Exhibit 10

 

WARRANT EXERCISE AGREEMENT

 

THIS WARRANT EXERCISE AGREEMENT, dated as of September 17, 2009 (this
“Agreement”) is entered into by and between Capstone Turbine Corporation, a
Delaware corporation (the “Company”), and the holder (the “Holder”) of that
certain Warrant to Purchase Common Stock (the “Initial Warrant”) issued by the
Company to the Holder on May 7, 2009 for the purchase of up to
                               shares (the “Initial Warrant Shares”) of the
Common Stock, $0.001 par value per share, of the Company (the “Common Stock”).

 

WHEREAS, the Company desires to induce the Holder to exercise the Initial
Warrant with respect to all of the shares of Common Stock purchasable
thereunder;

 

WHEREAS, in order to induce the Holder to exercise the Initial Warrant and in
exchange for certain cash consideration, the Company is willing to issue to the
Holder a new warrant (the “New Warrant”) to purchase, at an exercise price of
$1.42 per share,              shares of Common Stock (the “New Warrant Shares”),
such New Warrant to be substantially in the form attached hereto as Exhibit A;
and

 

WHEREAS, in consideration of the foregoing, the Holder is willing to exercise
the Initial Warrant and to purchase the New Warrant.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, intending to be legally bound hereby,
the parties hereto agree as follows:

 

1.             Inducement to Exercise.  On the date hereof, the Company hereby
agrees to issue to the Holder, and the Holder hereby agrees to purchase from the
Company, a New Warrant exercisable for the New Warrant Shares during the period
beginning on the date hereof and continuing until 11:59 p.m. New York time on
May 7, 2016.  The purchase price for the New Warrant is $0.0625 per New Warrant
Share subject to the New Warrant, or an aggregate purchase price of
$                   (the “New Warrant Purchase Price”).  No later than one
(1) Business Day after the execution of this Agreement, the Holder shall pay the
New Warrant Purchase Price to the Company by wire transfer of immediately
available funds to an account designated by the Company. The Company shall
deliver the New Warrant to the Holder at the address provided on the signature
page hereto not more than one (1) Business Day after payment of the Aggregate
Exercise Price of the Initial Warrant and the New Warrant Purchase Price.

 

2.             Exercise of the Initial Warrant.  Subject to the terms and
conditions set forth herein, the Company hereby agrees to reduce the Exercise
Price of the Initial Warrant to $0.90 so that the Aggregate Exercise Price for
the Initial Warrant for purposes of the transactions effected by this
Agreement,  shall be $                            .  On the date hereof, the
Holder hereby exercises the entire Initial Warrant for cash in the amount of the
Aggregate Exercise Price.  In connection with such exercise and concurrently
with the execution and delivery of this Agreement, Holder shall deliver an
executed copy of the Exercise Notice attached hereto as Exhibit B indicating a
Cash Exercise of the Initial Warrant.  No later than one (1) Business Day after
the execution of this Agreement, the Holder shall pay the sum equal to the
Aggregate Exercise Price payable upon exercise of the Initial Warrant as set
forth above to the Company by wire transfer of immediately available funds to an
account designated by the Company and shall deliver the original Initial Warrant
to the Company.  The Company shall deliver the Initial Warrant Shares to the
Holder in accordance with the terms of the Initial Warrant.

 

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3.             Representations of the Company.  The Company hereby covenants,
and makes the following representations and warranties, to the Holder, Lazard
Frères & Co. LLC and Lazard Capital Markets LLC, each of which is true and
correct on the date hereof and shall survive the transactions contemplated by
this Agreement.

 

(a)           Power and Authorization.  The Company is duly incorporated,
validly existing and in good standing, and has the power, authority and capacity
to execute and deliver this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby.

 

(b)           Valid and Enforceable Agreement; No Violations.  This Agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors’ rights generally, and
(b) general principles of equity.  Consummation of the transactions contemplated
hereby will not violate or conflict with the Company’s charter or bylaws or any
material agreement or instrument to which the Company is a party or by which the
Company or any of its assets are bound, or any laws or regulations applicable to
the Company.

 

(c)           Issuance of Securities.  The New Warrant has been duly authorized
and, when issued in accordance with this Agreement, will be duly and validly
issued.  The Company has reserved from its duly authorized capital stock a
sufficient number of shares of Common Stock to cover the issuance of the New
Warrant Shares.  The offering and sale of the New Warrant and the New Warrant
Shares is being made pursuant to (a) an effective Registration Statement on
Form S-3, No. 333-156459 (the “Registration Statement”) filed by the Company
with the Securities and Exchange Commission (the “Commission”), including the
Prospectus contained therein (the “Base Prospectus”), and (b) a Prospectus
Supplement (the “Prospectus Supplement” and, together with the Base Prospectus,
the “Prospectus”) containing certain supplemental information regarding the New
Warrant and terms of the offering that will be filed with the Commission and
delivered to the Holder. The offering and sale of the Initial Warrant Shares was
previously registered pursuant to the Registration Statement and a Prospectus
Supplement, dated as of and filed with the Commission on May 4, 2009 (together
with the Base Prospectus, the “May Prospectus”).

 

(d)           Registration Statement.  The Company and the transactions
contemplated by this Agreement meet the requirements and comply with the
conditions for the use of Form S-3 under the Securities Act of 1933, as amended
(the “Securities Act”).  The Registration Statement meets, and the offering and
sale of the New Warrant and New Warrant Shares as contemplated hereby complies
with, the requirements of Rule 415 under the Securities Act (including, without
limitation, Rule 415(a)(4) and (a)(5) of the Rules and Regulations).  The
Company has complied, to the Commission’s satisfaction, with all requests of the
Commission for additional or supplemental information.  No stop order preventing
or suspending use of the Registration Statement, any Preliminary Prospectus or
the Prospectus or the effectiveness of the Registration Statement has been
issued by the Commission, and no proceedings for such purpose pursuant to
Section 8A of the Securities Act against the Company or related to the offering
have been instituted or are pending or, to the Company’s knowledge, are
contemplated or threatened by the Commission, and any request received by the
Company on the part of the Commission for additional information has been
complied with.

 

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(e)           SEC Filings.  The Company is current in its filings of all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Upon
issuance, the New Warrant Shares are eligible for sale by the Holders to the
public pursuant to the Prospectus and the Initial Warrant Shares are eligible
for sale by the Holders to the public pursuant to the May Prospectus.

 

(f)            Disclosure.  The Company confirms that neither it nor any other
person acting on its behalf has provided the Holder or their agent or counsel
with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information about the Company. The Company
understands and confirms that the Holder will rely on the foregoing
representations in effecting transactions in securities of the Company.  All
disclosure provided to the Holder regarding the Company or any of its
subsidiaries, their business and the transactions contemplated hereby furnished
by or on behalf of the Company is true and correct and does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.  Each press release issued by the
Company or any of its subsidiaries during the twelve (12) months preceding the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  No event
or circumstance has occurred or information exists with respect to the Company
or any of its subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed

 

(g)           Consents.  Other than such filings as may be required to be made
with the Principal Market or the Commission, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other person, including, without limitation, any
other security holders of the Company, in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement.  All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof.  The Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts
that would reasonably lead to delisting or suspension of the Common Stock prior
to December 31, 2009.

 

4.             Representations of the Holder.  The Holder hereby covenants, and
makes the following representations and warranties, to the Company, Lazard
Frères & Co. LLC and Lazard Capital Markets LLC, each of which is true and
correct on the date hereof and shall survive the transactions contemplated by
this Agreement.

 

(a)           Power and Authorization.  The Holder is duly organized, validly
existing and in good standing, and has the power, authority and capacity to
execute and deliver this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby.

 

(b)           Valid and Enforceable Agreement; No Violations.  This Agreement
has been duly executed and delivered by the Holder and constitutes a legal,
valid and binding obligation of the Holder, enforceable against the Holder in
accordance with its terms, except that such enforcement may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors’ rights generally, and
(b) general

 

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principles of equity.  Consummation of the transactions contemplated hereby will
not violate or conflict with the Holder’s organizational documents or any
agreement or instrument to which the Holder is a party or by which the Holder or
any of its assets are bound.

 

(c)           Title to the Initial Warrants.  The Holder is, and has been since
issuance of the Initial Warrants, the sole legal and beneficial owner of the
Initial Warrants, and the Holder has good, valid and marketable title to the
Initial Warrants, free and clear of any mortgage, lien, pledge, charge, security
interest, encumbrance, title retention agreement, option, equity or other
adverse claim thereto.  The Holder has not, in whole or in part, (a) assigned,
transferred, hypothecated, pledged or otherwise disposed of the Initial Warrant
or its rights in the Initial Warrant, or (b) given any person or entity any
transfer order, power of attorney or other authority of any nature whatsoever
with respect to the Initial Warrant.

 

(d)           Accredited Investor.  The Holder is an “accredited investor”
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.

 

(e)           No Illegal Transactions.  The Holder has not, directly or
indirectly, and no person acting on behalf of or pursuant to any understanding
with the Holder has, engaged in any transactions in the securities of the
Company (including, without limitation, any Short Sales (as defined below)
involving any of the Company’s securities) since                     , 2009. 
Such Holder covenants that neither it nor any person acting on its behalf or
pursuant to any understanding with such Holder will engage, directly or
indirectly, in any transactions in the securities of the Company (including
Short Sales) prior to the time the transactions contemplated by this Agreement
are publicly disclosed.  “Short Sales” include, without limitation, all “short
sales” as defined in Rule 200 of Regulation SHO promulgated under the Exchange
Act, and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps, derivatives and similar arrangements
(including on a total return basis), and sales and other transactions through
non-U.S. broker-dealers or foreign regulated brokers.

 

(f)            No Reliance.  The Holder acknowledges that it is not relying, and
has not relied, upon any statement, advice (whether legal, tax, financial,
accounting or other), representation or warranty made by any entity or person
including, without limitation, the Company or any of its affiliates or
representatives, Lazard Frères & Co. LLC or Lazard Capital Markets LLC, except
for (a) the publicly available filings made by the Company with the Commission
under the Exchange Act, (b) the statements, representations and warranties made
by the Company in this Agreement, and (c) the Prospectus.

 

(g)           No Market.  The Holder understands that there is no established
public trading market for the New Warrant being offered to the Holder, and that
the Company does not expect such a market to develop.  In addition, the Company
does not intend to apply for listing the New Warrant on any securities
exchange.  Without an active market, the liquidity of the New Warrant will be
limited.

 

(h)           Experience of the Holder.  The Holder, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.  The Holder is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

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(i)            General Solicitation.  The Holder is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

 

(j)            Information.  The Holder represents that it has received (or
otherwise had made available to it by the filing by the Company of an electronic
version thereof with the Commission) the Base Prospectus, dated February 4,
2009, which is a part of the Company’s Registration Statement, the Prospectus
Supplement, the documents incorporated by reference therein and any free writing
prospectus (collectively, the “Disclosure Package”), prior to or in connection
with the receipt of this Agreement.  The Holder acknowledges that the Holder has
received any and all information requested by the Holder for the Holder to make
an investment decision. The Holder has had an opportunity to discuss the
Company’s business, management and financial affairs with the Company and their
respective representatives and has had the opportunity to review the Company’s
operations. The Holder has also had a full opportunity to ask questions of and
receive answers from the Company and its management regarding the terms and
conditions of this investment. Except as expressly set forth in this Agreement,
the Holder acknowledges and agrees that the Company has made no other
representation or warranty regarding the operations, business, prospects or
condition (financial or otherwise) of the Company or its affiliates.

 

(k)           Advisors.  The Holder understands that nothing in this Agreement,
the Prospectus Supplement, the Disclosure Package or any other materials
presented to the Holder in connection with the transactions contemplated by this
Agreement constitutes legal, tax or investment advice.  The Holder has consulted
such legal, tax and investment advisors and made such investigation as it, in
its sole discretion, has deemed necessary or appropriate in connection with the
transactions contemplated hereby.  The Holder maintains such Holder’s domicile
(and is not a transient or temporary resident) at the address shown on the
signature page of this Agreement. There are no claims for brokerage commission,
finders’ fees or similar compensation in connection with the transactions
contemplated by this Agreement or related documents based on any arrangement or
agreement binding upon the Holder.

 

5.             Covenants.

 

(a)           Disclosure of Transactions and Other Material Information.  On or
before 8:30 a.m., New York City time, on the first Business Day following the
date of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by this Agreement in the
form required by the 1934 Act and attaching this Agreement and the Exhibits
thereto as exhibits to such filing (including all attachments, the “8-K
Filing”).  From and after the filing of the 8-K Filing with the Commission, the
Holder shall not be in possession of any material, nonpublic information
received from the Company, any of its subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the 8-K
Filing.  Without the prior written consent of the Holder, neither the Company
nor any of its subsidiaries or affiliates shall disclose the name of the Holder
in any filing, announcement, release or otherwise, except for in the 8-K Filing.

 

(b)           Listing.  The Company shall promptly secure the listing of all of
the New Warrant Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing.  The Company shall
maintain the Common Stock’s authorization for quotation on the Principal
Market.  Neither the Company nor any of its subsidiaries shall take any

 

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action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market.  The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 5(b).

 

(c)           Lock-Up.  The Company will not, for a period of thirty (30) days
from the date of this Agreement, without the prior written consent of the
Holder, directly or indirectly offer, sell, assign, transfer, pledge, contract
to sell, or otherwise dispose of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, other than the
issuance of Common Stock or options to acquire Common Stock pursuant to the
Company’s employee benefit plans, qualified stock option plans or other director
or employee compensation plans as such plans are in existence on the date hereof
and described in the Prospectus and the issuance of Common Stock pursuant to the
valid exercises of options, warrants or rights outstanding on the date hereof;
provided, however, that the provisions of this Section 5(c) shall not apply to
transactions with other holders of warrants to purchase common stock issued by
the Company on May 7, 2009.

 

6.             Miscellaneous.

 

(a)           Assignment.  This Agreement and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors of the Holder.

 

(b)           Headings.  The headings used in this Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Agreement.

 

(c)           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.

 

(d)           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to
5:30 p.m., New York time, on a business day, (b) the next business day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a
day that is not a business day or later than 5:30 p.m., New York time, on any
business day, (c) the second business day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given.  The address
for such notices and communications shall be as follows:

 

If to the Company:

 

Capstone Turbine Corporation
21211 Nordhoff Street

Chatsworth, CA 91311

Fax:  (818) 734-5321

 

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with a copy to:

 

Waller Lansden Dortch & Davis, LLP

511 Union Street, Suite 2700

Nashville, TN 37219

Attn:       J. Chase Cole

Fax:  (615) 244-6804

 

If to the Holder, at the address specified on the signature page hereto.

 

(e)           Amendment.  This Agreement may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.

 

(f)            Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.

 

(g)           Defined Terms.  Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Initial Warrant.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.

 

 

 

Capstone Turbine Corporation

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

HOLDER:

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

Address:

 

 

 

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EXHIBIT A

 

Form of New Warrant

 

See attached.

 

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EXHIBIT B

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

CAPSTONE TURBINE CORPORATION

 

The undersigned holder hereby exercises the right to purchase
                                   of the shares of Common Stock (“Warrant
Shares”) of CAPSTONE TURBINE CORPORATION, a Delaware corporation (the
“Company”), evidenced by the attached Warrant to Purchase Common Stock (the
“Warrant”).  Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.

 

1.  Form of Exercise Price.  The Holder intends that payment of the Exercise
Price shall be made as a “Cash Exercise” with respect to all Warrant Shares.

 

2.  Payment of Exercise Price.  The Holder shall pay the Aggregate Exercise
Price, as adjusted by the Warrant Exercise Agreement, dated as of the date
hereof, by and between the Company and the Holder, in the sum of
$                                       to the Company in accordance with the
terms of the Warrant.

 

3.  Delivery of Warrant Shares.  The Company shall deliver to the Holder
                         Warrant Shares in accordance with the terms of the
Warrant.

 

Date: September       , 2009

 

 

 

 

 

Name of Registered Holder

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

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