Exhibit 10.2

CHANGE OF CONTROL SEVERANCE AGREEMENT

THIS CHANGE OF CONTROL SEVERANCE AGREEMENT (the “Agreement”) is made as of the
     day of July, 2008 between Active Power, Inc., (the “Company”), and
                                    , an individual resident of
                                         (“Employee”). Employee and the Company
are collectively referred to herein as the “Parties.”

1. At-Will Employment Status; Term. Employee is currently employed by the
Company. Employee is employed on an “at will” basis, which means that either the
Company or Employee may terminate Employee’s employment with the Company at any
time and for any or no reason. This Agreement shall terminate upon the date that
all obligations of the parties hereto under this Agreement have been satisfied
or, if earlier, on the date, prior to a Change in Control (as defined in the
Active Power, Inc. 2000 Stock Incentive Plan (the “Plan”)), Employee is no
longer employed by the Company.

2. Acceleration Upon Termination After a Change in Control. Although Employee’s
employment is at-will, in the event that Employee is terminated by the Company
without Cause (as defined below) or resigns with Good Reason (as defined below)
within twelve months after a Change in Control, all shares of stock that are
issuable upon exercise of all options granted to Employee by the Company prior
to the date of the Change in Control shall fully vest as of the date of such
termination, to the extent such stock options are outstanding and unvested at
the date of such termination, and all shares of stock of the Company that were
purchased prior to the Change in Control and that is subject to a right of
repurchase by the Company (or its successor) shall have such right of repurchase
lapse with respect to all of the shares. If Employee’s employment with the
Company terminates other than as a result of a termination by the Company
without Cause or resignation with Good Reason within the twelve months following
a Change of Control, then Employee shall not be entitled to receive any benefits
hereunder, but may be eligible for those benefits (if any) as may then be
established under the Company’s then existing severance and benefits plans and
policies at the time of such termination.

3. Conditions Precedent. Any accelerated vesting contemplated by Section 2 above
are conditional on Employee:

(a) continuing to comply with the terms of this Agreement and the Proprietary
Information and Nondisclosure Agreement between Employee and the Company (the
“Confidentiality Agreement”);

(b) delivering and not revoking, a separation agreement including a general
release of claims relating to Employee’s employment and/or this Agreement
against the Company or its successor, its subsidiaries and their respective
directors, officers and stockholders and affirmation of obligations hereunder
and under the Confidentiality Agreement in a form acceptable to the Company or
its successor; and

(c) in the event of a resignation for Good Reason, providing the Company with
written notice of the acts or omissions constituting the grounds for Good Reason
within ninety (90) days of the initial existence of the grounds for Good Reason
and a reasonable opportunity for the Company to cure the conditions giving rise
to such Good Reason, which shall not be less

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than thirty (30) days following the date of notice from Employee. If the Company
cures the conditions giving rise to such Good Reason within thirty (30) days of
the date of such notice, Employee will not be entitled to severance payments
and/or benefits contemplated by Section 2 above if Employee thereafter resigns
from the Company based on such grounds. Unless otherwise required by law, no
severance payments and/or benefits under Section 2 will be paid and/or provided
until after the expiration of any relevant revocation period.

4. Definitions. For purposes of this Agreement,

(a) Cause. For purposes of this Agreement, “Cause” shall mean (i) Employee’s
continued failure to substantially perform the duties and obligations of
Employee’s position (for reasons other than death or Disability), which failure,
if curable within the discretion of the Company, is not cured to the reasonable
satisfaction of the Company within thirty (30) days after receipt of written
notice from the Company of such failure; (ii) Employee’s failure or refusal to
comply with reasonable written policies, standards and regulations established
by the Company from time to time which failure, if curable in the discretion of
the Company, is not cured to the reasonable satisfaction of the Company within
thirty (30) days after receipt of written notice of such failure from the
Company; (iii) any act of personal dishonesty, fraud, embezzlement,
misrepresentation, or other unlawful act committed by Employee that results in a
substantial gain or personal enrichment of Employee at the expense of the
Company; (iv) Employee’s violation of a federal or state law or regulation
applicable to the Company’s business, which violation was or is reasonably
likely to be materially injurious to the Company; (v) Employee’s violation of,
or a plea of nolo contendere or guilty to, a felony under the laws of the United
States or any state; or (vi) the Employee’s material breach of the terms of the
Confidentiality Agreement.

(b) Good Reason. For purposes of this Agreement, “Good Reason” shall mean,
without Employee’s written consent: (i) there is a material reduction of the
level of Employee’s compensation (excluding any bonuses) (except where there is
a general reduction applicable to the management team generally); (ii) there is
a material reduction in Employee’s overall responsibilities or authority, or
scope of duties, it being understood that a reduction in Employee’s
responsibilities or authority following a Change in Control (as defined in the
Plan) shall not constitute Good Reason unless there also occurs a demotion in
Employee’s title or position; or (iii) a material change in the geographic
location at which Employee must perform his services; provided, that in no
instance will the relocation of Employee to a facility or a location of fifty
(50) miles or less from Employee’s then current office location be deemed
material for purposes of this Agreement.

(c) The Board shall make all determinations relating to termination, including
without limitation any determination regarding Cause.

5. Tax Treatment. The Company makes no representations or warranties with
respect to the tax consequences of the benefits to Employee under the terms of
this Agreement. Employee agrees and understands that Employee is responsible for
payment of any local, state and/or federal taxes on the sums paid hereunder by
the Company and any penalties or assessments thereon. Employee further agrees to
indemnify and hold the Company harmless from any

 

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claims, demands, deficiencies, penalties, assessments, executions, judgments, or
recoveries by any government agency against the Company for any amounts claimed
due on account of Employee’s failure to pay federal or state taxes or damages
sustained by the Company by reason of any such claims, including reasonable
attorney fees.

6. Section 409A.

(a) Notwithstanding anything to the contrary in this Agreement, if Employee is a
“specified employee” within the meaning of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”) and the final regulations and any guidance
promulgated thereunder (“Section 409A”) at the time of Employee’s termination
(other than due to death), and the continuing severance pay payable to Employee,
if any, pursuant to this Agreement, when considered together with any other
severance payments or separation benefits which may be considered deferred
compensation under Section 409A (together, the “Deferred Compensation Separation
Benefits”) will not and could not under any circumstances, regardless of when
such termination occurs, be paid in full by March 15 of the year following
Employee’s termination, then only that portion of the Deferred Compensation
Separation Benefits which do not exceed the Section 409A Limit (as defined
below) may be made within the first six (6) months following Employee’s
termination of employment in accordance with the payment schedule applicable to
each payment or benefit. For these purposes, each severance payment is hereby
designated as a separate payment and will not collectively be treated as a
single payment. Any portion of the Deferred Compensation Separation Benefits in
excess of the Section 409A Limit shall accrue and, to the extent such portion of
the Deferred Compensation Separation Benefits would otherwise have been payable
within the first six (6) months following Employee’s termination of employment,
will become payable on the first payroll date that occurs on or after the date
six (6) months and one (1) day following the date of Employee’s termination. All
subsequent Deferred Compensation Separation Benefits, if any, will be payable in
accordance with the payment schedule applicable to each payment or benefit.
Notwithstanding anything herein to the contrary, if Employee dies following
Employee’s termination but prior to the six (6) month anniversary of Employee’s
termination, then any payments delayed in accordance with this paragraph will be
payable in a lump sum as soon as administratively practicable after the date of
Employee’s death and all other Deferred Compensation Separation Benefits will be
payable in accordance with the payment schedule applicable to each payment or
benefit.

(b) The foregoing provision is intended to comply with the requirements of
Section 409A so that none of the severance payments and benefits to be provided
hereunder will be subject to the additional tax imposed under Section 409A, and
any ambiguities herein will be interpreted to so comply. The Company and
Employee agree to work together in good faith to consider amendments to this
Agreement and to take such reasonable actions which are necessary, appropriate
or desirable to avoid imposition of any additional tax or income recognition
prior to actual payment to Employee under Section 409A.

(c) For purposes of this Agreement, “Section 409A Limit” will mean the lesser of
two (2) times: (A) Employee’s annualized compensation based upon the annual rate
of pay paid to Employee during the Company’s taxable year preceding the
Company’s taxable year of

 

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Employee’s termination of employment as determined under Treasury Regulation
1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with
respect thereto; or (B) the maximum amount that may be taken into account under
a qualified plan pursuant to Section 401(a)(17) of the Code for the year in
which Employee’s employment is terminated.

7. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Employee (i) constitute
“parachute payments” within the meaning of Section 280G of the Code, and
(ii) would be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then Employee’s benefits under this Agreement shall be either

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such
benefits being subject to the Excise Tax,

whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by
Employee on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be taxable under
Section 4999 of the Code.

Unless the Company and Employee otherwise agree in writing, any determination
required under this Section shall be made in writing by the Company’s
independent public accountants (the “Accountants”), whose determination shall be
conclusive and binding upon Employee and the Company for all purposes. For
purposes of making the calculations required by this Section, the Accountants
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Section 280G and 4999 of the Code. The Company and Employee shall
furnish to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section.

8. Confidential Information. Employee shall continue to comply with the terms
and conditions of the Confidentiality Agreement, and maintain the
confidentiality of all of the Company’s confidential and proprietary
information. Such information includes, but is not limited to, all customer
lists, equipment, records, data, notes, reports, proposals, correspondence,
specifications, drawings, blueprints, sketches, materials, or other documents or
property belonging to the Company.

9. Miscellaneous.

(a) Withholding Taxes. The Company may withhold from all benefits payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.

 

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(b) Entire Agreement; Binding Effect. This Agreement and the Confidentiality
Agreement set forth the entire understanding between the Parties as to the
subject matter of this Agreement and supersede all prior agreements,
commitments, representations, writings and discussions between them; and neither
of the Parties shall be bound by any obligations, conditions, warranties or
representations with respect to the subject matter of this Agreement, except as
expressly provided herein or therein or as duly set forth on or subsequent to
the date hereof in a written instrument signed by the proper and fully
authorized representative of the party to be bound hereby. This Agreement is
binding on Employee and on the Company and his/her and its successors and
assigns (whether by assignment, by operation of law or otherwise).

(c) Arbitration. The Parties agree that, unless otherwise agreed to in a writing
signed by the Employee and the Chairman of the Board of Directors of the
Company, any and all disputes arising out of, or relating to, the terms of this
Agreement, their interpretation, and any of the matters herein released, shall
be subject to binding arbitration in Travis County, Texas before the American
Arbitration Association under its National Rules for the Resolution of
Employment Disputes. The Parties agree that the prevailing party in any
arbitration shall be entitled to injunctive relief in any court of competent
jurisdiction to enforce the arbitration award. The Parties agree that the
prevailing party in any arbitration shall be awarded its reasonable attorney
fees and costs. The Parties hereby agree to waive their right to have any
dispute between them resolved in a court of law by a judge or jury. This section
will not prevent either party from seeking injunctive relief (or any other
provisional remedy) from any court having jurisdiction over the Parties and the
subject matter of their dispute relating to Employee’s obligations under this
Agreement and the agreements incorporated herein by reference.

(d) Governing Law; Jurisdiction. This Agreement shall be governed by, and
construed and enforced in accordance with, the employment laws of Texas and the
other laws of the State of Texas as they apply to contracts entered into and
wholly to be performed therein by residents thereof. In addition, each party
hereto irrevocably and unconditionally agrees that any suit, action or other
legal proceeding arising out of this Agreement may be brought only in a state or
federal court within Texas.

(e) Severability. In the event that any provision hereof becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable of void, this
Agreement shall continue in full force and effect without said provision.

(f) Effect of Headings. The Section and subsection headings contained herein are
for convenience only and shall not affect the construction hereof.

(g) Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates set
forth below.

 

Employee     Active Power, Inc.

 

   

 

Signature     By:   James Clishem, CEO

 

    Dated:  

 

(Print Name)       Dated:  

 

     

 

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