exv10w3



 






Exhibit 10.3




CAPSTONE TURBINE CORPORATION

CHANGE OF CONTROL SEVERANCE PLAN




Amended and Restated January 31, 2005



Capstone Turbine Company (the “Company”) established the Capstone Turbine Corporation Change in
Control Severance Plan (the “Plan”) effective April 24, 2002 for the purpose of retaining its key
executives by assuring them of adequate severance pay in the event of a change in the control of
the Company. As authorized by its board of directors, the Company desires to amend the Plan,
effective January 31, 2005, to conform the Plan’s definition of “change of control” with its other
compensation programs and to ensure that the Plan is in compliance with the requirements of the
Employee Retirement Income Security Act of 1974 (“ERISA”).




ELIGIBILITY



Eligibility in the Plan is limited to the executive officers or employees of the Company who are
designated to participate in the Plan by the Company’s board of directors (the “Board”) from time
to time. Each officer or employee who is so designated as eligible to participate in the Plan is
referred to hereinafter as an “Executive.” Executives may be added or deleted based on Board
approval; provided that, only such Board approvals which have been received prior to the
consummation of the applicable Change of Control shall be effective as to the addition or deletion
of Executives.




SEVERANCE BENEFITS



In the event that an Executive is Involuntarily Terminated within 12 months of a Change of Control
(as such terms are defined herein), such Executive shall be entitled to receive from the Company an
amount equal to such Executive’s annual base salary plus the cash incentive compensation paid for
the year in which the effective date for the Change in Control occurs (such amount, the “Salary”).
The Salary shall be paid in one lump sum on the date such Executive was Involuntarily Terminated
(the “Termination Date”). Pursuant to COBRA, the Company shall continue such Executive Officer’s
health care coverage as under the Company’s medical and dental plans. The Company will pay for such
coverage until 12 months after the Termination Date. Thereafter, such Executive shall be eligible
to continue such coverage at his or her own expense for the remainder of his or her applicable
COBRA continuation period. As used herein, the term “Involuntarily Terminated” shall mean the
termination of an Executive’s service by reason of:




     1. involuntary dismissal or discharge by the Company for reasons other than Misconduct (as
defined below), or



     2. voluntary resignation following (A) a change in position with the Company or a reduction in
his or her level of responsibility, (B) any reduction in his or her level of compensation
(including base salary, fringe benefits, participation in any plans and target bonuses under any
corporate-performance based bonus or incentive programs) or (C) a relocation



 









 







of such individual’s place of employment by more than 50 miles, provided and only if such change,
reduction or relocation is effected without the individual’s consent.


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




CHANGE OF CONTROL



For the purposes of this severance plan, the term “Change in Control” means any of the following:




     1. the successful acquisition by a person or related group of persons, (other than the Company
or a person that directly or indirectly controls, is controlled by or is under common control with,
the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended) of securities possessing more than 50% of the total combined voting power
of the Company’s outstanding securities pursuant to a transaction or series of related transactions
which the Board does not at any time recommend the Company’s stockholders to accept or approve;



     2. the first date within any period of 12 consecutive months or less on which there is
effected a change in the composition of the Company’s Board such that a majority of the Board
ceases, by reason of one or more contested elections for Board membership, to be comprised of
individuals who either (i) have been members of the Company’s Board continuously since the
beginning of such period or (ii) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in clause (i) who were
still in office at the time such election or nomination was approved by the Board;



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



     4. the sale, transfer or other disposition of all or substantially all of the assets of the
Company in complete liquidation or dissolution of the Company;



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



     6. the issuance by the Company to a single person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled by or is under



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common control with, the Company) of securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities (determined after such issuance) in a single
transaction or a series of related transactions.



SUMMARY OF PLAN INFORMATION



The information in this section is intended to answer general questions regarding the operation of
the Plan.



Except for those responsibilities specifically reserved to the Board herein, the Plan is
administered by the “Administrator.” The Administrator is the committee of officers or Board
members designated from time to time by the Company to administer the Plan. In the absence of such
designation, the Company shall be the Administrator. The Administrator may delegate any of its
duties or authorities to any person or entity. The Administrator has absolute discretion to make
all decisions under the Plan, including making determinations about eligibility for and the amounts
of benefits payable under the Plan and interpreting all Plan provisions. All decisions of the
Administrator are final, binding and conclusive. If a Change in Control occurs, as determined by
the Administrator in its discretion, the Administrator shall consist of a committee of the
individuals who were the chief executive officer of the Company, the chief financial officer of the
Company and the senior human resources officer of the Company immediately prior to the Change in
Control.




How to Make a Claim for Benefits



If severance benefits are not automatically paid upon a payment event, an Executive may file a
request for benefits in writing with the “Administrator” (as defined in this section). Failure to
timely submit an application for benefits in writing, as specified in Section 5, will result in a
loss of Plan benefits. You may not assign your benefits. Any attempted assignment is void.



If an individual’s claim for Benefits is denied, the Administrator will furnish written notice of
denial to the individual (“Claimant”) within 90 days of the date the claim is received, unless
special circumstances require an extension of time for processing the claim. This extension will
not exceed 90 days, and the Claimant must receive written notice stating the grounds for the
extension and the length of the extension within the initial 90-day review period. If the
Administrator does not provide written notice, the Claimant may deem the claim denied and seek
review according to the appeals procedures set forth below.




     1. The notice of denial to the Claimant shall state:




	 	(a)  	The specific reasons for the denial;
	 
	 	(b)  	Specific references to pertinent provisions of the Plan on
which the denial was based;
	 
	 	(c)  	A description of any additional material or information needed
for the Claimant to perfect his or her claim and an explanation of why the
material or information is needed;






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	 	(d)  	A statement that the Claimant may request a review upon written
application to the Administrator, review pertinent Plan documents, and submit
issues and comments in writing and that any appeal that the Claimant wishes to
make of the adverse determination must be in writing to the Administrator
within 60 days after the Claimant receives notice of denial of benefits; and
	 
	 	(e)  	The name and address of the Administrator to which the Claimant
may forward an appeal. The notice may state that failure to appeal the action
to the Administrator in writing within the 60-day period will render the
determination final, binding and conclusive.





     2. If the Claimant appeals to the Administrator, the Claimant or his or her authorized
representative may submit in writing whatever issues and comments he or she believes to be
pertinent. The Administrator shall reexamine all facts related to the appeal and make a final
determination of whether the denial of benefits is justified under the circumstances. The
Administrator shall advise the Claimant in writing of:




	 	(a)  	The Administrator’s decision on appeal.
	 
	 	(b)  	The specific reasons for the decision.
	 
	 	(c)  	The specific provisions of the Plan on which the decision is
based.




Notice of the Administrator’s decision shall be given within 60 days of the Claimant’s written
request for review, unless additional time is required due to special circumstances. In no event
shall the Administrator render a decision on an appeal later than 120 days after receiving a
request for a review.




Plan Amendment or Termination



The Company may terminate or amend the Plan in its sole discretion at any time prior to a Change in
Control by a written amendment that is authorized by the Company. However, once a Change in Control
occurs, or upon the execution of a letter of intent or definitive agreement for the Company to
engage in a transaction that will result in a Change in Control, (i) no amendment or termination
will be effective with respect to an Executive unless he or she receives 30 days written notice of
such amendment and consents thereto in writing after consultation with legal counsel, (ii) the
identity of the Administrator may not be changed by an amendment without the express written
consent of a majority of individuals who are or will become eligible to receive benefits hereunder
as a result of the Change in Control.



The Company’s authorization of an amendment must be evidenced by one of the following: (1) a
resolution of the board of directors; (2) execution of the amendment by the Company’s chief
executive officer, president or secretary; or (3) ratification of the amendment by either a
resolution of the board of directors or written confirmation of ratification by the chief executive
officer, president or secretary. Notice of any amendment must be provided to or made available to
the


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Administrator. Oral amendments and modifications of this Plan are not effective. All amendments and
modifications must be in writing and signed as provided above to be effective.




Additional Information



Benefits are paid out of the general assets of the Company. The Company may, in its discretion
establish a “grantor trust” to fund the payment of Benefits. Otherwise, this Plan does not give an
Executive any rights to any particular assets of the Company. Cash amounts paid under a severance
plan are generally considered taxable income to the recipient.




ERISA Rights



Participant in the Plan are entitled to certain rights and protections under ERISA. ERISA provides
that all Plan participants shall be entitled to:





	 	•  	Examine, without charge, at the Plan Administrator’s office and at other specified
locations, all Plan documents, including insurance contracts, and copies of all documents
filed by the Plan with the U.S. Department of Labor, such as detailed annual reports and
plan descriptions.
	 
	 	•  	Obtain copies of all Plan documents and other Plan information upon written request to
the Plan Administrator. The Plan Administrator may make a reasonable charge for the copies.
	 
	 	•  	Receive a summary of the Plan’s annual financial report. The Plan Administrator is
required by law to furnish each participant with a copy of this summary annual report.




In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are
responsible for the operation of the employee benefit Plan. The people who operate your Plan,
called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and
other Plan participants and beneficiaries. No one, including the Company or any other person, may
fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit
under this Plan or from exercising your rights under ERISA. If a claim for a Benefit is denied in
whole or in part, you must receive a written explanation of the reason for the denial. You have the
right to have the Plan Administrator review and reconsider your claim.



Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request
materials from the Plan and do not receive them within 30 days, you may file suit in a federal
court. In such a case, the court may require the Plan Administrator to provide the materials and
pay you up to $110 a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Administrator.



If you have a claim for benefits that is denied or ignored, in whole or in part, and you have
exhausted all administrative remedies provided herein and ERISA, you may file suit in a federal
court. If it should happen that Plan fiduciaries misuse the Plan’s money or if you are
discriminated against for asserting your rights, you may seek assistance from the U.S. Department
of Labor or you may file suit in a federal court. The court will decide who should pay court costs
and fees. If you


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lose, the court may order you to pay these costs and fees, for example, if it finds your claim is
frivolous.



If you have any questions about your Plan, you should contact the Plan Administrator. If you have
any questions about this statement or about your rights under ERISA, you should contact the nearest
Area Office of the U.S. Labor-Management Services Administration, Department of Labor.




Summary of Plan Information




	 	 	 
	Name of Plan:

	 	Capstone Turbine Corporation Change in Control Severance Plan
	 
	 	 
	Company Address:

	 	Capstone Turbine Corporation

21211 Nordhoff Street

Chatsworth, CA 91311
	 
	 	 
	Who Pays for the Plan:

	 	The cost of the Plan is paid entirely by the Company.






The Company’s Employer Identification No.: 95-4180883




Plan Number: 510




Plan Year: January 1 to December 31




	 	 	 
	Plan Administrator:

	 	Administrator of the Change in Control Severance Plan

c/o Sharon Faltemier

Capstone Turbine Corporation

21211 Nordhoff Street

Chatsworth, CA 91311

	 
	 	 
	

	 	(818) 734-5300





Agent for Service of Legal Process on the Plan: Chief executive officer of the Company or the Plan
Administrator.




     IN WITNESS WHEREOF, Capstone Turbine Corporation, acting through the undersigned authorized
representative, has executed this Plan on the ___day of February, 2005, to be effective as of
January 31 2005.



	 	 	 	 	 
	 	 	CAPSTONE TURBINE CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 






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EXHIBIT A




Eligible Employees




     As provided in the Capstone Turbine Corporation Change in Control Severance Plan (“Plan”), the
board of directors of Capstone Turbine Corporation has designated the following individuals to be
eligible for participation and identified as “Executives;” as defined in the Plan. This designation
supercedes and replaces all prior designations made under the Plan, and is
effective___, 2004.




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