Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On October 29, 2008, the Compensation Committee of the Board of Directors of Active Power, Inc. (the "Company") approved the execution by the Company of written severance agreements (the "Severance Agreements") with James A. Clishem, the Company's Chief Executive Officer and President, and John K. Penver, the Company's Chief Financial Officer. The Severance Agreements supersede the oral agreements between the Company and each executive related to severance.

Mr. Clishem's Severance Agreement provides that if his employment is terminated for reasons other than cause, as defined therein, or by Mr. Clishem for good reason, as defined therein, then: (i) he shall be entitled to receive continued severance pay equal to twelve months of his base salary payable over such period, as well as reimbursement of health benefits during such period, (ii) the vesting under all unvested options would be accelerated by twelve months and
(iii) he would be entitled to all or a pro-rated portion of the bonus under the Company's management incentive program for the year of such severance based on the pro rata achievement of those corporate or individual objectives that are measured over a period of time, and the actual achievement of such objectives based on the occurrence of a specific event. Mr. Clishem's Severance Agreement further provides that Mr. Clishem shall be subject to a covenant not to compete during his employment with the Company and for a period of up to twelve months following his employment.

Mr. Penver's Severance Agreement provides that if his employment is terminated for reasons other than cause, as defined therein, or by Mr. Penver for good reason, as defined therein, then: (i) he shall be entitled to receive continued severance pay equal to nine months of his base salary payable over such period, as well as reimbursement of health benefits during such period, (ii) the vesting under all unvested options would be accelerated by nine months and (iii) he would be entitled to all or a pro-rated portion of the bonus under the Company's management incentive program for the year of such severance based on the pro rata achievement of those corporate or individual objectives that are measured over a period of time, and the actual achievement of such objectives based on the occurrence of a specific event. Mr. Penver's Severance Agreement further provides that Mr. Penver shall be subject to a covenant not to compete during his employment with the Company and for a period of up to nine months following his employment.

Each of the Severance Agreements also provides that if within twelve months following a change in control (as defined in the Company's 2000 Stock Incentive Plan) the executive officer's employment is terminated for reasons other than cause, or by the executive for good reason, then any unvested options or shares of restricted stock held by the executive officer on the date of such change in control would accelerate and vest in full as of the date of the termination.

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