Exhibit 10.1

CAPSTONE TURBINE CORPORATION

AMENDED AND RESTATED 2000 EQUITY INCENTIVE PLAN

Effective August 24, 2007

RECITALS:

WHEREAS, the Company previously established the Plan as an equity incentive
plan, which was last approved by the shareholders of the Company in an amendment
and restatement effective on September 10, 2004, and was subsequently amended on
March 17, 2005;

WHEREAS, the Company desires to amend and restate the Plan in order to (i)
incorporate prior amendments, (ii) modify administrative provisions regarding
the calculation of shares approved under the plan that are withheld for taxes
and similar purposes and stock redemption, (iii) require an appropriate
adjustment by the Committee of outstanding awards and the shares available under
the Plan in the event of a stock split, recapitalization or similar transaction,
and (iv) require that stock options be issued with a purchase price that is no
less than 100% of the market value of Common Stock on the grant date; and

WHEREAS, the Board has determined upon advice of counsel that this amendment to
the Plan is effective without further action upon its adoption by the Board;

NOW, THEREFORE, pursuant to authorization by the Board, the Plan is hereby
amended and restated as follows, effective as of August 24, 2007:

1.                                       Purposes of the Plan. The purposes of
the Capstone Turbine Corporation Amended and Restated 2000 Equity Incentive Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees,
Directors and Consultants and to promote the success of the Company’s business.
Options granted under the Plan may be Incentive Stock Options or Non-Qualified
Stock Options, as determined by the Committee at the time of grant. Restricted
Stock, Stock Purchase Rights and Stock Bonuses may also be granted under the
Plan.

2.                                       Definitions. As used herein, the
following definitions shall apply:

(a)                                  “Acquisition” means, unless specified
otherwise in an Agreement,

 

(i)                                     the successful acquisition by a person
or related group of persons, (other than the Company or a person that directly
or indirectly controls, is controlled by or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities pursuant to a transaction
or series of related transactions which the Board does not at any time recommend
the Company’s stockholders to accept or approve;

 

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(ii)                                  the first date within any period of 18
consecutive months or less on which there is effected a change in the
composition of the Board such that a majority of the Board ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either (A) have been members of the Company’s Board continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board;

 

(iii)                               a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Company is incorporated;

 

(iv)                              the sale, transfer or other disposition of all
or substantially all of the assets of the Company in complete liquidation or
dissolution of the Company;

 

(v)                                 any reverse merger in which the Company is
the surviving entity but in which securities possessing more than 50% of the
total combined voting power of the Company’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger; or

 

(vi)                              the issuance by the Company to a single person
or related group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by or is under common control with, the
Company) of securities possessing more than 50% of the total combined voting
power of the Company’s outstanding securities (determined after such issuance)
in a single transaction or a series of related transactions.

(b)                                 “Agreement” means a written agreement
between the Company and a Holder evidencing the terms and conditions of an
individual award or grant of an Option, Restricted Stock, Stock Bonus, or Stock
Purchase Right. Each Agreement is subject to the terms and conditions of the
Plan, except as otherwise provided for herein.

(c)                                  “Applicable Laws” means the requirements
relating to the administration of stock option plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options, Stock
Purchase Rights or Stock Bonuses are granted under the Plan.

(d)                                 “Board” means the Board of Directors of the
Company.

(e)                                  “Cause” means the commission of any act of
fraud, embezzlement, theft or dishonesty by a Holder, any unauthorized use or
disclosure by a Holder of confidential information or trade secrets of the
Company (or any parent or subsidiary thereof), or any other intentional
misconduct by a Holder adversely affecting the business or affairs of the
Company (or any parent or subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Company (or any parent or subsidiary) may consider as grounds for the
dismissal or discharge of any Holder.

 

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(f)                                    “Code” means the Internal Revenue Code of
1986, as amended, or any successor statute or statutes thereto. Reference to any
particular Code section shall include any successor section.

(g)                                 “Committee” means a committee appointed by
the Board in accordance with Section 4 hereof to administer the Plan.

(h)                                 “Common Stock” means the Common Stock of the
Company, par value $0.001 per share.

(i)                                     “Company” means Capstone Turbine
Corporation, a Delaware corporation.

(j)                                     “Consultant” means any consultant or
adviser if: (i) the consultant or adviser renders bona fide services to the
Company; (ii) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company’s
securities; and (iii) the consultant or adviser is a natural person who has
contracted directly with the Company to render such services.

(k)                                  “Director” means a member of the Board.

(l)                                     “Employee” means any person, including
an Officer or Director, who is an employee (as defined in accordance with
Section 3401(c) of the Code) of the Company or any Parent or Subsidiary of the
Company. A Service Provider shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed 90
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. Neither service as a Director nor payment of a director’s fee by
the Company shall be sufficient, by itself, to constitute “employment” by the
Company.

(m)                               “Exchange Act” means the Securities Exchange
Act of 1934, as amended, or any successor statute or statutes thereto. Reference
to any particular Exchange Act section shall include any successor section.

(n)                                 “Fair Market Value” means, as of any date,
the value of a share of Common Stock determined as follows:

(i)                                     If the Common Stock is listed on any
established stock exchange or a national market system, including, without
limitation, the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
a share of such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system, as reported in The Wall Street Journal or such other
source as the Committee deems reliable;

 

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(ii)                                  If the Common Stock is regularly quoted by
a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for a
share of the Common Stock; or

(iii)                               In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Committee.

(o)                                 “Holder” means a person who has been granted
or awarded an Option, Restricted Stock or Stock Purchase Right, or who holds
Shares acquired pursuant to the exercise of an Option or Stock Purchase Right or
pursuant to a Stock Bonus.

(p)                                 “Incentive Stock Option” means an Option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code and which is designated as an Incentive Stock Option by the
Committee.

(q)                                 “Independent Director” means a Director who
is:

(i)                                     An “outside director,” within the
meaning of Section 162(m) of the Code;

(ii)                                  A “non-employee director” within the
meaning of Rule 16b-3; and

(iii)                               An “independent director” under the listing
standards of The Nasdaq Stock Market.

(r)                                    “Non-Qualified Stock Option” means an
Option (or portion thereof) that is not designated as an Incentive Stock Option
by the Committee, or which is designated as an Incentive Stock Option by the
Committee but fails to qualify as an incentive stock option within the meaning
of Section 422 of the Code.

(s)                                  “Officer” means a person who is an officer
of the Company within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

(t)                                    “Option” means a stock option granted
pursuant to the Plan.

(u)                                 “Option Exchange Program” means a program
whereby outstanding Options are surrendered or cancelled in exchange for Options
that are granted more than six months and one day following such surrender or
cancellation and are of the same type (which may have a lower exercise price or
purchase price), of a different type and/or cash, and subject to certain
conditions (e.g., continued employment).

(v)                                 “Parent” means any corporation, whether now
or hereafter existing (other than the Company), in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
last corporation in the unbroken chain owns stock possessing more than fifty
percent of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

 

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(w)                               “Plan” means the Capstone Turbine Corporation
Amended and Restated 2000 Equity Incentive Plan.

(x)                                   “Public Trading Date” means the first date
upon which Common Stock of the Company is listed (or approved for listing) upon
notice of issuance on any securities exchange or designated (or approved for
designation) upon notice of issuance as a national market security on an
interdealer quotation system.

(y)                                 “Restricted Stock” means Shares acquired
pursuant to the exercise of an unvested Option in accordance with Section 10(h),
or pursuant to an election pursuant to a Stock Purchase Right granted under
Section 12(b) or Section 14.

(z)                                   “Rule 16b-3” means that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

(aa)                            “Section 16(b)” means Section 16(b) of the
Exchange Act, as such Section may be amended from time to time.

(bb)                          “Securities Act” means the Securities Act of 1933,
as amended, or any successor statute or statutes thereto. Reference to any
particular Securities Act section shall include any successor section.

(cc)                            “Service Provider” means an Employee, Director
or Consultant.

(dd)                          “Share” means a share of Common Stock, as adjusted
in accordance with Section 15 below.

(ee)                            “Stock Bonus” means a grant of Common Stock
granted pursuant to Section 14(e) or elected pursuant to Section 12(b).

(ff)                                “Stock Purchase Right” means a right to
purchase Common Stock pursuant to Section 14.

(gg)                          “Subsidiary” means any corporation, whether now or
hereafter existing (other than the Company), in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing more than 50%
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

3.                                       Stock Subject to the Plan. Subject to
the provisions of Section 15, the shares of stock subject to Options, Stock
Purchase Rights or Stock Bonuses shall be Common Stock, initially shares of the
Company’s Common Stock, par value $0.001 per share. Subject to the provisions of
Section 15, the maximum aggregate number of Shares which may be issued upon
exercise of such Options or Stock Purchase Rights or pursuant to such Stock
Bonuses is 6,080,000 Shares, plus the number of Shares previously authorized and
remaining available under the Company’s 1993 Stock Incentive Plan, as amended,
as of the Public Trading Date, plus any Shares covered by options granted under
the Company’s 1993 Stock Incentive Plan that are forfeited or expire unexercised
or otherwise become available after the Public Trading Date;

 

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provided, however, that the maximum aggregate number of Shares which may be
issued upon exercise of Incentive Stock Options is 13,880,000 Shares. The total
shares originally made available under the 1993 Stock Incentive Plan was
7,800,000. Shares issued upon exercise of Options or Stock Purchase Rights or
pursuant to Stock Bonuses may be authorized but unissued, or reacquired Common
Stock. If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Notwithstanding the provisions of this Section 3, no Shares may
again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an Incentive Stock Option under Code
Section 422.

4.                                       Administration of the Plan.

(a)                                  Administration Committee. The Plan shall be
administered by the Committee that is established and designated by the Board to
administer the Plan. Prior to the 2004 annual meeting of shareholders of the
Company, the Committee shall be comprised of at least two individuals who are
all Independent Directors. Effective at the conclusion of the 2004 annual
meeting of shareholders of the Company, the Committee shall be comprised of at
least three individuals who are all Independent Directors. The Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise, subject,
however, to such resolutions or Committee charter, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. Within
the scope of such authority, the Committee may delegate (i) to the chief
executive officer of the Company the authority to grant awards under the Plan to
eligible persons who are (1) not “covered employees,” within the meaning of
Section 162(m) of the Code, (2) not expected to be “covered employees” at the
time of recognition of income resulting from such award, and (3) not subject to
liability under Section 16 of the Exchange Act, and/or (ii) to any officer of
the Company any other authority that is included in Sections 4(b)(iv), (viii),
(ix) or (xi) or Section 9(b).

(b)                                 Powers of the Committee. Subject to the
provisions of the Plan and the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, the
Committee shall have the authority in its sole discretion:

(i)                                     to determine the Fair Market Value;

(ii)                                  to select the Service Providers to whom
Options, Stock Purchase Rights, and Stock Bonuses may from time to time be
granted hereunder;

(iii)                               to determine the number of Shares to be
covered by each such award granted hereunder;

(iv)                              to approve forms of Agreement for use under
the Plan;

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(v)                                 to determine the terms and conditions of any
award granted hereunder (such terms and conditions include, but are not limited
to, the exercise price, the time or times when Options or Stock Purchase Rights
may vest or be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any award granted hereunder or the Common Stock relating
thereto, based in each case on such factors as the Committee, in its sole
discretion, shall determine);

(vi)                              to institute an Option Exchange Program that
has been approved by the Board; provided, however, that the effectiveness of the
Option Exchange Program is subject to the approval of the Company’s
shareholders;

(vii)                           to determine whether to offer to buyout a
previously granted Option as provided in subsection 10(i) and to determine the
terms and conditions of such offer and buyout (including whether payment is to
be made in cash or Shares);

(viii)                        to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

(ix)                                to allow Holders to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right or pursuant to a Stock
Bonus that number of Shares having a Fair Market Value equal to the minimum
amount required to be withheld based on the statutory withholding rates for
federal and state tax purposes that apply to supplemental taxable income. The
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by
Holders to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Committee may deem necessary or advisable;

(x)                                   to amend any Option or Stock Purchase
Right granted under the Plan as provided in Section 14; and

(xi)                                to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan and to exercise such powers and
perform such acts as the Committee deems necessary or desirable to promote the
best interests of the Company which are not in conflict with the provisions of
the Plan.

(c)                                  Effect of Committee’s Decision. All
decisions, determinations and interpretations of the Committee shall be final
and binding on all Holders.

5.                                       Eligibility. Non-Qualified Stock
Options, Stock Purchase Rights and Stock Bonuses may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Consultant who has been granted an Option,
Stock Purchase Right or Stock Bonus may be granted additional Options, Stock
Purchase Rights or Stock Bonuses. In addition to the foregoing, each
Non-Employee Director (defined in Section 12) shall be granted Options at the
times and in the manner set forth in Section 12 and may receive Stock Bonuses in
lieu of cash compensation as described in Section 12.

 

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6.                                       Limitations.

(a)                                  Each Option shall be designated by the
Committee in the Agreement as either an Incentive Stock Option or a
Non-Qualified Stock Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of Shares subject to a Holder’s
Incentive Stock Options and other incentive stock options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options or other options shall be
treated as Non-Qualified Stock Options.

For purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time of grant.

(b)                                 None of the Plan, any Option, Stock Purchase
Right or Stock Bonus shall confer upon a Holder any right with respect to
continuing the Holder’s employment or consulting relationship with the Company,
nor shall they interfere in any way with the Holder’s right or the Company’s
right to terminate such employment or consulting relationship at any time, with
or without cause.

(c)                                  No Service Provider shall be granted, in
any calendar year, Options, Stock Purchase Rights or Stock Bonuses to acquire
more than 3,000,000 Shares. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company’s capitalization as
described in Section 15. For purposes of this Section 6(c), if an Option is
canceled in the same calendar year it was granted (other than in connection with
a transaction described in Section 15), the canceled Option will be counted
against the limit set forth in this Section 6(c). For this purpose, if the
exercise price of an Option is reduced, the transaction shall be treated as a
cancellation of the Option and the grant of a new Option.

7.                                       Term of Plan. The Plan shall become
effective upon its initial adoption by the Board and shall continue in effect
until it is terminated under Section 17. No Options, Stock Purchase Rights or
Stock Bonuses may be issued under the Plan with respect to the shares specified
in Section 3 hereof after the tenth anniversary of the earlier of (i) the date
upon which the Plan is adopted by the Board or (ii) the date the Plan is
approved by the stockholders. If the number of shares specified in Section 3 is
increased by an amendment to this Plan, Options Stock Purchase Rights or Stock
Bonuses may be awarded with respect to such increased shares for a period of ten
years after the earlier of the date that the amendment to the Plan is adopted by
the Board or the date that the amendment is approved by the stockholders.
Options, Stock Purchase Rights and Stock Bonuses granted before such dates shall
remain valid in accordance with their terms.

8.                                       Term of Option. The term of each Option
shall be stated in the Agreement; provided, however, that the term shall be no
more than ten years from the date of grant thereof; and provided further that,
in the case of an Incentive Stock Option granted to a Holder who, at the time
the Option is granted, owns (or is treated as owning under Code Section 424)
stock representing more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the term of the Option shall be no more
than five years from the date of grant thereof.

 

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9.                                       Option Exercise Price and
Consideration.

(a)                                  Except as provided in Section 13, the per
share exercise price for the Shares to be issued upon exercise of an Option
shall be such price as is determined by the Committee, but shall be subject to
the following:

(i)                                     In the case of an Incentive Stock Option

(A)                              granted to an Employee who, at the time of
grant of such Option, owns (or is treated as owning under Code Section 424)
stock representing more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of grant.

(B)                                granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

(ii)                                  In the case of a Non-Qualified Stock
Option

(A)                              granted to a Service Provider who, at the time
of grant of such Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of the grant.

(B)                                granted to any other Service Provider, the
per Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.

(iii)                               Notwithstanding the foregoing, Options may
be granted with a per Share exercise price other than as required in this
subsection (a) above pursuant to a merger or other corporate transaction.

(b)                                 The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Committee (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) with the consent of the Committee, actual or constructive
delivery of Shares which (x) in the case of Shares acquired from the Company,
have been owned by the Holder for more than six months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which such Option shall be exercised, (4)
with the consent of the Committee, payment in connection with the pledge of
Shares and a loan through a broker in a transaction described in Securities and
Exchange Commission Regulation T, (5) any other consideration acceptable to the
Committee, or (6) with the consent of the Committee, any combination of the
foregoing methods of payment.

 

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10.                                 Exercise of Option.

(a)                                  Vesting; Fractional Exercises. Except as
provided in Section 13, Options granted hereunder shall be vested and
exercisable according to the terms hereof at such times and under such
conditions as determined by the Committee and set forth in the Agreement. An
Option may not be exercised for a fraction of a Share.

(b)                                 Deliveries upon Exercise. All or a portion
of an exercisable Option shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company or his or her office:

(i)                                     A written or electronic notice complying
with the applicable rules established by the Committee stating that the Option,
or a portion thereof, is exercised. The notice shall be signed by the Holder or
other person then entitled to exercise the Option or such portion of the Option;

(ii)                                  Such representations and documents as the
Committee, in its sole discretion, deems necessary or advisable to effect
compliance with Applicable Laws. The Committee may, in its sole discretion, also
take whatever additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates and issuing
stop transfer notices to agents and registrars;

(iii)                               Upon the exercise of all or a portion of an
unvested Option pursuant to Section 10(h), an Agreement covering the purchase of
the Restricted Stock in a form determined by the Committee and signed by the
Holder or other person then entitled to exercise the Option or such portion of
the Option;

(iv)                              In the event that the Option shall be
exercised pursuant to Section 10(f) by any person or persons other than the
Holder, appropriate proof of the right of such person or persons to exercise the
Option; and

(v)                                 The receipt by the Company of full payment
for such Shares, including payment of any applicable withholding tax. Tax
withholding may, in the sole discretion of the Committee, be paid in the form of
(i) deduction from wages otherwise payable to the Holder, (ii) consideration
used by the Holder to pay for such Shares under Section 9(b), or (iii) Shares
that have a Fair Market Value equal to the minimum required withholdings and
that would otherwise be deliverable to the Holder upon exercise of the Option.

(c)                                  Conditions to Delivery of Share
Certificates. The Company shall not be required to issue or deliver any
certificate or certificates for Shares purchased upon the exercise of any Option
or portion thereof prior to fulfillment of all of the following conditions:

(i)                                     The admission of such Shares to listing
on all stock exchanges on which such class of stock is then listed;

(ii)                                  The completion of any registration or
other qualification of such Shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee shall, in its sole discretion,
deem necessary or advisable;

 

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(iii)                               The obtaining of any approval or other
clearance from any state or federal governmental agency which the Committee
shall, in its sole discretion, determine to be necessary or advisable; and

(iv)                              The lapse of such reasonable period of time
following the exercise of the Option as the Committee may establish from time to
time for reasons of administrative convenience.

(d)                                 Termination of Relationship as a Service
Provider. If a Holder ceases to be a Service Provider for any reason, the
Holder’s continuing rights, if any, to Options, Restricted Stock, Stock Bonuses
or Stock Purchase Rights will be as specified in the terms of the Agreement. In
the absence of a provision in the Agreement that specifies the date of
expiration when the Holder ceases to be a Service Provider, each Option shall
remain exercisable in accordance with the provisions set forth herein, as
follows: (i) upon termination as a Service Provider for reasons other than
Cause, death or disability, the Option shall remain exercisable for three months
following the termination of the Holder’s relationship as a Service Provider
(but in no event later than the expiration of the term of such Option as set
forth in the Agreement or terms of the grant) to the extent that the Option is
then vested and the Shares covered by the unvested portion of the Option shall
immediately become available for issuance under the Plan; (ii) any unexercised
portion of the Option shall terminate at the end of the three-month period
specified herein and the Shares covered thereby shall immediately become
available for issuance under the Plan; (iii) if a Holder’s relationship as a
Service Provider is terminated for Cause, the entire Option shall immediately
terminate, and the Shares covered thereby shall immediately become available for
issuance under the Plan, and (iv) if a Holder is terminated for reasons of death
or disability, the rights under the Option shall be determined by Sections 10(e)
and 10(f).

(e)                                  Disability of Holder. If a Holder ceases to
be a Service Provider as a result of the Holder’s disability, and the applicable
Agreement does not specify the date of expiration when the Holder ceases to be a
Service Provider, an Option shall remain exercisable for 12 months following the
Holder’s termination due to disability (but in no event later than the
expiration of the term of such Option as set forth in the Agreement or terms of
the grant), but only to the extent that the Option was exercisable on the date
of disability, and the Shares covered by the unvested portion of the Option
shall immediately become available for issuance under the Plan. To the extent
that the Option is not exercised by the end of the 12-month period, the Option
shall expire and the Shares covered thereby shall again become available for
issuance under the Plan. For purposes of Incentive Stock Options, the term
“disability” shall be defined in accordance with Section 22(e)(3) of the Code.

(f)                                    Death of Holder. If a Holder dies while a
Service Provider, and the applicable Agreement does not specify the date of
expiration when the Holder ceases to be a Service Provider, an Option shall
remain exercisable for 12 months following the Holder’s death (but in no event
later than the expiration of the term of such Option as set forth in the
Agreement or terms of the grant), but only to the extent that the Option was
exercisable on the date of death, and the Shares covered by the unvested portion
of the Option shall immediately become available for issuance under the Plan. To
the extent that the Option is not exercised by the end of the 12-month period,
the Option shall expire and the Shares covered thereby shall again become
available for issuance under the Plan. The Option may be exercised by the
executor or administrator of the Holder’s estate or, if applicable, by the
person(s) entitled to exercise the Option under the Holder’s will or the laws of
descent or distribution.

 

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(g)                                 Regulatory Extension. A Holder’s Agreement
may provide that if the exercise of the Option following the termination of the
Holder’s status as a Service Provider (other than upon the Holder’s death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in Section 8 or (ii) the expiration of a period of three
months after the termination of the Holder’s status as a Service Provider during
which the exercise of the Option would not be in violation of such registration
requirements.

11.                                 Non-Transferability. Options, Restricted
Stock, Stock Bonuses and Stock Purchase Rights may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Holder, only by the Holder.

12.                                 Granting of Options to and Stock Elections
by Non-Employee Directors.

(a)                                  A person who is a Director but is not an
employee of the Company or any of its affiliates (a “Non-Employee Director”) who
is initially elected to the Board shall, during the term of the Plan, be granted
an Option to purchase 21,600 Shares (subject to adjustment as provided in
Section 15) on such initial election (an “Initial Option”), and (ii) an Option
to purchase 10,000 Shares (subject to adjustment as provided in Section 15) on
the date of the first annual meeting of stockholders that occurs each year that
the Non-Employee Director is reelected to the Board (the “Annual Option”).
Members of the Board who are employees of the Company who subsequently retire
from the Company and remain on the Board will not receive an Initial Option but,
to the extent that they are otherwise eligible as Non-Employee Directors, will
receive, after retirement from employment with the Company, the Annual Option.

(b)                                 In the event that the Company provides cash
compensation to Non-Employee Directors for service as a Director or for service
as a member or chairperson of a committee of the Board (collectively “Cash
Compensation”), each Non-Employee Director may elect to receive (subject to
limitations in Section 12(b)(i)), in lieu of receiving any portion of his or her
Cash Compensation, a Stock Bonus. Such an election shall be made by filing an
election with the Company, in accordance with procedures adopted by the
Committee, prior to the time that such Cash Compensation is paid. All elections
made hereunder are subject to the following:

(i)                                     The number of Shares payable under a
Stock Bonus shall be calculated by dividing (A) the amount of the Cash
Compensation that would have been payable to the Non-Employee Director in the
absence of an election, by (B) the Fair Market Value of a Share on the date that
the Cash Compensation would have otherwise been paid; provided, however, that no
more than 20,000 Shares can be made subject to a Stock Bonus during any 12-month
period that begins with the annual meeting of the shareholders of the Company in
which Board members are elected. Any amount of the Cash Compensation subject to
the election that exceeds the Fair Market Value of the Shares that are
calculated hereunder shall be paid in cash to the Non-Employee Director.

 

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(ii)                                  Other than the right of the Non-Employee
Director herein to elect to receive a Stock Bonus, the terms thereof shall be
subject to the provisions of Section 14.

13.                                 Terms of Non-Employee Director Options. The
per Share price of each Option granted to a Non-Employee Director (as defined in
Section 12) shall be equal to 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted. Initial Options (as defined in Section
12) granted to Non-Employee Directors shall become exercisable in cumulative
annual installments of one-third of the Shares subject to such option on each of
the yearly anniversaries of the date of Initial Option grant that the
Non-Employee Director remains a Director, commencing with the first such
anniversary, such that each Initial Option shall be 100% vested on the third
anniversary of its date of grant if the Non-Employee Director continues to be a
Director on such date. Annual Options (as defined in Section 12) granted to
Non-Employee Directors shall become exercisable in cumulative quarterly
installments of one-fourth of the Shares subject to such Option on the first day
of each of calendar quarter that follows the date of the Annual Option grant
that the Non-Employee Director remains a Director, such that each Annual Option
shall be 100% vested on the one-year anniversary of its date of grant if the
Non-Employee Director continues to be a Director on such date. Subject to
Section 10, the term of each Option granted to a Non-Employee Director shall be
ten years from the date the Option is granted. No portion of an Option which is
unexercisable at the time of a Non-Employee Director’s termination of membership
on the Board shall thereafter become exercisable.

14.                                 Stock Purchase Rights and Stock Bonuses.

(a)                                  Rights to Purchase. Stock Purchase Rights
may be issued either alone, in addition to, or in tandem with Options granted
under the Plan and/or cash awards made outside of the Plan. After the Committee
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer. The offer shall be accepted by execution of an Agreement that
covers the purchase of Restricted Stock in the form determined by the Committee.

(b)                                 Repurchase Right. Unless the Committee
determines otherwise, the Agreement for the purchase of Restricted Stock shall
grant the Company the right to repurchase Shares acquired upon exercise of a
Stock Purchase Right upon the termination of the purchaser’s status as a Service
Provider for any reason. Subject to Section 22, the purchase price for Shares
repurchased by the Company pursuant to such repurchase right and the rate at
which such repurchase right shall lapse shall be determined by the Committee in
its sole discretion, and shall be set forth in the Agreement.

(c)                                  Other Provisions. The Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Committee in its sole discretion.

 

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(d)                                 Rights as a Shareholder. Once the Stock
Purchase Right is exercised, the purchaser shall have rights equivalent to those
of a shareholder and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 15 of the Plan.

(e)                                  Stock Bonuses. Notwithstanding any other
provision of the Plan, the Committee may grant Stock Bonuses, as compensation or
as bonuses, to such Service Providers as the Committee may select in its sole
discretion from time to time. Such Stock Bonuses may be issued either alone, in
addition to, or in tandem with Options or Stock Purchase Rights granted under
the Plan and/or cash awards made outside of the Plan. After the Committee
determines that it will offer Stock Bonuses under the Plan, it shall advise the
offeree in writing of the terms and conditions related to the offer, including
the number of Shares that such person shall be entitled to receive, the time
within which such person must accept such offer, and the manner of acceptance of
such offer.

15.                                 Adjustments upon Changes in Capitalization,
Merger or Asset Sale. The terms of this Section 15 will apply to the rights of a
Holder under all Agreements issued hereunder; provided, however, that the terms
of an Agreement will control with respect to the Holder’s rights and adjustments
that are made with respect to a merger, asset purchase or other acquisition
transaction if the Agreement specifically makes provision for rights and
adjustments upon the occurrence of any such acquisition transaction.

(a)                                  Upon the occurrence of any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin off,
combination, or other similar corporate transaction or event, the Committee
shall make an adjustment that, in its sole and absolute discretion, it deems
appropriate and consistent with sections 409A and 424(a) of the Code in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan with respect to any of the following:

(i)                                     the number and kind of shares of Common
Stock (or other securities or property) that may be granted with respect to any
Option, Stock Bonus, Stock Purchase Right or Restricted Stock award (including,
but not limited to, adjustments of the limitations in Section 3 on the maximum
number and kind of shares which may be issued and adjustments of the maximum
number of Shares that may be purchased by any Holder in any calendar year
pursuant to Section 6(c));

(ii)                                  the number and kind of shares of Common
Stock (or other securities or property) that may be subject to any Option, Stock
Bonus, Stock Purchase Right or Restricted Stock award; and

(iii)                               the grant or exercise price with respect to
any outstanding Option or Stock Purchase Right.

 

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(b)                                 In the event of any transaction or event
described in Section 15(a), the Committee, in its sole discretion, and on such
terms and conditions as it deems appropriate, either by the terms of the Option,
Stock Purchase Right or Restricted Stock or by action taken prior to the
occurrence of such transaction or event and either automatically or upon the
Holder’s request, is hereby authorized to take any one or more of the following
actions whenever the Committee determines that such action is appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended by the Company to be made available under the Plan or with respect to
any Option, Stock Purchase Right or Restricted Stock granted or issued under the
Plan or to facilitate such transaction or event:

(i)                                     To provide for either the purchase of
any such Option, Stock Purchase Right or Restricted Stock for an amount of cash
equal to the amount that could have been obtained upon the exercise of such
Option or Stock Purchase Right or realization of the Holder’s rights had such
Option, Stock Purchase Right or Restricted Stock been currently exercisable or
payable or fully vested or the replacement of such Option, Stock Purchase Right
or Restricted Stock with other rights or property selected by the Committee in
its sole discretion;

(ii)                                  To provide that such Option or Stock
Purchase Right shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in the Plan or the provisions of such
Option or Stock Purchase Right;

(iii)                               To provide that such Option, Stock Purchase
Right or Restricted Stock be assumed by the successor or survivor corporation,
or a parent or subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices;

(iv)                              To make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject to outstanding
Options and Stock Purchase Rights, and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding Options, Stock Purchase Rights or Restricted Stock or Options, Stock
Purchase Rights or Restricted Stock which may be granted in the future; and

(v)                                 To provide that immediately upon the
consummation of such event, such Option or Stock Purchase Right shall not be
exercisable and shall terminate; provided, that for a specified period of time
prior to such event, such Option or Stock Purchase Right shall be exercisable as
to all Shares covered thereby, and the restrictions imposed under an Agreement
upon some or all Shares may be terminated and, in the case of Restricted Stock,
some or all shares of such Restricted Stock may cease to be subject to
repurchase, notwithstanding anything to the contrary in the Plan or the
provisions of such Option, Stock Purchase Right or Restricted Stock or any
Agreement.

(c)                                  Subject to Section 3, the Committee may, in
its sole discretion, include such further provisions and limitations in any
Option, Stock Purchase Right, Restricted Stock, Agreement or certificate, as it
may deem equitable and in the best interests of the Company.

 

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(d)                                 If the Company undergoes an Acquisition,
then any surviving corporation or entity or acquiring corporation or entity, or
affiliate of such corporation or entity, may assume any Options, Stock Purchase
Rights or Restricted Stock outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 15(d)) for those
outstanding under the Plan. In the event any surviving corporation or entity or
acquiring corporation or entity in an Acquisition, or affiliate of such
corporation or entity, does not assume such Options, Stock Purchase Rights or
Restricted Stock or does not substitute similar stock awards for those
outstanding under the Plan, then with respect to (i) Options, Stock Purchase
Rights or Restricted Stock held by participants in the Plan whose status as a
Service Provider has not terminated prior to such event, the vesting of such
Options, Stock Purchase Rights or Restricted Stock (and, if applicable, the time
during which such awards may be exercised) shall be accelerated and made fully
exercisable and all restrictions thereon shall lapse at least ten days prior to
the closing of the Acquisition (and the Options or Stock Purchase Rights
terminated if not exercised prior to the closing of such Acquisition), and (ii)
any other Options or Stock Purchase Rights outstanding under the Plan, such
Options or Stock Purchase rights shall be terminated if not exercised prior to
the closing of the Acquisition.

(e)                                  In the event the Company undergoes an
Acquisition and any surviving corporation or entity or acquiring corporation or
entity, or affiliate of such corporation or entity, does assume any Options,
Stock Purchase Rights or Restricted Stock outstanding under the Plan (or
substitutes similar stock awards, including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 15(e), for those outstanding under the Plan), then, with respect to
each stock award held by participants in the Plan then performing services as
Employees or Directors, the vesting of each such stock award (and, if
applicable, the time during which such stock award may be exercised) shall be
accelerated and such stock award shall immediately become fully vested and
exercisable, if any of the following events occurs within 12 months after the
effective date of the Acquisition or within the Trial Period (as defined herein)
even if such Trial Period extends beyond 12 months after the effective date of
the Acquisition:

(i)                                     the Employee status or Director status,
as applicable, of the participant holding such stock award is terminated by the
Company without Cause; or

(ii)                                  the Employee holding such stock award
terminates his or her Employee status following (A) a change in position with
the Company or any reduction in his or her level of responsibility; (B) any
reduction in his or her level of compensation (including base salary, fringe
benefits, participation in any plans and target bonuses under any
corporate-performance based bonus or incentive programs); or (C) a relocation of
the place of employment of the Employee by more than 50 miles; provided and only
if such change, reduction or relocation is effected without such individual’s
consent. In the event that an individual consents to such change, the individual
enters a trial period (the “Trial Period”) of six months from the date of
consent. At any time during the Trial Period an individual may revoke his or her
consent and meet the conditions of a voluntary resignation following a change as
stated in (A), (B), or (C) above, without the individual’s consent.

 

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(f)                                    The existence of the Plan, any Agreement
and the Options or Stock Purchase Rights granted hereunder shall not affect or
restrict in any way the right or power of the Company or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the rights
thereof or which are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

16.                                 Time of Granting Options, Stock Purchase
Rights and Stock Bonuses. The date of grant of an Option, Stock Purchase Right
or Stock Bonus shall, for all purposes, be the date on which the Committee makes
the determination granting such Option, Stock Purchase Right or Stock Bonus, or
such other date as is determined by the Committee. Notice of the determination
shall be given to each Employee or Consultant to whom an Option, Stock Purchase
Right or Stock Bonus is so granted within a reasonable time after the date of
such grant.

17.                                 Amendment and Termination of the Plan.

(a)                                  Amendment and Termination. The Board may at
any time wholly or partially amend, alter, suspend or terminate the Plan.
However, without approval of the Company’s stockholders given within 12 months
before or after the action by the Board, no action of the Board may, except as
provided in Section 15, increase the limits imposed in Section 3 on the maximum
number of Shares which may be issued under the Plan or extend the term of the
Plan under Section 7.

(b)                                 Stockholder Approval. The Board shall obtain
stockholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.

(c)                                  Effect of Amendment or Termination. No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Holder, unless mutually agreed otherwise between the Holder and
the Committee, which Agreement must be in writing and signed by the Holder and
the Company. Termination of the Plan shall not affect the Committee’s ability to
exercise the powers granted to it hereunder with respect to Options, Stock
Purchase Rights, Stock Bonuses or Restricted Stock granted or awarded under the
Plan prior to the date of such termination.

18.                                 Stockholder Approval. The Capstone Turbine
Corporation 2000 Equity Incentive Plan, as originally adopted, was submitted for
the approval of the Company’s stockholders and such approval was received within
12 months after the date of the Board’s initial adoption thereof. In addition,
amendments to increase the number of Shares authorized for issuance hereunder
have been previously approved by the Company’s stockholders, and such amendments
are incorporated herein.

19.                                 Inability to Obtain Authority. The inability
of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

 

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20.                                 Reservation of Shares. The Company, during
the term of this Plan, shall at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the Plan.

21.                                 Investment Intent. The Company may require a
Plan participant, as a condition of exercising or acquiring stock under any
Option, Stock Purchase Right or Stock Bonus, (i) to give written assurances
satisfactory to the Company as to the participant’s knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option or Stock Purchase Right, electing or accepting the Stock
Bonus; and (ii) to give written assurances satisfactory to the Company stating
that the participant is acquiring the stock subject to the Option, Stock
Purchase Right or Stock Bonus for the participant’s own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares upon the exercise or acquisition
of stock under the applicable Option, Stock Purchase Right or Stock Bonus has
been registered under a then currently effective registration statement under
the Securities Act or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.

22.                                 Governing Law. The validity and
enforceability of this Plan shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to otherwise governing
principles of conflicts of law.

 

IN WITNESS WHEREOF, the undersigned officer of Capstone Turbine Corporation has
executed this instrument on this the 11th day of October 2007, to be effective
as set forth above.

 

 

CAPSTONE TURBINE CORPORATION

 

 

 

 

 

 

 

By:

/s/ Walter J. McBride

 

 

 

 

 

 

 

 

Its:

Executive Vice President & CFO

 

 

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