Document:

EXHIBIT 10.56

             AGREEMENT BETWEEN EDUCATIONAL VIDEO CONFERENCING, INC.
                    AND CALIFORNIA STATE BAPTIST ASSOCIATION
                FOR THE OFFERING OF INTERACTIVE TELEVIDEO COURSES

                               W I T N E S S E T H

     AGREEMENT made this 13 day of March 2000,  between the,  "CALIFORNIA  STATE
BAPTIST  ASSOCIATION"  (hereinafter  referred to as  "CALIFORNIA  STATE  BAPTIST
ASSOCIATION", located 825 Newhall Avenue, San Francisco CA 94124 and Educational
Video  Conferencing,  Inc.,  (hereinafter  referred to as "EVC"),  with  offices
located at 35 East Grassy Sprain Road, Yonkers, New York 10710.

        WHEREAS,   CALIFORNIA  STATE  BAPTIST   ASSOCIATION  is  an  institution
interested in providing opportunities to higher learning for its community, and,

        WHEREAS,  EVC is a  domestic  corporation  engaged  in the  business  of
Interactive Televideo, and other forms of distance learning,

        WHEREAS, CALIFORNIA STATE BAPTIST ASSOCIATION,  its congregations listed
below and EVC wish to enter into a mutually  beneficial  agreement  whereby  EVC
will  provide  access  to EVC  transmitted  courses  from  accredited  colleges,
universities and training organizations to each community,

        NOW,  THEREFORE in consideration of $10.00 in good funds, as well as the
mutual covenants contained herein, the parties hereby agree as follows:

     1. EVC shall have the right,  for the  duration of this  agreement  and any
renewal hereof to transmit all accredited college courses,  non-degree  courses,
and other programs  offered by accredited  colleges,  universities  and learning
organizations   through   EVC  via   Interactive   Televideo/Distance   Learning
(hereinafter  referred to as "ITV/DL"),  transmitted to CALIFORNIA STATE BAPTIST
ASSOCIATION and its congregations, commencing with the Summer Semester, 2000.

     2. EVC will provide all  telecommunications  equipment necessary to provide
access  for  EVC  courses  to  ITV/DL  students  at  CALIFORNIA   STATE  BAPTIST
ASSOCIATION site(s).

     3. Rooms and Equipment

        a.) CALIFORNIA  STATE BAPTIST  ASSOCIATION will provide a minimum of one
(1) room in no fewer than ten (10) and no more than twenty (20)  mutually agreed
upon affiliated churches starting with the Summer,  2000 academic semester.  EVC
and CALIFORNIA STATE BAPTIST  ASSOCIATION will thereafter  mutually agree on the
number of additional  member  congregations  this contract will cover for future
semesters for the remaining term of this agreement.

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        b.)  Each  classroom  shall  be  capable  of  accommodating   the  video
conferencing  equipment and necessary  accessories  (hereinafter  referred to as
"equipment"),  along with  accomadating  the students  enrolled in EVC sponsored
classes.  Said room does not have to be dedicated space, and may be used by each
CALIFORNIA  STATE  BAPTIST  ASSOCIATION  congregation  for its own use  when EVC
courses are not  running so long as said use does not  infringe on the rights of
EVC  hereunder,  or tend to impact  negatively  on the  success  of the  program
contemplated by this agreement.

     4. Advertising/Publicity

        a.) CALIFORNIA STATE BAPTIST  ASSOCIATION  shall use its best efforts in
marketing,  advertising,  and  promoting  EVC's  offering  of  access  to  video
conferenced  courses at  CALIFORNIA  STATE BAPTIST  ASSOCIATION  site(s) in live
church service announcements, advertisements, promotions, marketing plans, etc.,
which are directed at community target markets.

     5. EVC will be  responsible  for  installing  and  maintaining  appropriate
telecommunication lines for its video conferencing equipment at CALIFORNIA STATE
BAPTIST ASSOCIATION site(s). Said video conferencing equipment will be installed
and paid for by EVC.  All  such  video  conferencing  equipment  and  associated
accessories  shall  remain  the  exclusive  property  of EVC.  EVC is  under  no
obligation to continue to maintain either  telecommunication  lines or equipment
at any  CALIFORNIA  STATE  BAPTIST  ASSOCIATION  site(s) if, during any academic
semester,  the  total  enrollment  at EVC  sponsored  courses  falls  below  the
thresholds  cited herein,  as set forth in paragraph 11 of this  agreement.  EVC
may,  at its  sole  discretion,  remove  part or all of its  equipment  which is
located at CALIFORNIA STATE BAPTIST  ASSOCIATION  site(s) should enrollment fall
below the thresholds cited herein.

     6. All equipment supplied by EVC is the sole and exclusive property of EVC,
including but not limited to any and all patents,  copyrights and trademarks, if
any, associated therewith.

     7. a.) EVC is responsible  for the necessary  maintenance,  repair,  and/or
replacement  of  televideo   equipment  supplied  to  CALIFORNIA  STATE  BAPTIST
ASSOCIATION site(s) for the transmission of ITV/DL courses by EVC.

        b.) EVC will provide reasonably prompt service for repair or replacement
of defective interactive televideo equipment and software as necessary.

     8. EVC agrees to make every reasonable  effort to maintain its equipment in
good working order. However, EVC is not responsible for service or repair delays
or  interruption  of service  caused by strikes,  labor  actions,  power outages
(other than those limited to site locations alone), acts of God or other matters
beyond EVC's control.

     9. CALIFORNIA STATE BAPTIST ASSOCIATION hereby acknowledges that the ITV/DL
programs are targeted  toward the  non-traditional  student market and therefore
agrees to offer access sites to ITV/DL courses at dates and times appropriate to
target markets, generally between the hours of 5:00 p.m. and 10:00 p.m., Mondays
through Fridays and between 8:00 a.m. and 5:00 p.m. on Saturdays.

     10. Each CALIFORNIA STATE BAPTIST  ASSOCIATION  congregation must provide a
minimum of one (1)  classroom at each church  suitable  for video  conferencing.
Each CALIFORNIA STATE BAPTIST ASSOCIATION congregation is responsible for all of
its own room costs,  including  lighting,  appropriate student desks (or tables)
and chairs,  electricity,  and security  associated  with the offering of ITV/DL
courses  through EVC at  CALIFORNIA  STATE  BAPTIST  ASSOCIATION  site(s).  Each
CALIFORNIA STATE BAPTIST  ASSOCIATION  congregation will use its best efforts to
make additional classrooms available should enrollment demands require such.

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     11. CALIFORNIA STATE BAPTIST  ASSOCIATION agrees to designate one person as
the  single  point of  contact  for  CALIFORNIA  STATE  BAPTIST  ASSOCIATION  in
connection with this contract.  It further agrees that each church involved as a
classroom site shall designate one person as the primary point of contact.

     12. Enrollment Requirements and Rental Fees

        a.) EVC  and  CALIFORNIA  STATE  BAPTIST  ASSOCIATION  agree  that  this
agreement  requires that a minimum of eighty (80) student  course  registrations
(SCRs) to be enrolled at  CALIFORNIA  STATE  BAPTIST  ASSOCIATION  site(s)  each
semester at least one (1) month prior to the start of each  semester  before EVC
will provide video conferencing equipment.

        b.) Examples of SCRs are:

            (1) twenty (20) students enrolled in four (4) courses each; or,

            (2) eighty (80) students enrolled in one course each; or,

            (3) any  combination  thereof of  students  enrolled  in EVC offered
                courses, in which a minimum total of eighty (80) SCRs is reached
                in one or more courses.

        c.) Subject to the minimum enrollments specified in (a) above, EVC shall
pay to appropriate congregations of the CALIFORNIA STATE BAPTIST ASSOCIATION the
sum of $1,000 (one  thousand  dollars) per semester for each  classroom in which
the minimum number of (80) SCRs are registered  with all students  attending EVC
sponsored  courses.  Additionally,  EVC will compensate one site  coordinator at
each church the sum of $500.00  (five  hundred  dollars) per year to help secure
registrations and administer the Telecommute to College Program.

     13. Term of Agreement

        a.) The basic term of this agreement shall be FIVE (5) YEARS.

        b.) The parties  hereby  acknowledge  the necessity for allowing  ITV/DL
students  continuity and ongoing access to CALIFORNIA STATE BAPTIST  ASSOCIATION
site(s) for EVC offered courses and programs.

        c.) In light of the foregoing, the parties agree that commencing July 1,
2000 and every  July 1st  thereafter,  this  agreement  shall  automatically  be
extended for an  additional  period of ONE (1) YEAR,  subject to the  conditions
hereinafter contained.

        d.) In the event that either  party should  desire not to  automatically
extend this  agreement,  then and in that event,  such party shall so notify the
other in writing,  by Certified Mail,  Return Receipt  Requested,  no later than
April 1 of any given year, after which the agreement will not be extended for an
additional  ONE (1) YEAR,  but will have only the Four (4) YEARS of the existing
term remaining.

     14.  EVC  agrees  to use its  best  efforts  to  negotiate  and  execute  a
reasonable  agreement with Concordia  College for the offering of  undergraduate
and graduate courses through EVC via ITV/DL.

     15. The foregoing constitutes the entire agreement between the parties, and
any other  agreements  or  representations,  whether  verbal or written,  if not
contained herein, are void, of no effect, and are not binding upon the parties.

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<PAGE>

     16.  No valid  modification,  amendment,  or  deletion  may be made to this
agreement  except in writing and  executed by the parties in  substantially  the
same manner as this agreement.

     17. Any and all notices  required  hereunder  shall be by  Certified  Mail,
Return Receipt Requested, to each party's last known address and shall be deemed
given at the time of mailing.

     18. If any portion of this agreement  shall be found to be void,  voidable,
or  unenforceable,  it shall not effect the  validity  of the  remainder  of the
agreement.

     19. EVC may, at its sole  option,  remove its  equipment  terminate  if any
church site registers  less than the stated  minimum  requirement of eighty (80)
SCRs every academic semester.

     20. The parties agree that any disputes or disagreements  arising hereunder
or in connection  herewith  shall be settled by binding  arbitration  before the
American  Arbitration  Association at their offices located in White Plains, New
York,  and that any judgment  awarded  thereunder may be entered in any court of
appropriate jurisdiction, and will have full force and effect therein.

     21. This agreement shall be construed in accordance  with, and governed by,
the laws of the State of New York.

     In witness  whereof the parties have  hereunto set their hands and seal the
date first appearing above.

EDUCATIONAL VIDEO CONFERENCING, INC.

By: /s/ Dr. John J. Mc Grath
    -------------------------
        Dr. John J. McGrath
        President

CALIFORNIA STATE BAPTIST ASSOCIATION

By: /s/ Rubin Tate
    ------------------------
        Rubin Tate

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<PAGE>

   Congregation          Address          Authorized Signature           Title

1. _____________________________________________________________________________

2. _____________________________________________________________________________

3.______________________________________________________________________________

   Congregation          Address          Authorized Signature           Title

4.______________________________________________________________________________

5.______________________________________________________________________________

6.______________________________________________________________________________

7.______________________________________________________________________________

8.______________________________________________________________________________

9.______________________________________________________________________________

10._____________________________________________________________________________

11._____________________________________________________________________________

12._____________________________________________________________________________

13._____________________________________________________________________________

14._____________________________________________________________________________

15._____________________________________________________________________________

16._____________________________________________________________________________

17._____________________________________________________________________________

18._____________________________________________________________________________

19._____________________________________________________________________________

20._____________________________________________________________________________

                                       5<PAGE>

                                                                     EXHIBIT 4.2

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER
SUCH ACT AND APPLICABLE LAWS, OR IN A TRANSACTION WHICH, IN THE OPINION OF
COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO
THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND
THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER.

THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO
CERTAIN RESTRICTIONS CONTAINED IN AN INVESTORS' RIGHTS AGREEMENT, INCLUDING
MARKET STAND-OFF PROVISIONS AND A SHAREHOLDERS AGREEMENT, BOTH AS AMENDED,
COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

No. - WC-001 -                                               November 23, 1999

                              ACTIVE POWER, INC.

                         COMMON STOCK PURCHASE WARRANT

          This certifies that, for value received, ECT MERCHANT INVESTMENTS
CORP. ("ECT"), or registered assigns (the "Holder"), during the term of this
        ---                                ------
Warrant as set forth in Section 1, is entitled to purchase from ACTIVE POWER,
INC., a Texas corporation (the "Company"), for value received, up to SEVENTY-
                                -------
FIVE THOUSAND (75,000) Warrant Shares (as defined below), upon surrender hereof
at the principal office of the Company referred to below, with a duly executed
Notice of Exercise in the form attached, and simultaneous payment therefor in
lawful money of the United States, at the Exercise Price (as defined in Section
2 below). The number, character and Exercise Price of such Warrant Shares are
subject to adjustment as provided herein. The term "Warrant" as used herein
                                                    -------
shall include this Warrant, and any warrants delivered in substitution or
exchange therefor as provided herein.

          "Warrant  Shares" shall mean the Company's Common Stock, par value
           ---------------
$0.01 per share ("Common Stock").
                  ------------

          1. Term of Warrant. Subject to the terms and conditions set forth
             ---------------
herein, this Warrant shall be exercisable, in whole or in part, at any time or
from time to time before 5:00 p.m. Austin, Texas time, on the date (the
"Expiration Date") which is seven years after the date hereof. After the
 ---------------
Expiration Date this Warrant shall be void.

<PAGE>

          2. Exercise Price. The purchase price per share for the Common Stock
             --------------
purchased under this Warrant shall be TWENTY-TWO AND 68/100 DOLLARS ($22.68)
(the "Exercise Price"), subject to adjustment as provided under Section 12
      --------------
hereof.

          3. Exercise of Warrant.
             -------------------

               (a)  Method of Exercise. The purchase rights represented by this
                    ------------------
Warrant are exercisable by the Holder by delivery of a Notice of Exercise, the
form of which is attached hereto as Exhibit A, duly completed and executed on
                                    ---------
behalf of the Holder, at the office of the Company, and upon payment therewith
of the aggregate Exercise Price with respect to such Warrant Shares in cash or
by check payable to the Company.

               (b)  Other Matters. This Warrant shall be deemed to have been
                    -------------
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Warrant Shares issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issued upon such exercise. In the event that this Warrant
is exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the remaining number of shares for which
this Warrant may then be exercised.

          4. No Fractional Shares or Scrip. No fractional shares or scrip
             -----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.

          5. Replacement of Warrant. On receipt of evidence reasonably
             ----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.

          6. No Rights as Stockholders; Notices to Holders. Nothing contained in
             ---------------------------------------------
this Warrant or in any of the Warrants shall be construed as conferring upon the
Holders or their transferees the right to vote or to receive dividends or to
consent or to receive notice as shareholders in respect of any meeting of
shareholders for the election of directors of the Company or any other matter,
or any rights whatsoever as shareholders of the Company.

          7. Transfer; Issuance of Stock Certificates; Restrictive Legends.
             -------------------------------------------------------------

               (a) Transfer. Subject to compliance with the restrictions on
                   --------
transfer set forth in this Section 7, each transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant to the
Company, together with a written assignment of this Warrant in

                                       2
<PAGE>

the form of Exhibit B hereto duly executed by the Holder or its agent or
            ---------
attorney. Upon such surrender and delivery, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment. A Warrant, if
properly assigned in compliance with the provisions hereof, may be exercised by
the new holder for the purchase of Warrant Shares without having a new Warrant
issued. Prior to presentment for registration or transfer thereof, the Company
may deem and treat the registered holder of this Warrant as the absolute owner
hereof (notwithstanding any notations of ownership or writing thereon made by
anyone other than a duly authorized officer of the Company) for all purposes and
shall not be affected by any notice to the contrary. All Warrants issued upon
assignment of Warrants shall be the valid obligations of the Company, evidencing
the same rights and entitled to the same benefits as the Warrants surrendered
upon such registration of transfer or exchange. Notwithstanding the foregoing,
the Holder hereof may not transfer this Warrant to any subsequent transferees
(other than to transferees who are affiliates of the Holder) unless the Holder
transfers all shares of Series E Preferred Stock or Common Stock or rights to
acquire shares of Common Stock then held by the Holder (including those held by
affiliates of the Holder).

               (b) Stock Certificates. Certificates for the Warrant Shares shall
                   ------------------
be delivered to the Holder within a reasonable time after the rights represented
by this Warrant shall have been exercised pursuant to Section 1, and a new
Warrant representing the shares of Common Stock, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
Holder within such time. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder
including, without limitation, any documentary, stamp or similar tax that may be
payable in respect thereof; provided, however, that the Company shall not be
                            --------  --------
required to pay any income tax to which the holder hereof may be subject in
connection with the issuance of this Warrant or the Warrant Shares; and provided
                                                                    ------------
further, that if Warrant Shares are to be delivered in a name other than the
-------
name of the Holder representing any Warrant being exercised, then no such
delivery shall be made unless the person requiring the same has paid to the
Company the amount of transfer taxes or charges incident thereto, if any.

               (c) Restrictive Legends.
                   -------------------

                    (i)    Except as otherwise provided in this Section 7, each
certificate for Warrant Shares initially issued upon the exercise of this
Warrant, and each certificate for Warrant Shares issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL
BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY
THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE

                                       3
<PAGE>

REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS."

                    (ii)   Except as otherwise provided in this Section 7, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:

"NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER
SUCH ACT AND APPLICABLE LAWS, OR IN A TRANSACTION WHICH, IN THE OPINION OF
COUNSEL TO THE HOLDERS OF THIS WARRANT (WHICH COUNSEL SHALL BE SATISFACTORY TO
THE COMPANY), QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND
THE RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER."

                    (iii)  Notwithstanding the foregoing, the legend
requirements of this Section 7 shall terminate as to any particular Warrant or
Warrant Share when the Company shall have received from the Holder an opinion of
counsel in form and substance reasonably acceptable to the Company that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by this Section 7 shall terminate, the Holder
hereof or of the Warrant Shares, as the case may be, shall be entitled to
receive from the Company without cost to Holder a new Warrant or certificate for
Warrant Shares of like tenor, as the case may be, without such restrictive
legend.

          (d)  Compliance with Securities Laws.
               --------------------------------

               (i)   The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon exercise
hereof are being acquired solely for the Holder's own account for investment,
and that the Holder will not offer, sell or otherwise dispose of this Warrant or
any Warrant Shares to be issued upon exercise hereof or except under
circumstances that will not result in a violation of the Securities Act or any
state securities laws. Upon exercise of this Warrant, the Holder shall, if
requested by the Company, confirm in writing, by executing the form attached as
Schedule 1 to Exhibit A hereto, that the Warrant Shares so purchased are being
              ---------
acquired for investment, and not with a view toward distribution or resale in
violation of applicable securities laws.

               (ii)  In connection with the issuance of this Warrant, the Holder
specifically represents to the Company by acceptance of this Warrant as follows:

                    (A) The Holder has had an opportunity to discuss the
Company's business with the management of the Company, is aware of the Company's
business affairs and financial condition, has had access to the Company's books
and records, and has been afforded the opportunity to ask questions of and
receive answers from officers of the Company. The Holder has substantial
experience in evaluating the merits and risks of its investment in the

                                       4
<PAGE>

Company. The Purchaser is an "accredited investor" within the meaning of Rule
501 of Regulation D of the Securities Act as presently in effect.

                    (B) The Holder understands that this Warrant has not been,
and upon exercise hereof the Warrant Shares will not be, registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein.

                    (C) The Holder further understands that this Warrant, and
upon exercise the Warrant Shares, must be held indefinitely unless subsequently
registered under the Securities Act and any applicable state securities laws, or
unless exemptions from registration are otherwise available.

          8. Reservation of Stock. The Company covenants that during the term
             --------------------
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of Warrant Shares to provide for the
issuance of Common Stock upon the exercise of this Warrant and, from time to
time, will take all steps necessary to amend its corporate charter, if
necessary, to provide sufficient reserves of Warrant Shares issuable upon
exercise of the Warrant. The Company further covenants that all Warrant Shares
that may be issued upon the exercise of this Warrant will be free from all
taxes, liens and charges except for restrictions on transfer and any taxes,
liens and charges imposed on the Holder unrelated to the Company's issuance of
Warrant Shares upon exercise of the Warrant.

          9. Representations and Warranties. The Company represents and warrants
             ------------------------------
to the Holder as follows:

               (a) Authorization. This Warrant has been duly authorized and
                  --------------
executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and the rules of
law or principles at equity governing specific performance, injunctive and other
equitable remedies;

               (b) Reservation; Issuance. The Warrant Shares have been duly
                   ---------------------
authorized and reserved for issuance by the Company and, when issued in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable;

               (c) No Conflicts. The execution and delivery of this Warrant are
                   ------------
not, and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with the Company's
charter or bylaws; do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company; and do not and will not
conflict with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby,
and

                                       5
<PAGE>

the filing of any registration statements required to be filed by the Company
pursuant to any registration rights granted to Holder by the Company.

               (d) No Litigation. There are no actions, suits, audits,
                   -------------
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.

          10. Notices. All notices, requests and other communications with
              -------
respect to the Warrants shall be in writing. Communications may be made by
telecopy or similar writing. Each communication shall be given to the Holder at
the address in the warrant register and the Company at its offices in Austin,
Texas, or at any other address as the party may specify for this purpose by
notice to the other party. Each communication shall be effective (1) if given by
telecopy, when the telecopy is transmitted to the proper address and the receipt
of the transmission is confirmed, (2) if given by mail, 72 hours after the
communication is deposited in the mails properly addressed with first class
postage prepaid or (3) if given by any other means, when delivered to the proper
address and a written acknowledgement of delivery is received.

          11. Amendments. Any term of this Warrant may be amended with the
              ----------
written consent of the Company and the Holder of this Warrant.

          12. Adjustments. The Exercise Price and the number of shares
              -----------
purchasable hereunder are subject to adjustment from time to time as follows:

               (a) Adjustment for Dividends in Other Stock, Property, etc.;
                   -------------------------------------------------------
Reclassification, etc. In case at any time while this Warrant is outstanding and
---------------------
unexpired, the holders of Warrant Shares shall have received, or (on or after
the record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor, (i) other or
additional stock or other securities or property (other than cash) by way of
dividend; or (ii) other or additional stock or other securities or property by
way of stock-split, spin-off, split-up, reclassification, recapitalization,
combination of shares or similar corporate rearrangement; then and in each such
case the Holder, upon the exercise hereof, shall be entitled to receive the
amount of stock and other securities and property which such Holder would hold
on the date of such exercise if on the original issue date he had been the
holder of record of the number of Warrant Shares called for on the face of this
Warrant and had thereafter, during the period from the original issue date to
and including the date of such exercise, retained such shares and all such other
or additional stock and other securities and properties receivable by him as
aforesaid during such period, giving effect to all adjustments called for during
such period by this Section 12.

               (b) Merger, Consolidation or Disposition of Assets. In the event
                   ----------------------------------------------
of any capital reorganization or any reclassification (other than a change in
par value) of the capital stock of the Company, or of any exchange or conversion
of the Warrant Shares for or into securities of another corporation, or in the
event of the consolidation or merger of the Company with or into any other
person (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock) or
in case of any

                                       6
<PAGE>

sale or conveyance of all or substantially all of the assets of the Company
including intellectual property rights which, in the aggregate constitute
substantially all of the Company's material assets, the person formed by such
consolidation or resulting from such capital reorganization, reclassification or
merger or which acquires such assets, as the case may be, shall make provision
such that this Warrant shall thereafter be exercisable for the kind and amount
of shares of stock, other securities, cash and other property receivable upon
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance, as the case may be, by a holder of the shares of
Common Stock equal to the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to the effective date of such capital
reorganization, reclassification of capital stock, consolidation, merger, sale
or conveyance, assuming (i) such holder of Common Stock of the Company is not a
person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made as the
case may be (each, a "constituent entity"), or an affiliate of a constituent
entity, and (ii) such person failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance and, in any case appropriate adjustment shall be made
in the application of the provisions herein set forth with respect to rights and
interests thereafter of the Holder, to the end that the provisions set forth
herein (including the specified changes in and other adjustments to the Exercise
Price and the number of Warrant Shares issuable upon exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relating to any
shares of stock or other securities or other property thereafter deliverable
upon exercise of this Warrant.

               (c) Time of Adjustments. Each adjustment required by this Section
                   -------------------
12 shall be effective as and when the event requiring such adjustment occurs.

               (d) Notice of Adjustment. Whenever the Exercise Price and the
                   --------------------
number of Warrant Shares purchasable upon the exercise of each Warrant is
adjusted as herein provided, the Company shall promptly provide each Holder a
certificate setting forth the Exercise Price and the number of Warrant Shares
purchasable upon the exercise of each Warrant after such adjustment, setting
forth a brief statement of the facts requiring such adjustments and setting
forth the computation by which such adjustments were made. Such certificate
shall be conclusive evidence of the correctness of such adjustments.

               (e) No Adjustment for Cash Dividends. Except as provided in this
                   --------------------------------
Section 12, no adjustment in respect of any cash dividends shall be made during
the term of a Warrant or upon the exercise of a Warrant.

               (f) Statement on Warrants. Irrespective of any adjustments in the
                   ---------------------
number or kind of shares purchasable upon the exercise of the Warrant, the
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the initial Warrant.

               (g) No Dilution or Impairment. The Company will not, by amendment
                   -------------------------
to its charter or through any reorganization, sale of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the

                                       7
<PAGE>

carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of the
Warrant. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of stock receivable upon the exercise
of the Warrant above the amount payable therefor upon such exercise; and (ii)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock upon the full exercise of the Warrant.

               (h) Notices of Record Date, etc.  In the event of:
                   ---------------------------

                   (i)     any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right;

                    (ii)   any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
conveyance of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation; or

                    (iii)  any voluntary or involuntary dissolution, liquidation
or winding up of the Company;

then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (A) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right; (B) the date on which any
such reorganization, reclassification, conveyance, consolidation, merger,
dissolution, liquidation, or winding up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Warrant Shares (or other
securities) shall be entitled to exchange their Warrant Shares (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, conveyance, consolidation,
merger, dissolution, liquidation, or winding up; and (C) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least 15 days prior to
the date therein specified.

          13.  Miscellaneous.
               -------------

               (a) Successors and Assigns. This Warrant and the rights evidenced
                   ----------------------
hereby shall inure to the benefit of and be binding upon the successors of the
Company and the Holder and their respective permitted assigns. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant, and shall be enforceable by any such Holder.

               (b) Headings. The headings of the Sections of this Warrant are
                   --------
for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.

                                       8
<PAGE>

               (c) Choice of Law. This Warrant and the performance or breach
                   -------------
thereof shall be governed by and interpreted as to substantive matters in
accordance with the applicable laws of the State of Texas (excluding its choice
of law rules), except that upon the Company's reincorporation as a Delaware
corporation, if effected, the Warrant shall be governed under Delaware law.

                                    * * * *

                                       9
<PAGE>

                  IN WITNESS WHEREOF, the undersigned has caused this Warrant to
be executed by its officers thereunto duly authorized.

Dated: November 23, 1999             ACTIVE POWER, INC.

                                     By: /s/
                                        ------------------------------------
                                     Name:__________________________________
                                     Title:_________________________________

                                     Address:   11525 Stonehollow Drive,
                                                Suite 135 Austin, Texas 78758
<PAGE>

                                    EXHIBIT A

                               NOTICE OF EXERCISE
                               ------------------

          (1) The undersigned hereby irrevocably elects to purchase ___________
     shares of Common Stock of Active Power, Inc., pursuant to the terms of the
     attached Warrant, and tenders herewith payment in full of the aggregate
     purchase price of $_________ for such shares.

          (2) In exercising this Warrant, the undersigned hereby confirms and
     acknowledges that the shares of Common Stock are being acquired for
     investment and not with a view to, or for resale in connection with, the
     distribution thereof and that the undersigned has no present intention of
     distributing or reselling such shares. In support thereof, the undersigned
     has executed an Investment Representation Statement attached hereto as
     Schedule 1.

          (3) Please issue a certificate or certificates representing said
     shares of Common Stock in the name of the undersigned or in such other name
     or names as are specified below:

                                          _______________________________
                                          (Name)

                                          _______________________________
                                          _______________________________
                                          (address)

          (4) Please issue a new Warrant for the unexercised portion of the
     attached Warrant in the name of the undersigned.

ECT MERCHANT INVESTMENTS CORP.

By:__________________________
Name:________________________
Title:_______________________
Date:________________________
<PAGE>

                                   Schedule 1

                       INVESTMENT REPRESENTATION STATEMENT

To:           Active Power, Inc.

Security:     Common Stock issuable upon exercise of Common Stock Purchase
              Warrant dated November 23, 1999.

          In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
                                     ---------
follows:

          (a) The Purchaser is aware of the Company business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
      --------------

          (b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities and
Exchange Commission ("SEC"), the statutory basis for such exemption may be
                      ---
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.

          (c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.

          (d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the
<PAGE>

Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.

         (e) The Purchaser further understands that at the time it wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.

         (f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.

                                            Purchaser:

                                            __________________________

                                            Date:_____________________
<PAGE>

                                                                       Exhibit B

                                 ASSIGNMENT FORM
                                 ---------------
                     (Subject to compliance with Section 7)

         FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of Warrant Shares set forth below:

Name of Assignee                    Address                      No. of Shares
----------------                    -------                      -------------

and does hereby irrevocably constitute and appoint ____________________ to make
such transfer on the books of Active Power, Inc., maintained for the purpose,
with full power of substitution in the premises.

         The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof are being acquired for investment and that the Assignee
will not offer, sell or otherwise dispose of this Warrant or any shares of stock
to be issued upon exercise hereof except in compliance with Securities Act of
1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.

Signature:_______________________________________
Name of Holder:__________________________________
Name of Authorized Representative,
   if a legal entity:____________________________

Title of Representative:_________________________
Date:____________________________________________

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