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                                                                     EXHIBIT 4.2


                          CAPSTONE TURBINE CORPORATION

                        INDUCEMENT STOCK OPTION AGREEMENT

         THIS AGREEMENT is entered into on this 16th day of January, 2006 by and
between Capstone Turbine Corporation (the "Company") with WALTER J. MCBRIDE (the
"Optionee") to evidence the award of an option to purchase the common stock of
the Company that was made on January 11, 2006.

                                    RECITALS:

         WHEREAS, the Company, through action of the compensation committee of
its board of directors taken on July 1, 2005, made a conditional option awards
to Optionee to purchase the Company's Common Stock (the "Option") as an
inducement to (i) encourage Optionee to accept an offer of employment as the
Company's chief financial officer, and (ii) remain employed with the Company for
at least six months;

         WHEREAS, Optionee received an Option effective upon commencing
employment with the Company on July 11, 2005, and, having continued in such
employment for six months, has satisfied the conditions for a second Option
specified in the action of the compensation committee on July 1, 2005;

         WHEREAS, the parties desire to set forth the terms of such Option and
to acknowledge that the shares of Common Stock that may be acquired hereunder
shall be registered under the Securities Act of 1933, as amended ("Securities
Act") on Form S-8; and

         WHEREAS, the parties further acknowledge that this Option is granted
separately from the Capstone Turbine Corporation 2000 Equity Incentive Plan (the
"2000 Plan"), but desire that this Option be subject to the terms contained in
the of the 2000 Plan, except as otherwise provided for herein;

         NOW, THEREFORE, in consideration of these premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree to the following terms and conditions
regarding the Option covered hereby:

I.       NOTICE OF STOCK OPTION GRANT

            Notice is hereby given of the grant of the Option, subject to the
            following terms. References in this Agreement to certain terms of
            the Option shall be as defined in this Article I:
              Date of Grant:                January 11, 2006
              Exercise Price:               $3.20 per Share
              Total Number of Shares:       500,000
              Total Exercise Price:         $1,600,000
              Type of Option:               Non-Qualified Stock Option
              Term:                         10 years commencing on Date of Grant


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         EXERCISE AND VESTING SCHEDULE:

         This Option shall vest and become exerciseable on the dates and as
described in this paragraph, subject to the Optionee continuing to be either an
Employee or a Consultant to the Company on such vesting dates. On JANUARY 11,
2007, Optionee shall be vested in and have the right to exercise the Option with
respect to 125,000 Shares. Thereafter, Optionee shall become vested in and have
the right to exercise this Option with respect to 1/48th of the number of Shares
subject to the Option on the day of each month corresponding to the Date of
Grant, so that the Option shall be fully vested and exercisable on the fourth
anniversary of the Date of Grant. However, if Optionee is terminated by the
Company other than for Cause prior to the one-year anniversary of the Date of
Grant, Optionee shall become vested in and have the right to exercise this
Option with respect to 1/48th of the number of Shares subject to the Option for
each full month of employment following the Date of Grant, based on the day of
the month corresponding to the Date of Grant, through the date of such
termination.

         OPTION TERMINATION:

         The Option shall terminate on JANUARY 11, 2016; provided, however, that
if Optionee ceases to be either an Employee or a Consultant prior thereto, then
the Option shall terminate earlier pursuant to the terms of Sections 10(d),
10(e), and 10(f) of the Plan.

II.      AGREEMENT

         1. Grant of Option. The Option to purchase the Shares of Common Stock
is subject to the terms set forth in Article I of this Agreement. Except as
expressly provided for herein, this Option is also subject to the terms,
definitions and provisions of the 2000 Plan, which are incorporated herein by
reference. All capitalized terms used in this Agreement shall have the meanings
ascribed to such terms in the 2000 Plan, except as may be otherwise defined
herein.

          2. Exercise of Option. The Option shall be exercisable cumulatively
according to the vesting schedule set forth in Article I of this Agreement,
based on Optionee's continued status as an Employee or a Consultant, and subject
to the procedures and methods for payment set forth in the 2000 Plan. Any
portion of the exercisable portion of the Option may be exercised at any time by
the Optionee until the Option has terminated.

         3. Lock-Up Period. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act or any applicable state laws, Optionee shall
not sell or otherwise transfer any Shares or other securities of the Company
during the 180-day period (or such longer period as may be requested in writing
by the Managing Underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

         4. Non-Transferability of Option. The Option may not be transferred in
any manner except by will or by the laws of descent or distribution. It may be
exercised during the lifetime of



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Optionee only by Optionee. The terms of the Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

         This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which shall constitute one
document.

                                      CAPSTONE TURBINE CORPORATION



                                      By:  /s/ John Tucker
                                           -----------------------------------
                                           John Tucker
                                           Chief Executive Officer

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS STOCK OPTION AGREEMENT, NOR IN THE CAPSTONE TURBINE CORPORATION
2000 EQUITY INCENTIVE PLAN, WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR
CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY
AT ANY TIME, WITH OR WITHOUT CAUSE.

         Optionee hereby acknowledges receipt of the 2000 Plan and a current
prospectus for the offering represented by the grant of this Option. Optionee
represents that he is familiar with the terms and provisions of the 2000 Plan
and this Agreement and does hereby accept the Option subject to all of its
terms. Optionee has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of this Agreement
and the Option granted hereunder. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the 2000 Plan or this Agreement. Optionee further agrees
to notify the Company upon any change in the residence address indicated below.

Dated: January 16, 2006                     /s/ Walter J. McBride
                                            ----------------------------------
                                            Walter J. McBride, Optionee

                                            Residence Address:
                                                               ---------------

                                            ----------------------------------


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                                    EXHIBIT A

                          CAPSTONE TURBINE CORPORATION

                               NOTICE OF EXERCISE

Capstone Turbine Corporation
21211 Nordhoff Street
Chatsworth, CA 91311

Attention: Corporate Secretary

         1. Exercise of Option. Effective as of today, ___________, 2___, the
undersigned ("Optionee") hereby elects to exercise the right to purchase
_________ shares of the Common Stock (the "Shares") of Capstone Turbine
Corporation (the "Company") under and pursuant to the terms of that certain
option granted on JANUARY 11, 2006, as evidenced in an agreement dated January
__, 2006 (the "Agreement").

         2. Representations of Optionee. Optionee acknowledges that he/she has
received, read and understands the Agreement, the Capstone Turbine Corporation
2000 Equity Incentive Plan (the "2000 Plan") and all materials constituting the
prospectus for the option described in the Agreement. Optionee has had
opportunity to consult with legal and tax counsel prior to this exercise.

         3. Rights as Stockholder. Optionee understands that (i) the Company
shall promptly issue (or cause to be issued) Shares to be acquired upon the
exercise signified in this notice, (ii) Optionee has no right to vote or receive
dividends or any other rights as a stockholder with respect to Shares covered
hereby until the Shares are issued, as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company,
(iii) no adjustment will be made for a dividend or other right for which the
record date is prior to the date the Shares are issued, except as provided in
Section 15 of the 2000 Plan.

         4. Tax Consultation. Optionee acknowledges that adverse tax
consequences can result from the purchase or disposition of the Shares. Optionee
represents that Optionee has consulted with any tax advisors that Optionee deems
appropriate in connection with the purchase or disposition of the Shares and
that Optionee is not relying on the Company for any tax advice.

         5. Successors and Assigns. The Company may assign any of its rights
under this notice to single or multiple assignees, and this notice shall inure
to the benefit of the successors and assigns of the Company. This notice shall
be binding upon Optionee and his heirs, executors, administrators, successors
and assigns.

         6. Interpretation. Any dispute regarding the interpretation of this
notice shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the 2000
Plan (the "Committee"), which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Committee shall be final and
binding on the Company and on Optionee.


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         7. Governing Law; Severability. This notice shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this notice
be determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

         8. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

         9. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this notice.

         10. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares, as well as any applicable withholding tax.

         11. Entire Agreement. The 2000 Plan and the Agreement are incorporated
herein by reference. This notice, the 2000 Plan and the Agreement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof.


Submitted by:                                 Accepted by:
                                              CAPSTONE TURBINE CORPORATION
------------------------
OPTIONEE: Walter J. McBride                   By:
                                                  ----------------------------
                                              Name:
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                                              Title
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