**Exhibit 10.2**

 

**INCENTIVE STOCK OPTION AGREEMENT**

 

**BROADWIND ENERGY, INC.**

**2007 EQUITY INCENTIVE PLAN**

 

THIS AGREEMENT is enteredinto and effective as of the                        day of                                ,20    , by and between Broadwind Energy, Inc., aDelaware corporation (the “**Company**”) and                            (“**Participant”**).

 

**RECITALS**

 

A.            Participant on the date hereof is a key employee orofficer of the Company or one of its Affiliates; and

 

B.            The Company wishes to grant incentive stock options toParticipant pursuant to this Agreement and the 2007 Equity Incentive Plan (the “**Plan**”); and

 

C.            The Administrator has authorized the grant of anincentive stock option to Participant to give Participant an inducement toacquire a proprietary interest in the Company and an added incentive to advancethe interests of the Company and has determined that, as of the effective dateof this Agreement, the fair market value of the Company’s common stock is                           Dollars ($                  )per share.

 

**AGREEMENTS**

 

In consideration of thepremises and of the mutual covenants herein contained, the parties hereto agreeas follows:

 

**ARTICLE I.  GRANT OF OPTION**

 

The Company herebygrants  to Participant the right,privilege, and option (the “**Option**”) topurchase up to                          (                )shares (the “**Option Shares**”) of the Company’sCommon Stock, according to the terms and subject to the conditions hereinafterset forth and as set forth in the Plan. **  [The per share price to be paid byParticipant in the event of an exercise of the Option shall be                        Dollars ($**                  **) OR: Because Participant owns stock possessing morethan ten percent (10%) of the total combined voting power of all classes ofstock of the Company or its Parent or any Subsidiary, the per share price to bepaid by Participant in the event of an exercise of the Option shall be                                          Dollars ($**                  **), which is not less than one hundred ten percent(110%) of the fair market value of the Company’s Common Stock at the date ofgrant of this Option.] ** The Option is intended to be an “incentive stock option,” as defined inSection 422 of the Internal Revenue Code as amended (the “**Code**”), to the extent permitted bySection 422(d) of the Code.  Shares granted in excess of the422(d) limit will be treated as a nonqualified stock option.

 

**ARTICLE II.  DURATION OF OPTION AND EXERCISABILITY**

 

A.            Initial Period of Exercisability.  Except asprovided in **Articles II.B** and **II.C** below, the Option shall becomeexercisable according to the following schedule.  Once the Option becomesfully exercisable Participant may continue to exercise this Option under theterms and conditions of this Agreement until the first of the termination ofthis Option as provided herein or the Expiration Date (as defined below). If Participant

 

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does not purchase upon an exercise of this Optionthe full number of shares which Participant is then entitled to purchase,Participant may purchase upon any subsequent exercise prior to this Option’stermination or Expiration Date such previously unpurchased shares in additionto those Participant is otherwise entitled to purchase.  Except asotherwise provided in **Articles II.B**and **II.C** below, the term duringwhich this Option may be exercised will continue until 5:00 p.m. (Centraltime) on  **[the date that is no more than ten (10) years following the date ofgrant of this Option OR: for greater than ten percent (10%) holders insert thedate that is no more than five (5) years following the date of grant ofthis Option]**   (the “**ExpirationDate**”).  In no event shall this Option be exercisable after theExpiration Date.

 

| **Vesting Date** | ** ** | **Number of  Option Shares  Available for Exercise** |
|------------------|------------|------------------------------------------------------|
| ** **       | ** ** | ** **                                           |
|             |       |                                                 |
|             |       |                                                 |

 

B.            Termination of Employment for Reasons Other Than Deathor Disability.  In the event Participant ceases to be a key employeeor officer of the Company or any Affiliate for any reason other than death oran event that constitutes permanent and total disability within the meaning ofSection 22(e)(3) of the Code (“**Disability**”),any unexercised portion of this Option which was exercisable as of the date ofsuch termination may be exercised, in whole or in part, by Participant beforethe earlier of (i) the close of business on the three-month anniversarydate of such termination of employment, and (ii) the ExpirationDate.  To the extent this Option was not exercisable upon such terminationof employment, or if Participant does not exercise the unexercised portion ofthe Option that was exercisable within the time specified in this **Article II.B**, all rights of Participantunder this Option shall terminate, and the Option shall thereafter be void.

 

C.            Termination of Employment Due to Death or Disability. In the event Participant ceases to be a key employee or officer of the Companyor any Affiliate by reason of death or Disability, any unexercised portion ofthis Option which was exercisable as of the date of such termination may beexercised, in whole or in part, by Participant (or by Participant’s heirs orlegal representative(s) in the event of death or Disability) before theearlier of (i) the close of business on the twelve-month anniversary dateof such termination of employment and (ii) the Expiration Date.  Tothe extent this Option was not exercisable upon such termination of employment,or if Participant does not exercise the unexercised portion of the Option thatwas exercisable within the time specified in this **Article II.C**, all rights of Participant under this Optionshall terminate, and the Option shall thereafter be void.

 

**ARTICLE III.  MANNER OF OPTION EXERCISE**

 

A.            Notice.  This Option may be exercised byParticipant in whole or in part from time to time, subject to the conditionscontained in the Plan and herein, by delivery, in person or by registered mail,to the Company at its principal executive office, of a written notice ofexercise.  Such notice shall be in a form satisfactory to theAdministrator, shall identify the Option, shall specify the number of OptionShares with respect to which the Option is being exercised, and shall be signedby the person or persons so exercising the Option.  Such notice shall beaccompanied by payment in full of the total purchase price of the Option Sharespurchased; the exercise of the Option shall be deemed effective upon receipt ofsuch notice by the Company and

 

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upon payment that complies with the terms of thePlan and this Agreement.  In the event that the Option is being exercised,as provided by the Plan and **Article II.C**,above, by Participant’s heirs or legal representative(s), the notice shall beaccompanied by appropriate proof of right of such person or persons to exercisethe Option.  As soon as practicable after the effective exercise of theOption, Participant (or Participant’s heirs or legal representative(s) inthe event of death or Disability) shall be recorded on the stock transfer booksof the Company as the owner of the Option Shares purchased, and the Company maydeliver to Participant (or Participant’s heirs or legal representative(s)) oneor more duly issued stock certificates evidencing such ownership.  Allrequisite original issue or transfer documentary stamp taxes shall be paid bythe Company.

 

B.            Payment.  At the time of exercise of thisOption, Participant may determine whether to pay the total purchase price ofthe Option Shares to be purchased solely in cash (including a personal check ora certified or bank cashier’s check, payable to the order of the Company) or bytransfer from Participant to the Company of previously-owned shares of CommonStock of the Company with a then current aggregate Fair Market Value equal tosuch total purchase price, or by a combination of cash and suchpreviously-owned shares of Common Stock.  The Administrator may rejectParticipant’s election to pay all or part of the purchase price under thisOption with previously-owned shares of common stock and may require such purchaseprice to be paid entirely in cash if, in the sole discretion of theAdministrator, payment in previously-owned shares would cause the Company to berequired to recognize a charge to earnings in connection therewith.  Forpurposes of this Agreement, (a) “previously-owned shares” shall meanshares of Common Stock of the Company that Participant has owned for at leastsix months prior to the time of exercise, and (b) “Fair Market Value” willbe determined as set forth in the Plan.

 

C.            Investment Purpose.  The Company shall not berequired to issue or deliver any shares of Common Stock under this Optionunless (a)(1) such shares are covered by an effective and currentregistration statement under the Securities Act of 1933 and applicable statesecurities laws or (2) if the Administrator has determined not to soregister such shares, exemptions from registration under the Securities Act of1933 and applicable state securities laws are available for such issuance (asdetermined by counsel to the Company) and the Company has received fromParticipant (or Participant’s heirs(s) or legal representative(s), in theevent of death or Disability) any representations or agreements requested bythe Company in order to permit such issuance to be made pursuant to such exemptions,and (b) the Company has obtained any other consent, approval or permitfrom any state or federal governmental agency which the Administrator shall, inits sole discretion upon the advice of counsel, deem necessary oradvisable.  Unless a registration statement under the Securities Act of1933 is in effect with respect to the issuance or transfer of Option Shares,transfer of such shares shall be restricted unless the Company receives anopinion of counsel satisfactory to the Company to the effect that registrationunder the Securities Act of 1933 and applicable state securities laws is notrequired with respect to such transfer.

 

**ARTICLE IV.  NONTRANSFERABILITY**

 

This Option shall not betransferable by Participant, either voluntarily or involuntarily, or subject toany lien, directly or indirectly, by operation of law or otherwise, except asprovided in the Plan.  Any attempt to transfer or encumber this Optionother than in accordance with the Plan shall void this Option and this Option,to the extent not fully exercised, shall terminate.

 

**ARTICLE V.  DISPOSITIONSAND WITHHOLDING TAXES**

 

A.            Notification of Disqualifying Disposition. Prior to making a disposition (as defined in Section 424(c) of theCode) of any shares of Common Stock acquired pursuant to the exercise of thisOption before the expiration of two years after the date hereof or before theexpiration of one year after the date on which such shares of Common Stock weretransferred to Participant pursuant to exercise of this Option,

 

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Participant shall send written notice to theCompany of the proposed date of such disposition, the number of shares to bedisposed of, the amount of proceeds to be received from such disposition andany other information relating to such disposition that the Company mayreasonably request.  The right of Participant to make such a dispositionshall be conditioned on the receipt by the Company of all amounts necessary tosatisfy any federal, state or local withholding tax requirements attributableto such disposition.  The Administrator shall have the right, in its solediscretion, to endorse any certificates representing the Option Shares with alegend restricting transfer and to cause a stop transfer order to be enteredwith the Company’s transfer agent until such time as the Company receives theamounts necessary to satisfy such withholding requirements or until the laterof the expiration of two years from the date hereof or one year from the dateon which such shares were transferred to Participant pursuant to the exerciseof this Option.

 

B.            General Obligation.  The Company is entitledto (a) withhold and deduct from future payments to Participant, or makeother arrangements for the collection of, all legally required amountsnecessary to satisfy any federal, state or local withholding tax requirementsattributable to Participant’s exercise of this Option, including, withoutlimitation, a disposition of shares of Common Stock described in **Article V.A** above, that causes this Optionto cease to qualify as an “incentive stock option” within the meaning ofSection 422 of the Code and the regulations thereunder, or(b) require Participant promptly to remit the amount of such withholdingto the Company before acting on any such disposition of shares of CommonStock.  In the event that the Company is unable to withhold such amounts,for whatever reason, Participant hereby agrees to pay to the Company an amountequal to the amount the Company would otherwise be required to withhold underfederal, state or local law.

 

C.            Use of Shares.  The Administrator may, in itssole discretion and subject to such rules as the Administrator may adopt,permit Participant to satisfy, in whole or in part, any withholding taxobligation which may arise in connection with the exercise of this Optioneither by electing to have the Company withhold from the shares of Common Stockto be issued upon the exercise of this Option that number of shares of commonstock, or by electing to deliver to the Company previously-owned shares ofcommon stock, in either case having a Fair Market Value (determined as setforth in the Plan) on the date such tax is determined under the Code (the “**Tax Date**”) equal to the amount necessary tosatisfy the minimum required tax withholding amount based on the minimumstatutory withholding rates for federal and state tax purposes, includingpayroll taxes, that are applicable to the supplemental income resulting fromthe option.  In no event may the Company withhold shares having a FairMarket Value in excess of such statutory minimum required taxwithholding.  Participant’s election to have the company withhold sharesof Common Stock or to deliver previously-owned shares of Common Stock uponexercise is irrevocable and is subject to the consent of the Administrator andshall otherwise comply with such rules as the Administrator may adopt toassure compliance with Rule 16b-3 or any successor provision, as then ineffect, of the General Rules and Regulations under the Securities andExchange Act of 1934, if applicable.  To the extent that shares of CommonStock may be issued prior to the Tax Date to the electing Participant,Participant hereby agrees to surrender that number of shares on the Tax Datehaving an aggregate Fair Market Value (determined as set forth in the Plan)equal to the withholding tax due.

 

**ARTICLE VI.  CAPITALADJUSTMENTS**

 

Pursuant and subject toSection 14 of the Plan, in the event of an increase or decrease in thenumber of shares of common stock resulting from a stock split, reverse stocksplit, stock dividend, combination of shares, rights offering, reclassificationof the common stock, or any other change in the corporate structure or sharesof the Company, the Administrator, in order to prevent dilution or enlargementof the rights of Participant, may make appropriate adjustment as to the numberand kind of securities subject to this Option.  Any such adjustmentaffecting this Option shall be made without change in the aggregate purchaseprice applicable to the unexercised portion of the Option but with anappropriate adjustment in the price for each share or other unit of anysecurity subject to the Option. Without the consent of Participant, however, nosuch change shall be made in the terms of the Option if such change woulddisqualify the Option from treatment as an “incentive stock

 

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option” within the meaningof Code Section 422, or any successor provision, or would be considered amodification, extension or renewal of an option under Code Section 424(h),or any successor provision.

 

**ARTICLE VII.  BINDING EFFECT**

 

This Agreement shall bebinding upon the heirs, executors, administrators and successors of the partieshereto.

 

**ARTICLE VIII.  2007 EQUITY INCENTIVE PLAN**

 

The Option represented bythis Agreement has been granted under, and is subject to the terms of, thePlan.  The terms of the Plan are hereby incorporated by reference hereinin their entirety and Participant, by execution hereof, acknowledges havingreceived a copy of the Plan.  Capitalized terms not defined herein shallhave the meaning set forth in the Plan.  The provisions of this Agreementshall be interpreted as to be consistent with the Plan and any ambiguitiesherein shall be interpreted by reference to the Plan.  In the event thatany provision hereof is inconsistent with the terms of the Plan, the lattershall prevail.

 

**ARTICLE IX.  NON-SOLICITATION**

 

A.            RestrictiveCovenant.  During the periodbeginning on the date of this Option and ending on the later of (i) one yearfollowing the termination of Participant’s employment with, or service to, theCompany or an Affiliate pursuant to **ArticleII.B** or (ii) the expiration of this Option pursuant to **Article II.A** or **Article II.C**, Participant shall not, except with the expressprior written consent of the Company: (i) directly or indirectly, either for Participant, or on behalf of anyof the Company’s or any Affiliate’s competitors (“**Competitors**”): (1) induce or attempt to induce any employee,independent contractor or consultant of the Company or any Affiliate to leavethe employ of, or terminate its engagement with, the Company or any Affiliate;or (2) in any way interfere with the relationship between the Company or anyAffiliate and any employee, independent contractor or consultant of the Companyor any affiliate; or (ii) directly or indirectly, either for Participant, or onbehalf of any of the Competitors, solicit the business of any person or entityknown to Participant to be a customer of the Company or any of its Affiliates,where Participant, or any person reporting to Participant, had an ongoingbusiness relationship or had made substantial efforts with respect to suchcustomer during Participant’s employment with, or service to, the Company or anAffiliate.

 

B.            Violation of Restrictive Covenant.  Participant, by accepting this Option, agreesthat the foregoing covenants are reasonable with respect to their duration andscope.  Participant further acknowledgesthat the restrictions are reasonable and necessary for the protection of thelegitimate business interests of the Company and its Affiliates, that theycreate no undue hardships, that any violation of these restrictions would causesubstantial injury to the Company and its Affiliates, and that suchrestrictions were a material inducement to the Company to grant thisOption.  In the event of any violation orthreatened violation of these restrictions, any and all rights of Participantunder this Option, whether unvested or vested, shall be forfeited and shallimmediately terminate and shall thereafter be void.

 

**ARTICLE X.  MISCELLANEOUS**

 

A.            Employment or Other Relationship; Rights asStockholder.  Nothing in this Agreement shall be construed to(a) limit in any way the right of the Company or any Affiliate toterminate the status of Participant as an employee of the Company at any time,or (b) be evidence of any agreement or understanding, express or implied,that the Company or any Affiliate will employ Participant in any particular position,at any particular rate of compensation or for any particular period oftime.  Participant shall have no rights as a stockholder with respect toshares subject to the Option until such shares have been issued to Participantupon exercise of the Option.  No adjustment shall be made for dividends(ordinary or extraordinary, whether in cash, securities or

 

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other property), distributions or other rights forwhich the record date is prior to the date such shares are issued, except asprovided in Section 14 of the Plan.

 

B.            Securities Law Compliance.  The exercise ofall or any parts of this Option shall only be effective at such time as counselto the Company shall have determined that the issuance and delivery of CommonStock pursuant to such exercise will not violate any state or federalsecurities or other laws.  Participant may be required by the Company, asa condition of the effectiveness of any exercise of this Option, to agree inwriting that all Common Stock to be acquired pursuant to such exercise shall beheld, until such time that such Common Stock is registered and freely tradableunder applicable state and federal securities laws, for Participant’s ownaccount without a view to any further distribution thereof, thatthecertificates for such shares shall bear an appropriate legend to that effectand that such shares will be not transferred or disposed of except incompliance with applicable state and federal securities laws.

 

C.            Lockup Period Limitation.  Participant agreesthat in the event the Company advises Participant that it plans an underwrittenpublic offering of its common stock in compliance with the Securities Act of1933, as amended, and that the underwriter(s) seek to impose restrictionsunder which certain stockholders may not sell or contract to sell or grant anyoption to buy or otherwise dispose of part or all of their stock purchaserights of the underlying common stock, Participant hereby agrees that for aperiod not to exceed 180 days from the prospectus, Participant will not sell orcontract to sell or grant an option to buy or otherwise dispose of this optionor any of the underlying shares of common stock without the prior writtenconsent of the underwriter(s) or its representative(s).

 

D.            Blue Sky Limitation.  Notwithstandinganything in this Agreement to the contrary, in the event the Company makes anypublic offering of its securities and determines in its sole discretion that itis necessary to reduce the number of issued but unexercised stock purchaserights so as to comply with any state securities or Blue Sky law limitationswith respect thereto, the Board of Directors of the Company shall have theright (i) to accelerate the exercisability of this Option and the date onwhich this Option must be exercised, provided that the Company givesParticipant 15 days’ prior written notice of such acceleration, and(ii) to cancel any portion of this Option or any other option granted toParticipant pursuant to this Agreement which is not exercised prior to orcontemporaneously with such public offering.  Notice shall be deemed givenwhen delivered personally or when deposited in the United States mail, firstclass postage prepaid and addressed to Participant at the address of Participanton file with the Company.

 

E.             Accounting Compliance.  Participant agreesthat, if a “transaction” (as defined in Section 14 of the Plan) occurs andParticipant is an “affiliate” of the Company or any Subsidiary (as defined inapplicable legal and accounting principles) at the time of such Change ofControl, Participant will comply with all requirements of Rule 145 of theSecurities Act of 1933, as amended, and the requirements of such other legal oraccounting principles, and will execute any documents necessary to ensure suchcompliance.

 

F.             Stock Legend.  The certificates for anyshares of Common Stock purchased by Participant (or, in the case of death,Participant’s heirs or legal representative(s)) shall bear an appropriatelegend to reflect the restrictions of this **ArticleX** and **Article III.C**,provided, however, that failure to so endorse any of such certificates shallnot render invalid or inapplicable this **ArticleX**.

 

G.            Shares Reserved.  The Company shall at alltimes during the term of the option period reserve and keep available suchnumber of shares as will be sufficient to satisfy the requirements of thisAgreement.

 

H.            Arbitration.  Any dispute arising out of orrelating to this Agreement or the alleged breach of it, or the making of this Agreement,including claims of fraud and inducement, shall be discussed between thedisputing parties in a good faith effort to arrive at a mutual settlement ofany such controversy.  If, notwithstanding, such dispute cannot beresolved, such dispute shall be settled by binding arbitration.  Judgmentupon the award rendered by the arbitrator may be entered in any court havingjurisdiction thereof.  The

 

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arbitrator shall be a retired state or federaljudge or an attorney who has practiced securities or business litigation for atleast ten (10) years.  If the parties cannot agree on an arbitratorwithin twenty (20) days, any party may request that a judge of the CircuitCourt of Cook County, Illinois select an arbitrator.  Arbitration will beconducted pursuant to the provisions of this Agreement and the commercialarbitration rules of the American Arbitration Association, unless suchrules are inconsistent with the provisions of this Agreement.  Limited civil discovery shall be permittedfor the production of documents and taking of depositions.  Unresolveddiscovery disputes may be brought to the attention of the arbitrator who maydispose of such disputes.  The arbitrator shall have the authority toaward any remedy or relief that a court of this state could order or grant;provided, however, that punitive or exemplary damages shall not beawarded.  The arbitrator may award to the prevailing party, if any, asdetermined by the arbitrator, all of its costs and fees, including thearbitrator’s fee, administrative fees, travel expenses, out-of-pocket expensesand reasonable attorney’s fees.  Unless otherwise agreed by the parties,the place of any arbitration proceedings shall be Chicago, Illinois.

 

**ARTICLE XI.  GOVERNING LAW**

 

This Agreement and allrights and obligations hereunder shall be construed in accordance with the Planand governed by the laws of the State of Delaware.

 

*[Signature page follows]*

 

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IN WITNESS WHEREOF, theparties hereto have executed this Agreement effective the day and year firstabove written.

 
| ** **                                                                             | ** ** | **BROADWIND ENERGY INC.** |
|----------------------------------------------------------------------------------------|------------|---------------------------|
| ** **                                                                             | ** ** | ** **                |
| ** **                                                                             | ** ** | ** **                |
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|                                                                                   |       | By:                       |
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|                                                                                   |       | Its:                      |
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| ** **                                                                             | ** ** | ** **                |
| By execution hereof, the Participant acknowledges having received a  copy of the Plan. | ** ** | **PARTICIPANT**           |
|                                                                                   | ** ** | ** **                |

 

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