shall satisfy their obligation to make the October 15, 2004 payment referenced in paragraph 2 to Plaintiffs in the
following manner and amounts: by one or more cashier’s checks made jointly payable to Magnex Corporation and Paul E. Hodges in the amount of $886,077, and one or more cashier’s checks made jointly payable to White Enigma, LLC and Randy
Bergeron in the amount of $2,907,653 (these October 15, 2004 payments are hereinafter collectively referred to as the “Sum,” and October 15, 2004 shall be referred to as the “Payment Date”). Upon the payment to Paul E. Hodges
described in this paragraph, the Oakland County Judgment shall be considered satisfied, and Active Power shall file a Satisfaction of Judgment with the Oakland County Court. Active Power warrants that it has the authority to file said Satisfaction
of Judgment. 
  
 4. Active Power shall sign and deliver a
Stipulation and Order of Dismissal With Prejudice as to the Action (collectively, “the Stipulated Order”), in the form given in Exhibit A hereto, to counsel for Plaintiffs. Plaintiffs’ counsel will hold the Stipulated Order until
Plaintiffs receive the Sum from Active Power. Simultaneously with receipt of the Sum, Plaintiffs’ counsel shall deliver to Active Power’s counsel original copies of the Stipulated Order (signed by all Plaintiffs with respect to the
Action), which will then be filed with the appropriate court by counsel for Active Power. The parties agree to cooperate fully with each other in achieving the execution of the Stipulated Order or such other forms of order of dismissal with
prejudice as the appropriate court may deem appropriate. 
  
 5.
Plaintiffs, jointly and severally, hereby fully and forever release, remise, acquit and discharge Active Power, jointly and severally as well as all of their respective heirs, successors, assigns, predecessors, subsidiaries, affiliates, agents,
attorneys, employees, shareholders, customers, officers, and directors, all of whom are hereinafter referred to as “Defendant Releasees,” from all manner of action and causes of action, suits, claims, debts, judgments, damages, theories of
recovery, demands and rights whatsoever, in law or in equity now existing or which may hereafter accrue in favor of the Plaintiffs or any of them by reason of any facts, known or unknown, existing from the beginning of the world through the end of
time. 
  
 6. Plaintiffs hereby covenant that except for actions or
suits based upon breaches of the terms of this Agreement, they will not commence any action or suit, in law or in equity, against Defendant Releasees on account of any action or cause of action, known or unknown, which now exists or which may
hereafter accrue in their joint or several favor upon the basis of facts, known or unknown, which have been alleged, or which could have been alleged in the Action. This covenant includes, but is not limited to, any and all legal action mentioned by
Randy M. Bergeron in correspondence sent by him to Defendants and others on September 1, September 2, and October 6, 2004, attached collectively as Exhibit B. In addition to any other liability which shall accrue upon the breach of this covenant,
the breaching party shall be liable to pay all reasonable attorneys’ fees and costs incurred by the Releasee in the defense of such action or suit. 

 7. Active Power hereby fully and forever release, remise, acquit and discharge all Plaintiffs, jointly
and severally and all of their respective heirs, successors, assigns, predecessors, subsidiaries, affiliates, agents, attorneys, employees, shareholders, customers, officers, and directors, all of whom are hereinafter referred to as “Plaintiff
Releasees,” from all manner of action and causes of action, suits, claims, debts, judgments, damages, theories of recovery, demands and rights whatsoever, in law or in equity now existing or which may hereafter accrue in favor of the Defendants
or any of them by reason of any facts, known or unknown, existing from the beginning of the world through the end of time. 
  
 8. Active Power hereby covenant that except for actions or suits based upon breaches of the terms of this Agreement, they will not commence any action or
suit, in law or in equity, against Plaintiff Releasees on account of any action or cause of action, known or unknown, which now exists or which may hereafter accrue in their joint or several favor upon the basis of facts, known or unknown, which
have been alleged, or which could have been alleged in the Action. In addition to any other liability which shall accrue upon the breach of this covenant, the breaching party shall be liable to pay all reasonable attorneys’ fees and costs
incurred by the Releasee in the defense of such action or suit. 
  
 9. Plaintiffs hereby sell, assign, transfer, and convey to Active Power, Inc. any and all legal and equitable right, title, and interest they have or may have, collectively or individually, in (1) the “Superconducting Kinetic Energy
Storage Device” (as described in a November 24, 1990 Letter of Intent attached as Exhibit C), (2) “the Passive Magnetic Bearing” (as described in the document attached as Exhibit D), and (3) all Active Power technology (as described
in Active Power’s patents, patent applications, public filings, and website), including but not limited to the claims to such technologies asserted in the Wayne County Action. Said assignments, transfers, and conveyances include all
improvements to and derivations of said Superconducting Kinetic Energy Storage Device, Passive Magnetic Bearing and other said technology. Plaintiffs expressly disclaim any interest, right, or title in or to any technology owned by Active Power as
of the date of this Agreement, including but not limited to all ownership and income right in or from the Passive Magnetic Bearing, Superconducting Kinetic Energy Storage Device and the other said technology. 
  
 10. It is further agreed and acknowledged that Fundamental Research Company
is hereby terminated and dissolved pursuant to Section 6.1(a) of the JVA (which JVA is attached as Exhibit E). It is further agreed and acknowledged that Fundamental Research Company has no assets other than any assets that may be covered by the
transfers referenced in paragraph 9 herein and that, therefore, the liquidation procedure described in Section 12 of the JVA is unnecessary. 
  
 11. Each party hereto understands and agrees, in compliance with any statute or ordinance which requires a specific release of unknown claims or
benefits, that this Agreement includes a release by each party hereto of unknown claims, and that each party hereto is expressly waiving and relinquishing any and all claims, rights or benefits that such party may have that are unknown to such party
at the time of the execution of this Agreement. Further, each party understands and agrees that if, hereafter, such party discovers facts different from or in addition to those which such party now knows or believes to be true, that the waivers,
releases and covenants not to sue contained in this Agreement shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such fact. 

 12. Each party hereby represents and warrants to each other party that it has not assigned, pledged, or
otherwise in any manner whatsoever sold or transferred, either by instrument in writing or otherwise, any of such party’s right, title, interest, demand, cause of action, or claim, or consideration to be transferred, that is the subject of this
Agreement; that it is the sole and lawful owner of all rights, title and interest in and to all released matters, claims and demands arising out of or in any way related to the matters which are subject of this Agreement, or consideration to be
transferred pursuant hereto; and that no other person or entity of any kind has or had any interest in the matters covered by consideration to be transferred pursuant to this Agreement. Each party further warrants that it has not entered into any
agreement or other arrangement that would limit the effectiveness of the releases and other agreements exchanged hereunder. Active Power notes that Comerica Bank has an interest in the Oakland County Judgment. 
  
 13. This Agreement is freely and voluntarily given by Plaintiffs and Active
Power without any duress or coercion, and after each of the undersigned has consulted with independent counsel of their own choosing, and each of the undersigned has carefully and completely read all of the terms and provisions of this Agreement.
Each party realizes that the settlement of the matters covered hereby is final and conclusive, and it is each party’s desire that such settlement be final and conclusive. 
  
 14. The terms of this Agreement shall be confidential. No party to this Agreement shall communicate the terms thereof to any
other person or entity, except in the following circumstances: 
  

	 	a)	pursuant to a lawful court order, including but not limited to state or federal civil or criminal subpoenas or other valid process; 

  

	 	b)	any disclosure required by a state or federal regulatory agency, committee, or other similar authority or any statute, rule, or regulation thereof. 

  
 Any party to this Agreement who receives process requiring disclosure as described in the
foregoing exceptions shall, within 48 hours of the receipt thereof, send a copy of the process by facsimile to (if the sending party is one of Plaintiffs) General Counsel at Active Power, Inc. in Austin, Texas at (512) 836-4511 and to Richard
Zuckerman, Esq. at (313) 465-7619, or (if the sending party is Active Power) to R. Christopher Cataldo, Esq. at (313) 961-8358. The party receiving process shall have no responsibility to take any other action in response to such process, including
challenging its lawfulness, validity, or enforceability. 
  
 15.
Each individual party to this Agreement warrants that he has the authority to enter into and sign this Agreement. Each corporate party to this Agreement warrants that it has been duly authorized to enter into and sign this Agreement by its Board of
Directors and Shareholders if that corporate party is a non-publicly traded corporation. If that corporate party is a publicly traded corporation it warrants that its signing officer or representative has been duly authorized to enter into and sign
this Agreement by its Board of Directors. 
  
 16. The only parties
having or claiming an interest in Fundamental Research Company, its technology, its assets, or any agreement to which Fundamental Research Company 

 is a party (including the Letter of Intent attached as Exhibit C) before the execution of this Agreement are Magnex
Corporation, White Enigma LLC, and Pinkerton Generator, Inc. The only owners and officers of Magnex Corporation are Paul E. Hodges and Joseph Hodges, both of whom specifically warrant that they are authorized to sign this Agreement on behalf of
Magnex Corporation. The only owner and officer of White Enigma LLC is Randy Bergeron, who specifically warrants that he is authorized to sign this Agreement on behalf of White Enigma LLC. 
  
 17. Neither the execution of this Agreement nor any statement made herein constitutes an admission of wrongdoing or
liability by any party, such wrongdoing or liability being expressly denied. Rather, this Agreement is a mutual settlement and compromise of disputed claims so that the parties may avoid the expense, uncertainties and hazards of further litigation.

  
 18. Each party hereto agrees to take or cause to be taken
whatever additional actions (if any) and execute whatever additional documents (if any) that may be necessary or advisable from time to time in order to carry out or effect one or more of the obligations provided for in this Agreement. 

 
 19. Each party understand and agrees that it shall be solely responsible
for the reporting and payment (if any be required) of any federal, state and local taxes that are due, or may be due, for any payments and other consideration received by such party under or in connection with this Agreement; and agrees to indemnify
and hold each other party harmless from any and all taxes, penalties and/or other assessments that any such party may be alleged to be, or may become, obligated to pay on account of such other party’s failure to comply with the preceding
statement. 
  
 20. This Agreement may be executed in any number of
counterparts, each of which shall constitute a duplicate hereof. 
  
 21. No waiver or modification of this Agreement or any covenant, condition, or limitation herein shall be valid and no evidence or waiver or modifications shall be offered or received in evidence at any proceeding or litigation at law or in
equity between or among the parties hereto arising out of or affecting this Agreement or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing duly signed by the party or parties to be charged or to
which such waiver or modification relates. This Agreement cannot be amended, modified or altered other than by signed, written agreement by each of the parties hereto to which such amendment, modification or alteration relates. 
  
 22. This Agreement was negotiated and drafted jointly by the parties and
their counsel, and shall not be construed against any party as the drafter thereof. 
  
 23. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan without regard to its choice of law rules. 
  
 24. Notwithstanding anything to the contrary in this Agreement, none of the money paid by any of Active Power or other
defendants to any of Plaintiffs pursuant to this Agreement shall inure to the benefit of Fundamental Research Company. 

 25. Each party agrees that if any provision or portion of any provision of this Agreement is held to be
invalid or unenforceable or to be contrary to public policy or any law, for any reason, all remaining provisions are severable and should remain in force to the greatest possible degree. 
  
 26. This Agreement constitutes the entire and complete agreement between the parties and there are no other side, prior or
collateral agreements, oral or written, or representations or inducements other than as expressly set forth in this Agreement. This Agreement supersedes any prior agreements, if any, made between or among the parties relative to the subject matter
hereof. 
  
 27. This Agreement is binding on the respective
representatives, heirs, executors, administrators, successors and assigns of each party hereto who is an individual and the respective successors and assigns of each party hereto that is not an individual. 
  

													
	 Magnex Corporation
	  	 White Enigma, LLC

		
	 /s/ Joseph Hodges

	  	 /s/ Randy M. Bergeron

	 By:
	 	 Joseph Hodges
	  	 By:
	  	 Randy M. Bergeron

	 	 	 Its:
	 	 	  	 President
	  	 	  	 Its:
	  	 President

					
	 By:
	 	 Paul E. Hodges
	  	 	  	 	  	 
	 	 	 Its:
	 	 	  	 Manager
	  	 	  	 	  	 
				
	 	 	 Oct. 15, 2004
	  	 	  	 Oct. 15, 2004

	 	 	 Date
	  	 	  	 Date

		
	 Paul E. Hodges
	  	 Randy M. Bergeron

		
	 /s/ Paul E. Hodges

	  	 /s/ Randy M. Bergeron

				
	 	 	 Oct. 15, 2004
	  	 	  	 Oct. 15, 2004

	 	 	 Date
	  	 	  	 Date

		
	 Fundamental Research Company
	  	 Active Power, Inc.

		
	 /s/ R. Christopher Cataldo

	  	 /s/ Michael Chibib

	 By:
	 	 R. Christopher Cataldo
	  	 By:
	  	 Michael Chibib

	 	 	 Its:
	 	 	  	 Attorney
	  	 	  	 Its:
	  	 General Counsel

				
	 	 	 Oct. 15, 2004
	  	 	  	 Oct. 15, 2004

	 	 	 Date
	  	 	  	 Date

 Exhibit A 
  
 STATE OF MICHIGAN 
 IN THE CIRCUIT COURT FOR THE COUNTY OF WAYNE 
  

					
	Magnex Corporation, a Delaware corporation, White Enigma, LLC, a Michigan limited liability company, Paul E. Hodges, Randy M. Bergeron and Fundamental Research Company, a Michigan
Partnership,	  	)
)
)
)
)	  	 
	Plaintiffs,	  	)
)	  	 
	v.	  	)	  	 
	 	  	)	  	Case No. 02-210028 CZ
	 Joseph Pinkerton, Active Power, Inc.,
 a Delaware
corporation, Magnetic Bearing
 Technologies, Inc., Pinkerton Generator, Inc.,
 a Michigan corporation and Caterpillar Inc.
	  	)
)
)
)	  	Hon. Robert J. Colombo, Jr.
	 	  	)	  	 
	Defendants.	  	)	  	 

  
 STIPULATION AND
ORDER OF DISMISSAL WITH PREJUDICE 
  
 Pursuant to a
stipulation of the parties, the above-entitled action is hereby dismissed with prejudice, each party to bear his or its own costs and fees in connection with the action. 
  

			
	 IT IS SO ORDERED.
	  	 
	 	  	 __________________________________________

	 	  	 HONORABLE ROBERT J. COLOMBO, JR.

	 	  	 Wayne County Circuit Court Judge

	 Dated:                    
	  	 

  
 Approved as to form: 
  

							
	
 JAFFE, RAITT,
HEUER & WEISS, P.C.
	  	
 HONIGMAN
MILLER SCHWARTZ AND COHN LLP

	 Attorneys Plaintiffs
	  	 Attorneys for Defendants

	 By:
	  	 R. Christopher Cataldo (P39353)
	  	 By:
	  	 Richard E. Zuckerman (P26521)

	 One Woodward Avenue, Suite 2400
	  	 	  	 Jennifer Zbytowski Belveal (P54740)

	 Detroit, Michigan 48226
	  	 	  	 Brian D. Wassom (P60381)

	 (313) 961-8380
	  	 2290 First National Building

	 	  	 Detroit, Michigan 48226-3583

	 	  	 (313) 465-7000

  
 DET 1413068

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