EXHIBIT 10.3
Capstone Turbine Corporation
Shares of Common Stock, par value $0.001
SUBSCRIPTION AGREEMENT
     THIS SUBSCRIPTION AGREEMENT (the “AGREEMENT”) by and between ASSET MANAGERS
INTERNATIONAL LTD, an international business company incorporated in the British
Virgin Islands (the “INVESTOR”), and CAPSTONE TURBINE CORPORATION, a corporation
organized and existing under the laws of the State of Delaware (the “COMPANY”)
is dated the 7th day of October, 2005 and effective as of the execution of the
Escrow Agreement by and between the Company, the Investor and Mellon Investor
Services, LLC (the “COMMENCEMENT DATE”).
     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company shares of the Company’s common stock, par value $0.001 per share (the
“COMMON STOCK”), with an aggregate purchase price of up to Thirty-four Million
Dollars ($34,000,000.00); and
     WHEREAS, the shares of Common Stock will be issued pursuant to a
registration statement filed with the Securities and Exchange Commission (the
“SEC”) on Form S-3 (SEC File No. 333-128164) (the “SHELF REGISTRATION
STATEMENT”) with respect to, among other securities, the Company’s Common Stock
(such shares of Common Stock covered by the Shelf Registration Statement are
referred to herein as the “REGISTERED STOCK”).
     NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
     Section 1.1 “ADVANCE” shall mean the portion of the Commitment Amount
advanced by or on behalf of the Investor to or for the benefit of the Company on
any Advance Date for the purchase of shares of Registered Stock.
     Section 1.2 “ADVANCE DATE” shall mean each Trading Day during the Offering
Period (other than October 13, 2005) on which the Investor purchases, and the
Company sells, Registered Stock during the Offering Period in connection with an
Advance.
     Section 1.3 “ADVANCE NOTICE” shall mean a written (including by electronic
transmission) notice in the form attached hereto as Exhibit A to the Investor
setting forth the Daily Advance Amount that the Company is requesting with
respect to the Advance Date.
     Section 1.4 “AGREEMENT” shall have the meaning set forth in the preamble to
this Agreement.

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     Section 1.5 “BID PRICE” shall mean, on any Trading Day, the closing bid
price (as reported by Bloomberg, L.P.) of the Common Stock on the Principal
Market.
     Section 1.6 “COMMENCEMENT DATE” shall have the meaning set forth in the
preamble to this Agreement.
     Section 1.7 “COMMITMENT AMOUNT” shall mean the aggregate amount of up to
Thirty-four Million Dollars ($34,000,000) which the Investor has agreed to
provide to the Company during the Offering Period in order to purchase the
Company’s Registered Stock pursuant to the terms and conditions of this
Agreement.
     Section 1.8 “COMMON STOCK” shall have the meaning set forth in the recitals
to this Agreement.
     Section 1.9 “COMPANY” shall have the meaning set forth in the preamble to
this Agreement.
     Section 1.10 “DAILY ADVANCE AMOUNT” shall mean, on the first Advance Date,
$6,296,296.30, and on each subsequent Advance Date $3,078,189.30, or such other
amount advanced to or for the benefit of the Company for the purchase of shares
of Registered Stock as determined by the Company in accordance with this
Agreement (subject to the Maximum Daily Advance Amount).
     Section 1.11 “ESCROW AGENT” shall mean Mellon Investor Services LLC, and
its successors and assigns under the Escrow Agreement.
     Section 1.12 “ESCROW AGREEMENT” shall mean the escrow agreement among the
Company, the Investor, and Escrow Agent dated the date hereof.
     Section 1.13 “EXCHANGE ACT” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
     Section 1.14 “INVESTOR” shall have the meaning set forth in the preamble to
this Agreement.
     Section 1.15 “MARKET PRICE” shall mean the VWAP of each share of Common
Stock on the Trading Date with respect to which an Advance Notice has been
delivered.
     Section 1.16 “MAXIMUM DAILY ADVANCE AMOUNT” shall be $4,722,222.22 per any
Advance Date (other than the first Advance Date).
     Section 1.17 “NASD” shall mean the National Association of Securities
Dealers, Inc.
     Section 1.18 “OFFERING PERIOD” shall mean the period commencing on the
Trading Day immediately following the Commencement Date and expiring on the
tenth (10th) Trading Day after the Commencement Date; provided, however, that
the Offering Period shall not include October 13, 2005 as a Trading Day, and
that the Offering Period shall be extended automatically by one Trading Day for
each Trading Day on which no Advance is made, up to a

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maximum of ten (10) additional Trading Days; and further provided that the
Offering Period shall automatically expire upon the first to occur of, in the
aggregate, the purchase and sale of 17,000,000 shares of Common Stock or the
purchase and sale of shares of Common Stock with an aggregate purchase price of
$54,000,000 pursuant to this Agreement and the Subscription Agreement by and
between the Company and Monarch Pointe Fund, Ltd., dated October 7, 2005.
     Section 1.19 “PERSON” shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
     Section 1.20 “PRINCIPAL MARKET” shall mean the Nasdaq National Market.
     Section 1.21 “PURCHASE PRICE” shall be ninety-six percent (96%) of the
Market Price, computed to three decimal places, on the applicable Advance Date;
provided however, that if the Company offers Common Stock to one or more third
parties during the Offering Period at a price lower than the Purchase Price
calculated in accordance with the foregoing, the Purchase Price shall be the
lowest price at which the Company offers such shares of Common Stock.
     Section 1.22 “REGISTERED STOCK” shall have the meaning set forth in the
recitals to this Agreement.
     Section 1.23 “SHELF REGISTRATION STATEMENT” shall have the meaning set
forth in the recitals to this Agreement.
     Section 1.24 “SEC” shall have the meaning set forth in the recitals to this
Agreement.
     Section 1.25 “SECURITIES ACT” shall mean the Securities Act of 1933, as
amended.
     Section 1.26 “TRADING DAY” shall mean any day during which the Principal
Market shall be open for business.
     Section 1.27 “VWAP” shall mean the volume weighted average price of the
Company’s Common Stock as quoted by Bloomberg, LP on the applicable Trading Day.
     Section 1.28 “WRITTEN DIRECTION TO DISBURSE” shall mean the written notice
from the Investor and the Company to the Escrow Agent in the form attached
hereto as Exhibit B, which written notice may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.
ARTICLE II
ADVANCES
     Section 2.1 ADVANCES; SHARES TRANSFERS
               2.1.1 ADVANCES. On the first Trading Day after the Commencement
Date (i.e., the first “Advance Date”), the Company shall receive the Daily
Advance Amount of

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$6,296,296.30, and on each of the nine (9) Trading Days (subject to the
following proviso and sentence) thereafter during the Offering Period the
Company shall, unless the Company delivers an Advance Notice to the Investor
requesting a different Daily Advance Amount from zero to the Maximum Daily
Advance Amount in accordance with Section 2.3, receive a Daily Advance Amount of
$3,078,189.30; provided, however, that no Advance will be made, and no shares of
Registered Stock will be purchased, on October 13, 2005. Notwithstanding
anything to the contrary contained herein, no Advance will be made on any of
such nine (9) Trading Days, and the Investor shall not direct the Escrow Agent
to disburse any funds, on any such Trading Day on which between 6:30 a.m.
(Pacific Time) and 11:00 a.m. (Pacific Time) the VWAP of the Company’s Common
Stock is below ninety percent (90%) of the closing VWAP for the immediately
preceding Trading Day; provided, however, that the Company may elect to sell the
previously designated number of shares of Registered Stock and the Investor
shall direct the Escrow Agent to disburse the Daily Advance Amount on such a day
if the Company delivers written notice (including by electronic transmission) to
that effect to the Investor before 11:00 a.m. (Pacific Time) on such date. All
Advances shall be made on the Advance Date after the determination of the
Purchase Price and the number of shares of Registered Stock to be purchased with
respect to such Advance.
               2.1.2 REGISTERED STOCK TRANSFERS. With respect to each Advance,
the Investor shall receive via DTC transfer to the Investor’s brokerage account
on the next Trading Day after the Advance Date, the number of shares of
Registered Stock equal to the quotient obtained by dividing the Daily Advance
Amount disbursed to the Company with respect to such Advance by the per share
Purchase Price. No fractional shares shall be issued. Fractional shares shall be
rounded to the next higher whole number of shares. The maximum aggregate number
of shares of Common Stock which the Investor shall have the right or obligation
to acquire hereunder shall not exceed the lesser of: (i) 10,703,704 shares; and
(ii) the number of shares of Common Stock that has an aggregate Purchase Price
equal to the Commitment Amount.
     Section 2.2 CLOSING. On the Commencement Date, (i) the Company shall give
its transfer agent instructions providing for the transfer to the account
designated by the Escrow Agent of 10,703,704 shares of Registered Stock in
accordance with the Escrow Agreement and (ii) the Investor shall deliver (or
shall have delivered) to the Escrow Agent $28,000,000 and by 6:30 a.m. (Pacific
Time) on October 12, 2005 the Investor shall deliver an additional $6,000,000 of
the Commitment Amount by wire transfer of immediately available funds to the
account designated by the Escrow Agent in accordance with the Escrow Agreement.
The maximum aggregate number of shares of Common Stock which the Company shall
be required to sell hereunder shall not exceed the lesser of: (i) 10,703,704
shares; and (ii) the number of shares of Common Stock that has an aggregate
purchase price equal to the Commitment Amount. Each of the Company and the
Investor shall deliver to the other all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement in order
to implement and effect the transactions contemplated herein. Disbursement of
Advances to the Company and transfer of the shares of the Company’s Registered
Stock to the Investor shall occur in accordance with the conditions set herein
above and in the Escrow Agreement.
     Section 2.3 ADVANCE NOTICE; WRITTEN DIRECTION TO DISBURSE. On or before
6:00 a.m. (Pacific Time) on each Trading Day after the first Trading Day during
the

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Offering Period, subject to all other terms and provisions herein, the Company
shall deliver to the Investor an Advance Notice setting forth the requested
Daily Advance Amount (but not more than the Maximum Daily Advance Amount)
requested on such Advance Date. Subject to all other terms and provisions
herein, the Investor and the Company shall, after the close of the Principal
Market on each Trading Day including the first Trading Day during the Offering
Period, deliver to the Escrow Agent a Written Direction to Disburse, specifying
the Daily Advance Amount to be disbursed to the Company, the VWAP for the Common
Stock on such Advance Date, the Purchase Price for the shares of Registered
Stock, and the number of shares of Registered Stock to be transferred to the
account of Investor. If the Company does not deliver an Advance Notice on or
before 6:00 a.m. (Pacific Time) with respect to an Advance Date other than the
first Trading Day during the Offering Period, the Daily Advance Amount for such
Advance Date shall be $3,078,189.30.
     Section 2.4 TERMINATION OF INVESTMENT. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to each Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Shelf Registration Statement or (ii) the Company
shall at any time fail materially to comply with the requirements of Article VI.
The obligation of the Company to transfer shares of Registered Stock to the
Investor pursuant to this Agreement shall terminate permanently (including with
respect to each Advance Date that has not yet occurred) in the event that the
Investor shall at any time materially fail to comply with the requirements of
Article III.
     Section 2.5 AGREEMENT TO ADVANCE FUNDS. The Investor agrees to advance the
Commitment Amount to the Escrow Agent after the completion of each of the
following conditions and the other conditions set forth in this Agreement
required to be completed prior to advancement of the Commitment Amount:

  (a)   the execution and delivery by the Company, and the Investor, of this
Agreement and the Exhibits and Schedules hereto;     (b)   the Company’s
transfer agent shall have set aside in reserve the number of shares of
Registered Stock required by Section 2.2(b) for the benefit of the Investor;    
(c)   there shall not have been any stop order or suspension of the
effectiveness of the Shelf Registration Statement;     (d)   the Company shall
have obtained all material permits and qualifications required by any applicable
state for the offer and sale of the Registered Stock, and the sale and issuance
of the Registered Stock shall be legally permitted by all laws and regulations
to which the Company is subject;     (e)   the Company shall file with the
Commission in a timely manner a prospectus supplement under Securities Act Rule
424(b) describing the specific plan of distribution (the “PROSPECTUS
SUPPLEMENT”) and all reports, notices

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      and other documents required of a “reporting company” under the Exchange
Act and applicable SEC regulations; and     (f)   the conditions set forth in
Section 7.2 shall have been satisfied as of the time of the advancement of the
Commitment Amount.

     Section 2.6 DAMAGES. In the event the Investor sells shares of the
Company’s Common Stock after receipt of an Advance Notice and the Company fails
to perform its obligations as mandated in Article II, and specifically the
Company fails to effect through the Escrow Agent the transfer of the shares of
Registered Stock to the Investor, the Company acknowledges that the Investor
shall suffer financial loss and therefore shall be liable for any and all direct
losses, commissions or fees incurred by the Investor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
     Investor hereby represents to the Company that the following are true and
correct as of the date hereof:
     Section 3.1 ORGANIZATION AND AUTHORIZATION. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments, on behalf of the Investor. This Agreement has been duly
executed and delivered by the Investor and, assuming the execution and delivery
hereof and acceptance thereof by the Company, will constitute the legal, valid
and binding obligations of the Investor, enforceable against the Investor in
accordance with its terms.
     Section 3.2 NO UNDERWRITER. The Investor is not acting and will not act as
an “underwriter” (as that term is defined in the Securities Act) with respect to
the Company’s Common Stock.
     Section 3.3 NO STABILIZATION. Neither the Investor nor any of its
directors, officers, employees, agents, partners, members, controlling persons
or shareholders holding 5% or more of the Common Stock, has taken or will take,
directly or indirectly, any actions designed, or that might reasonably be
expected to cause or result in the stabilization or manipulation of the price of
the Common Stock.
     Section 3.4 NO SHORTING. Neither the Investor nor any of its affiliates
has, directly or indirectly, offered to “short sell”, contracted to “short
sell,” otherwise engaged in any “short selling” or encouraged others to “short
sell” the securities of the Company, including, without limitation, shares of
Common Stock that will be received as a result of the transactions contemplated
by this Agreement, and neither the Company nor any of its affiliates will engage
in any of the foregoing at any time any of them own shares of Common Stock
acquired under this

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Agreement. For purposes of this Agreement, “short selling” shall include any
short sale and any similar hedging or derivative securities transaction;
provided, however, that nothing contained herein shall prohibit the Investor
from selling any shares of Common Stock that will be received as a result of the
transactions contemplated by this Agreement “against the box.”
     Section 3.5 RESTRICTIONS ON RESALE. Investor shall not sell any shares of
Common Stock directly to any shareholder of the Company who owns of record or
beneficially fifteen percent (15%) or more, or any offeror for shares of Common
Stock which is seeking to acquire fifteen percent (15%) or more, of the Common
Stock the Company; provided, however, that nothing herein shall prevent the
Investor from selling its Common Stock in an open-market transaction through a
registered broker or dealer (as such terms are defined in the Exchange Act).
     Section 3.6 INVESTOR OWNERSHIP OF COMMON STOCK. Immediately prior to the
Commencement Date, neither the Investor nor any of its affiliates owns (either
directly or indirectly) any shares of Common Stock of the Company. Neither the
Investor nor any of its affiliates has, directly or indirectly, entered into any
agreement with any third party to sell shares, or offered to sell, any shares of
Common Stock to be acquired pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
     The Company hereby represents and warrants to the Investor as follows:
     Section 4.1 In connection with the sale of the Registered Stock, the
Company has made available, as requested (including electronically via the SEC’s
EDGAR system) to Investor its periodic and current reports, forms, schedules,
proxy statements and other documents (including exhibits and all other
information incorporated by reference) filed with the SEC under the Exchange
Act. The Company’s Annual Report on Form 10-K for the year ended March 31, 2005
and all subsequent reports, forms, schedules, statements, documents, filings and
amendments filed by the Company with the SEC under the Exchange Act, are
collectively referred to as the “DISCLOSURE DOCUMENTS.” All references in this
Agreement to financial statements and schedules and other information which is
“contained,” “included” or “stated” in the Disclosure Documents (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules, documents, exhibits and other information
which is incorporated by reference in the Disclosure Documents. The Disclosure
Documents as of their respective dates did not, and will not as of the
Commencement Date or any Advance Date, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Disclosure Documents and the documents incorporated or deemed to
be incorporated by reference therein, at the time they were filed or hereafter
are filed with the SEC, complied and will comply, at the time of filing, in all
material respects with the requirements of the Securities Act and/or the
Exchange Act, as the case may be, as applicable.
     Section 4.2 Schedule 4.2(A) attached hereto sets forth a complete list of
the subsidiaries of the Company (the “SUBSIDIARIES”). Each of the Company and
its Subsidiaries has been duly incorporated and each of the Company and the
Subsidiaries is validly existing in good standing as a corporation under the
laws of its jurisdiction of incorporation, with the

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requisite corporate power and authority to own its properties and conduct its
business as now conducted as described in the Disclosure Documents and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or other), properties or results of
operations of the Company and the Subsidiaries, taken as a whole (any such
event, a “MATERIAL ADVERSE EFFECT”); as of the Commencement Date, the Company
will have the authorized, issued and outstanding capitalization set forth in the
Disclosure Documents (the “COMPANY CAPITALIZATION”); the Company does not have
any Subsidiaries or own directly or indirectly any of the capital stock or other
equity or long-term debt securities of or have any equity interest in any other
person; all of the outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights and are owned free and clear of all liens, encumbrances, equities, and
restrictions on transferability (other than those imposed by the Securities Act
and the state securities or “Blue Sky” laws) or voting; except as set forth in
the Disclosure Documents, all of the outstanding shares of capital stock of the
Subsidiaries are owned, directly or indirectly, by the Company; except as set
forth in the Disclosure Documents, no options, warrants or other rights to
purchase from the Company or any Subsidiary, agreements or other obligations of
the Company or any Subsidiary to issue or other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company or any Subsidiary are outstanding; and except as
included in the Company’s public filings on file with the Securities and
Exchange Commission, there is no agreement, understanding or arrangement among
the Company or any Subsidiary and each of their respective stockholders or any
other person relating to the ownership or disposition of any capital stock of
the Company or any Subsidiary or the election of directors of the Company or any
Subsidiary or the governance of the Company’s or any Subsidiary’s affairs, and,
if any, such agreements, understandings and arrangements will not be breached or
violated as a result of the execution and delivery of, or the consummation of
the transactions contemplated by, this Agreement.
     Section 4.3 The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly and validly authorized by the Company and, when executed
and delivered by the Company, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as the enforcement thereof may be limited by (A) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors’ rights
generally or (B) general principles of equity and the discretion of the court
before which any proceeding therefore may be brought (regardless of whether such
enforcement is considered in a proceeding at law or in equity) (collectively,
the “ENFORCEABILITY EXCEPTIONS”).
     Section 4.4 The Common Stock of the Company conforms to the description
thereof contained in the Disclosure Documents. The stockholders of the Company
have no preemptive or similar rights with respect to the Common Stock.

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     Section 4.5 No consent, approval, authorization, license, qualification,
exemption or order of any court or governmental agency or body or third party is
required for the performance of this Agreement by the Company or for the
consummation by the Company of any of the transactions contemplated thereby, or
the application of the proceeds of the issuance of the Registered Stock as
described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have been
obtained on or prior to the Commencement Date, (ii) as are not required to be
obtained on or prior to the Commencement Date that will be obtained when
required, or (iii) the failure to obtain which would not, individually or in the
aggregate, have a Material Adverse Effect.
     Section 4.6 None of the Company or the Subsidiaries is (i) in material
violation of its articles of incorporation or bylaws (or similar organizational
document), (ii) in breach or violation of any statute, judgment, decree, order,
rule or regulation applicable to it or any of its properties or assets, which
breach or violation would, individually or in the aggregate, have a Material
Adverse Effect, or (iii) except as described in the Disclosure Documents, in
default (nor has any event occurred which with notice or passage of time, or
both, would constitute a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or agreement or instrument to which it
is a party or to which it is subject, which default would, individually or in
the aggregate, have a Material Adverse Effect.
     Section 4.7 The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
thereby and the fulfillment of the terms thereof will not (a) violate, conflict
with or constitute or result in a breach of or a default under (or an event
that, with notice or lapse of time, or both, would constitute a breach of or a
default under) any of (i) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their respective
properties or assets are subject, (ii) the Certificate of Incorporation or
bylaws of any of the Company or the Subsidiaries (or similar organizational
document) or (iii) any statute, judgment, decree, order, rule or regulation of
any court or governmental agency or other body applicable to the Company or the
Subsidiaries or any of their respective properties or assets or (b) result in
the imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of the
Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
     Section 4.8 The audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations, cash flows and changes in shareholders’ equity of the entities,
at the dates and for the periods to which they relate and have been prepared in
all material respects in accordance with generally accepted accounting
principles applied on a consistent basis; the interim unaudited consolidated
financial statements included in the Disclosure Documents present fairly the
consolidated financial position, results of operations and cash flows of the
entities, at the dates and for the periods to which they relate subject to
year-end audit adjustments and have been prepared in all material respects in
accordance with generally accepted accounting principles applied on a consistent
basis with the audited consolidated financial statements included therein; the
selected financial

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data included in the Disclosure Documents present fairly the information shown
therein and have been prepared and compiled in all material respects on a basis
consistent with the audited financial statements included therein, except as
otherwise stated therein; and each of the auditors previously engaged by the
Company or to be engaged in the future by the Company is an independent
certified public accountant as required by the Securities Act for an offering
registered thereunder.
     Section 4.9 Except as described in the Disclosure Documents, there is not
pending or, to the knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which any of
the Company or the Subsidiaries is a party, or to which their respective
properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the Company or any
such Subsidiary, would, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold hereunder
or the application of the proceeds therefrom or the other transactions described
in the Disclosure Documents.
     Section 4.10 The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how that are necessary to conduct their businesses as
described in the Disclosure Documents. None of the Company or the Subsidiaries
has received any written notice of infringement of (or knows of any such
infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
     Section 4.11 Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals presently required or necessary
to own or lease, as the case may be, and to operate its respective properties
and to carry on its respective businesses as now or proposed to be conducted as
set forth in the Disclosure Documents (“PERMITS”), except where the failure to
obtain such Permits would not, individually or in the aggregate, have a Material
Adverse Effect and none of the Company or the Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Disclosure Documents and except where such
revocation or modification would not, individually or in the aggregate, have a
Material Adverse Effect.
     Section 4.12 Subsequent to June 30, 2005 and except as described in the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 or
in the Company’s Annual Report on Form 10-K for the year ended March 31, 2005,
(i) the Company and the Subsidiaries have not incurred any material liabilities
or obligations, direct or contingent, or entered into any material transactions
not in the ordinary course of business or (ii) the Company and the Subsidiaries
have not purchased any of their respective outstanding capital stock, or
declared, paid or otherwise made any dividend or distribution of any kind on any
of their respective capital stock or otherwise (other than, with respect to any
of such Subsidiaries, the purchase of capital stock by the Company), (iii) there
has not been any material increase in the long-term indebtedness of the Company
or any of the Subsidiaries, (iv) there has not occurred any event or

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condition, individually or in the aggregate, that has a Material Adverse Effect,
and (v) the Company and the Subsidiaries have not sustained any material loss or
interference with respect to their respective businesses or properties from
fire, flood, hurricane, earthquake, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding.
     Section 4.13 There are no material legal or governmental proceedings nor
are there any material contracts or other documents required by the Securities
Act to be described in a prospectus that are not described in the Disclosure
Documents. Except as described in the Disclosure Documents, none of the Company
or the Subsidiaries is in default under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except for such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
     Section 4.14 The Company and the Subsidiaries own no real property, and
each has good and marketable title to the leasehold estate in the real property
described in the Disclosure Documents as being leased by it, free and clear of
all liens, charges, encumbrances or restrictions, except, in each case, as
described in the Disclosure Documents or such as would not, individually or in
the aggregate, have a Material Adverse Effect. All material leases, contracts
and agreements to which the Company or any of the Subsidiaries is a party or by
which any of them is bound are valid and enforceable against the Company or any
such Subsidiary, are, to the knowledge of the Company, valid and enforceable
against the other party or parties thereto and are in full force and effect, in
each case subject to the Enforceability Exceptions.
     Section 4.15 Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which adequate reserves have been provided in
accordance with generally accepted accounting principles, there is no tax
deficiency that has been asserted against the Company or any Subsidiary that
would, individually or in the aggregate, have a Material Adverse Effect.
     Section 4.16 None of the Company or the Subsidiaries is, or immediately
after any Advance Date will be, required to register as an “investment company”
or a company “controlled by” an “investment company” within the meaning of the
Investment Company Act of 1940, as amended (the “INVESTMENT COMPANY ACT”).
     Section 4.17 None of the Company or the Subsidiaries or, to the knowledge
of any of such entities’ directors, officers, employees, agents or controlling
persons, has taken, directly or indirectly, any action for the purpose of
causing the stabilization or manipulation of the price of the Common Stock.
     Section 4.18 There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiaries which is pending
or, to the knowledge of the Company or any of the Subsidiaries, threatened.

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     Section 4.19 Each of the Company and the Subsidiaries carries general
liability insurance coverage comparable to other companies of its size and
similar business.
     Section 4.20 Except as disclosed in the Disclosure Documents, each of the
Company and the Subsidiaries maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management’s authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its material assets is permitted only in
accordance with management’s authorization and (D) the values and amounts
reported for its material assets are compared with its existing assets at
reasonable intervals.
     Section 4.21 Other than the fee to Credit Suisse First Boston set forth in
the Prospectus Supplement, the Company does not know of any claims for services,
either in the nature of a finder’s fee or financial advisory fee, with respect
to the offering of the Registered Stock and the transactions contemplated by
this Agreement.
     Section 4.22 The Common Stock is traded on the Principal Market. Except as
described in the Disclosure Documents, the Company currently is not in violation
of, and the consummation of the transactions contemplated by this Agreement will
not violate, any rule of the Principal Market.
     Section 4.23 Set forth in the Prospectus Supplement is the Company’s
intended use of the proceeds from this transaction.
     Section 4.24 To the Company’s knowledge, none of the officers or directors
of the Company (i) has been convicted of any crime (other than traffic
violations or misdemeanors not involving fraud) or is currently under
investigation or indictment for any such crime, (ii) has been found by a court
or governmental agency to have violated any securities or commodities law or to
have committed fraud or is currently a party to any legal proceeding in which
either is alleged, (iii) has been the subject of a proceeding under the
bankruptcy laws or any similar state laws, or (iv) has been an officer,
director, general partner, or managing member of an entity which has been the
subject of such a proceeding.
ARTICLE V
INDEMNIFICATION
     Section 5.1 INDEMNIFICATION.

  (a)   In consideration of the Investor’s execution and delivery of this
Agreement, and in addition to all of the Company’s other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “INVESTOR
INDEMNITEES”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Investor Indemnitee is a
party to the action for which indemnification hereunder is

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      sought), and including reasonable attorneys’ fees and disbursements (the
“INDEMNIFIED LIABILITIES”), incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to (i) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
or (ii) any breach of any covenant, agreement or obligation of the Company
contained in this Agreement or any other certificate, instrument or document
contemplated hereby or thereby. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.     (b)   In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Investor’s other obligations under this Agreement, the
Investor shall defend, protect, indemnify and hold harmless the Company and all
of its officers, directors, shareholders, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “COMPANY INDEMNITEES”) from
and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to
(i) any misrepresentation or breach of any representation or warranty made by
the Investor in this Agreement or the Prospectus Supplement, or (ii) any breach
of any covenant, agreement or obligation of the Investor contained in this
Agreement or any other certificate, instrument or document contemplated hereby
or thereby. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.     (c)   The obligations of the parties to
indemnify or make contribution under this Section 5.1 shall survive termination.

ARTICLE VI
COVENANTS OF THE COMPANY
     Section 6.1 LISTING OF COMMON STOCK. The Company shall maintain the Common
Stock’s authorization for quotation on the Principal Market.
     Section 6.2 EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Exchange Act.

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     Section 6.3 TRANSFER AGENT INSTRUCTIONS. The Company shall deliver or cause
the Escrow Agent to deliver instructions to the Company’s transfer agent to
transfer shares of Registered Stock equal to the Daily Advance Amount divided by
the per share Purchase Price to the Investor on each Advance Date.
     Section 6.4 CORPORATE EXISTENCE. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
     Section 6.5 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE AN ADVANCE. The Company will immediately notify the Investor upon
its becoming aware of the occurrence of any of the following events in respect
of a registration statement or related prospectus relating to an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the registrable securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the registration statement or related
prospectus of any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the registration statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company’s
reasonable determination that a post-effective amendment to the registration
statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
     Section 6.6 RESTRICTION ON SALE OF CAPITAL STOCK. During the Offering
Period, the Company shall not, without the prior written consent of the
Investor, (i) issue or sell any Common Stock or preferred stock without
consideration or for a consideration per share less than the Bid Price of the
Common Stock determined immediately prior to its issuance, (ii) issue or sell
any preferred stock, warrant, option, right, contract, call, or other security
or instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than such Common
Stock’s Bid Price determined immediately prior to its issuance, or (iii) file
any registration statement on Form S-8.
     Section 6.7 CONSOLIDATION; MERGER. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all the assets of the Company to another
entity (a “CONSOLIDATION EVENT”) unless the resulting successor or acquiring
entity (if not the Company) assumes by

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written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
ARTICLE VII
CONDITIONS FOR ADVANCE AND CONDITIONS TO ADVANCES
     Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Advance is subject to the satisfaction, or
waiver by the Company, at or before each Advance Date, of each of the conditions
set forth below.

  (a)   ACCURACY OF THE INVESTOR’S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor contained herein shall be true
and correct in all material respects.     (b)   PERFORMANCE BY THE INVESTOR. The
Investor shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement the Commencement
Date to be performed, satisfied or complied with by the Investor at or prior to
the Commencement Date.

     Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO SELL
REGISTERED STOCK AND THE OBLIGATION OF THE INVESTOR TO PURCHASE REGISTERED
STOCK. The right of the Company to receive an Advance and the obligation of the
Investor hereunder to acquire and pay for shares of the Company’s Common Stock
incident to an Advance is subject to the fulfillment by the Company, of each of
the following conditions on each Advance Date:

  (a)   ACCURACY OF COMPANY’S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects.     (b)   REGISTRATION OF THE COMMON STOCK
WITH THE SEC. The Shelf Registration Statement shall have previously become
effective and shall remain effective on each Advance Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Shelf Registration Statement
or that the SEC otherwise has suspended or withdrawn the effectiveness of the
Shelf Registration Statement, either temporarily or permanently, or intends or
has threatened to do so (unless the SEC’s concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Shelf Registration Statement or related
prospectus shall exist. The Prospectus Supplement must have been filed with the
SEC on or prior to the Commencement Date.     (c)   AUTHORITY. The Company shall
have obtained all permits and qualifications required by any applicable state
for the offer and sale of the

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      shares of Common Stock, or shall have the availability of exemptions
therefrom. The sale and issuance of the shares of Common Stock shall be legally
permitted by all laws and regulations to which the Company is subject.     (d)  
FUNDAMENTAL CHANGES. There shall not exist any fundamental changes to the
information set forth in the Shelf Registration Statement which would require
the Company to file a post-effective amendment to the Shelf Registration
Statement.     (e)   PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to each Advance Date.     (f)   NO
INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.     (g)   NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON
STOCK. The trading of the Common Stock is not suspended by the SEC or the
Principal Market. The issuance of shares of Common Stock with respect to the
applicable Advance, if any, shall not violate the shareholder approval
requirements of the Principal Market. The Company shall not have received any
notice threatening the continued listing of the Common Stock on the Principal
Market.     (h)   MAXIMUM DAILY ADVANCE AMOUNT. The amount of an Advance
requested by the Company shall not exceed the Maximum Daily Advance Amount. In
addition, notwithstanding anything to the contrary contained herein, in no event
shall the number of shares the Investor is required or permitted to purchase
pursuant to an Advance equal or exceed the number of shares that would cause the
aggregate number of shares of Common Stock that are acquired as a result of the
transactions contemplated hereby and beneficially owned by the Investor and its
affiliates to exceed nine and 99/100 percent (9.99%) of the then outstanding
Common Stock of the Company. Shares owned by any other investor pursuant to a
Subscription Agreement referenced in this Agreement will not be aggregated with
shares owned by the Investor for purposes of determining beneficial ownership.
For the purposes of this Section beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act.

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  (i)   NO KNOWLEDGE. The Company has no knowledge of any event which would be
more likely than not to have the effect of causing the Shelf Registration
Statement to be suspended or otherwise ineffective.

ARTICLE VIII
NON-DISCLOSURE OF NON-PUBLIC INFORMATION
     Section 8.1 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
               Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor of any event or the existence of
any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Shelf Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.1 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Shelf Registration Statement contains an untrue
statement of material fact or omits a material fact required to be stated in the
Shelf Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
CHOICE OF LAW/JURISDICTION
     Section 9.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES FURTHER AGREE THAT ANY
ACTION BETWEEN THEM SHALL BE HEARD IN AND EXPRESSLY CONSENT TO THE JURISDICTION
AND VENUE OF THE STATE AND FEDERAL COURTS LOCATED IN THE CITY OF LOS ANGELES,
CALIFORNIA FOR THE ADJUDICATION OF ANY CIVIL ACTION ASSERTED PURSUANT TO THIS
PARAGRAPH.

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ARTICLE X
ASSIGNMENT; TERMINATION
     Section 10.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.
     Section 10.2 TERMINATION. Except for provisions which expressly survive
termination, this Agreement shall terminate upon the earliest to occur of the
following:
               (i) The expiration of the Offering Period;
               (ii) Investor provides written notice to the Company that
Investor is terminating the Agreement due to a material inaccuracy of any
representation or warranty of the Company or its failure to comply with any
covenant or obligation hereunder, or the Company provides written notice to the
Investor that the Company is terminating the Agreement due to a material
inaccuracy of any representation or warranty of the Investor or its failure to
comply with any covenant or obligation hereunder;
               (iii) immediately without further action by either party if the
sale of Common Stock hereunder is prohibited or enjoined by applicable law or
governmental or self-regulatory body; and
               (iv) by written agreement of the parties.
ARTICLE XI
NOTICES
     Section 11.1 NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or
by other electronic transmission (including email); (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

     
If to the Company, to:
  Capstone Turbine Corporation
 
  21211 Nordhoff Street
 
  Chatsworth, CA 91311
 
  Attention: John R. Tucker
 
  Telephone: 818-407-3611
 
  Facsimile: 818-734-5321
 
  Email: jtucker@capstoneturbine.com
 
   
With a copy to:
  Waller Lansden Dortch & Davis, PLLC
 
  511 Union Street, Suite 2700
 
  Nashville, TN 37219
 
  Attention: J. Chase Cole, Esq.

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  Telephone: (615) 850-8476
 
  Facsimile: (615) 244-6804
 
  Email: chase.cole@wallerlaw.com
 
   
If to the Investor(s):
  Asset Managers International Ltd
 
  c/o Olympia Capital (Ireland) Ltd. Harcourt Center 6th Floor, Block 3
 
  Harcourt Road Dublin 2, Ireland
 
  Attention: Andrew Bennett
 
  Facsimile: +353 (1) 478 6298
 
  Email: abennett@olympiacapital.ie
 
   
With a Copy to:
  Pentagon Capital Management Plc
 
  88 Baker Street, London W1U 6TQ
 
  Attention: Lewis Chester
 
  Telephone: +44 20 7 299 9922
 
  Facsimile: +44 20 7 299 9988
 
  Email: lchester@pentagoncapital.com

Each party shall provide two (2) days’ prior written notice to the other party
of any change in address or facsimile number.
ARTICLE XII
MISCELLANEOUS
     Section 12.1 COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.
     Section 12.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
     Section 12.3 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

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     Section 12.4 SURVIVAL. The representations and warranties of the Company
set forth in this agreement shall survive until the first (1st) anniversary of
the Commencement Date.
     Section 12.5 BROKERAGE. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party except as
indicated in the Disclosure Documents. The Company on the one hand, and the
Investor, on the other hand, agree to indemnify the other against and hold the
other harmless from any and all liabilities to any person claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
     Section 12.6 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party’s domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
     Section 12.7 ATTORNEYS’ FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party or parties shall be entitled to receive from the other party or parties
reasonable attorneys’ fees, costs and necessary disbursements in addition to any
other relief to which the prevailing party or parties may be entitled.
     Section 12.8 SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon Investor and the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person.
     Section 12.9 NO WAIVER. No failure or delay on the part of the Company or
Investor in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or Investor at law or in equity or otherwise. No waiver of or consent to
any departure by the Company or Investor from any provision of this Agreement
shall be effective unless signed in writing by the party entitled to the benefit
thereof, provided that notice of any such waiver shall be given to each party
hereto as set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.

            COMPANY:
CAPSTONE TURBINE CORPORATION

      By:   /s/ John R. Tucker       Name:   John R. Tucker      Title:  
President and Chief Executive Officer     
    INVESTOR:
ASSET MANAGERS INTERNATIONAL LTD

      By:   /s/ Carolynn D. Hiron       Name:   Carolynn D. Hiron      Title:  
Director   

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EXHIBIT A
ADVANCE NOTICE
     The undersigned, _______________ hereby certifies, with respect to the sale
of shares of Common Stock of CAPSTONE TURBINE CORPORATION (the “COMPANY”),
issuable in connection with this Advance Notice dated __________________ (the
“NOTICE”), delivered pursuant to the Subscription Agreement (the “AGREEMENT”),
as follows:
     1. The undersigned is the duly elected _______________ of the Company.
     2. The representations and warranties of the Company contained in the
Agreement are true and correct in all material respects and the Company is in
compliance with each of its obligations under such Agreement as of the date
hereof.
     3. The Daily Advance Amount requested on _______________, 2005, is
$_______________.
     The undersigned has executed this Notice this _______________day of
_______________, 2005.

            COMPANY:
CAPSTONE TURBINE CORPORATION

      By:         Name:         Title:      

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EXHIBIT B
WRITTEN DIRECTION TO DISBURSE
     The undersigned, _______________, hereby certifies as follows, on behalf of
ASSET MANAGERS INTERNATIONAL LTD (the “INVESTOR”), pursuant to the Subscription
Agreement dated as of even date herewith (the “AGREEMENT”).
     1. The undersigned is the duly elected _______________of the Investor.
     2. The Investor received an Advance Notice from Capstone Turbine
Corporation (the “Company”) on _______________, 2005, requesting a Daily Advance
Amount of $_______________.
     3. The VWAP of the shares of Common Stock is $_______________, and the
Purchase Price per share for such shares is $_______________.
     4. Pursuant to the Agreement, the Investor shall acquire the number of
shares of Registered Stock equal to $_______________ [amount from 2 above]
divided by the per share Purchase Price.
     5. The Escrow Agent is directed to disburse immediately $_______________ to
the account designated by the Company in the Escrow Agreement.
     6. The Escrow Agent is directed to effect immediately the transfer of
_______________ shares of Registered Stock to the Investor’s account set forth
in the Escrow Agreement.
     The undersigned has executed this Written Direction this _______________
day of _______________, 2005.

            ASSET MANAGERS INTERNATIONAL LTD
      By:         Name:         Title:        

The signature below manifests the Company’s
agreement as to numbers 3, 4, 5 and 6 set
forth above.

          CAPSTONE TURBINE CORPORATION
      By:         Name:         Title:        

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Schedule 4.2(A)
Capstone Turbine International, Inc.

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