Exhibit 10.2

ENVIRONMENTAL POWER CORPORATION

Stock Appreciation Right Agreement

under the 200[5][6] Equity Incentive Plan

This Stock Appreciation Right Agreement (the “Agreement”) has been made as of
                     , 2007 (the “Grant Date”) between Environmental Power
Corporation, a Delaware corporation (the “Company”), and                     
(the “Participant”).

Under the Company’s 200[5][6] Equity Incentive Plan (the “Plan”), the
Compensation Committee (the “Committee”) of the Company’s Board of Directors
(the “Board”), to which Committee authority has been delegated by the Board in
accordance with Section 3(b) of the Plan, has authorized the grant of the award
evidenced by this Agreement (the “Award”) pursuant to Section 7 of the Plan.
Capitalized terms not otherwise defined in this Agreement shall have the
respective meanings ascribed to them in the Plan.

AWARD

In accordance with the Plan, the Company has made this Award, effective as of
the Grant Date and upon the following terms and conditions:

1. Additional Defined Terms. The following terms as used in this Award shall
have the following meanings:

“Common Stock” shall mean the Company’s common stock, $0.01 par value per share.

“Exercise Date” shall mean any date on which this Award is exercised, in whole
or in part, in accordance with Section 3 of this Agreement.

“Fair Market Value” shall mean the fair market value of a share of Common Stock,
determined as follows:

(a) If the Common Stock is listed on a national securities exchange, the Nasdaq
Global Market or another nationally recognized trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall be deemed to be the
closing price per share of Common Stock thereon on (i) in the case of the Grant
Date, the Grant Date, and (ii) in the case of the Exercise Date, the trading day
immediately preceding the Exercise Date (provided that if no such price is
reported on such day, the Fair Market Value per share of Common Stock shall be
determined pursuant to clause (b), below).

(b) If the Common Stock is not listed on a national securities exchange, the
Nasdaq Global Market or another nationally recognized trading system as of the
Exercise Date, the Fair Market Value per share of Common Stock shall be deemed
to be the amount most recently determined by the Board or the Committee to
represent the fair market value per share of the Common Stock (including without
limitation a determination for purposes of granting Common Stock options or
issuing Common Stock under any plan, agreement or arrangement with employees of
the Company).

“Final Exercise Date” shall mean the day immediately prior to the tenth
anniversary of the Grant Date.

“Initial Value” shall mean              Dollars ($            ) per Stock
Appreciation Right, which is equal to the Fair Market Value of a share of Common
Stock on the Grant Date.

“SAR Value” shall mean an amount equal to the excess, if any, of the Fair Market
Value on the applicable Exercise Date over the Initial Value, multiplied by the
number of Stock Appreciation Rights in respect of which this Award is being
exercised.

 

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“Stock Appreciation Right” shall mean a unit of value equal to the increase, if
any, in the Fair Market Value of one (1) share of Common Stock over the Initial
Value. Stock Appreciation Rights are not shares of Common Stock and do not
represent the right to purchase shares of Common Stock.

2. Number of Stock Appreciation Rights. The number of Stock Appreciation Rights
subject to this Award is              (            ).

3. Vesting, Exercise and Payment of Award.

(a) Vesting. This Award shall become exercisable (“vest”) as follows:

 

Date/Event

   Number of Stock Appreciation Rights As
to Which Award Vests               

(b) Exercise. The right of exercise shall be cumulative so that to the extent
that this Award is not exercised in any period to the maximum extent permissible
it shall continue to be exercisable, in whole or in part, with respect to all
Stock Appreciation Rights for which it is vested until the earlier of 5:00 p.m.
Eastern time on the Final Exercise Date or the termination of this Award under
Section 4 hereof or the Plan. Each election to exercise this Award shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and stating the number of Stock
Appreciation Rights as to which this Award is exercised. Except as otherwise
provided in Section 5, the Participant shall not be required to make any payment
in order to exercise this Award. The Participant may exercise this Award with
respect to less than the number of Stock Appreciation Rights covered hereby or
then vested, provided that no partial exercise of this Award may be made with
respect to any fractional Stock Appreciation Right or with respect to fewer than
10 whole Stock Appreciation Rights.

(d) Payment. As promptly as practicable following each Exercise Date, the
Company shall pay to the Participant an amount equal to the applicable SAR
Value. Payment of the SAR Value shall be made in (i) cash, (ii) shares of Common
Stock having a Fair Market Value equal to the SAR Value on the Exercise Date or
(iii) a combination of cash or such shares of Common Stock, in each case at the
sole discretion of the Committee, provided that, in no event will the number of
shares of Common Stock issued to the Participant in respect of any payment
pursuant to an exercise of this Award exceed the number of shares of Common
Stock then available for issuance under the Plan.

4. Conditions Applicable to Award.

(a) Continuous Relationship with the Company Required. Except as otherwise
provided in this Section 4, this Award may not be exercised unless the
Participant, at the time he or she exercises this Award, is, and has been at all
times since the Grant Date, an employee or officer of, or consultant or advisor
to, the Company or any parent or subsidiary of the Company as defined in
Section 424(e) or (f) of the Code (an “Eligible Participant”).

(b) Termination of Relationship with the Company. If the Participant ceases to
be an Eligible Participant for any reason, then, except as provided in
paragraphs (c) and (d) below, the right to exercise this Award shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this Award shall be exercisable only to the extent that the
Participant was entitled to exercise this Award on the date

 

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of such cessation. Notwithstanding the foregoing, if the Participant, prior to
the Final Exercise Date, violates the non-competition or confidentiality
provisions of any employment contract, confidentiality and nondisclosure
agreement or other agreement between the Participant and the Company, the right
to exercise this Award shall terminate immediately upon such violation.

(c) Exercise Period Upon Death or Disability. If the Participant dies or becomes
disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final
Exercise Date while he or she is an Eligible Participant and the Company has not
terminated such relationship for “cause” as specified in paragraph (d) below,
this Award shall be exercisable, within the period of one year following the
date of death or disability of the Participant, by the Participant (or in the
case of death by an authorized transferee), provided that this Award shall be
exercisable only to the extent that this Award was exercisable by the
Participant on the date of his or her death or disability, and further provided
that this Award shall not be exercisable after the Final Exercise Date.

(d) Discharge for Cause. If the Participant, prior to the Final Exercise Date,
is discharged by the Company for “cause” (as defined below), the right to
exercise this Award shall terminate immediately upon the effective date of such
discharge. “Cause” shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for “Cause” if the Company determines, within
30 days after the Participant’s resignation, that discharge for cause was
warranted.

5. Tax Withholding. Any payment, whether in cash or in shares of Common Stock,
pursuant to any exercise of this Award, will be net of, any federal, state or
local withholding taxes required by law to be withheld in respect of this Award.
If all or any portion of any payment is made in shares of Common Stock, the
Company may elect to withhold from such payment shares of Common Stock having a
Fair Market Value equal to such taxes required to be withheld, or may, as a
condition to making any such payment, require the Participant to pays to the
Company, or makes provision satisfactory to the Company for payment of, any such
taxes.

6. No Right to Continued Employment. Nothing in this Agreement or in the Plan
shall confer upon the Participant the right to continue as an employee of, or
consultant or advisor to, the Company.

7. Award Not Transferable. This Award is not assignable or transferable by the
Participant, either voluntarily or by operation of law, except by will or the
laws of descent and distribution. Upon any attempt to transfer, assign, pledge,
hypothecate, sell or otherwise dispose of this Award, or of any right or
privilege conferred hereby, or upon the levy of any attachment or similar
process upon this Award, or upon such right or privilege, this Award shall
immediately become null and void.

8. Determinations. Determinations by the Board or the Committee, shall be final
and conclusive with respect to the interpretation of the Plan and this
Agreement.

9. Governing Law. The validity and construction of this Agreement shall be
governed by the laws of the state of Delaware applicable to transactions taking
place entirely within that state.

10. Provisions of the Plan. This Award is subject to the provisions of the Plan,
a copy of which is furnished to the Participant with this Award.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and
granted in Portsmouth, New Hampshire, to be effective as of the Grant Date.

 

ENVIRONMENTAL POWER CORPORATION   By:  

 

 

PARTICIPANT’S ACCEPTANCE

IN WITNESS OF Participant’s acceptance of this Award and Participant’s agreement
to be bound by the provisions of this Agreement and the Plan, Participant has
signed this Agreement as of                     , 2007.

 

 

  Participant’s Signature  

 

  (print name)   Address:  

 

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