Exhibit 10.1


CAPSTONE
TURBINE CORPORATION


AMENDED
AND RESTATED 2000 EQUITY INCENTIVE PLAN


Effective
August 24, 2007


RECITALS:


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


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


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


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


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


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


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


 


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


 


1















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


 


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


 


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


 


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


 


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


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


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


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


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


 


2















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


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


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


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


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


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


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


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


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


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


 


3















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


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


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


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


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


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


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


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


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


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


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


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


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


 


4















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


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


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


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


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


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


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


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


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


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


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


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


 


5















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


4.                                       Administration
of the Plan.


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


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


(i)                                     to determine
the Fair Market Value;


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


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


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


6















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


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


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


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


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


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


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


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


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


 


7















6.                                       Limitations.


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


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


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


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


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


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


 


8















9.                                       Option Exercise Price and Consideration.


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


(i)                                     In the case of
an Incentive Stock Option


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


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


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


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


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


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


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


 


9















10.                                 Exercise of Option.


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


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


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


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


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


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


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


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


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


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


 


10















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


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


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


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


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


 


11















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


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


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


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


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


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


 


12















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


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


14.                                 Stock Purchase
Rights and Stock Bonuses.


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


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


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


 


13















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


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


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


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


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


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


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


 


14















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


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


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


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


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


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


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


 


15















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


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


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


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


 


16















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


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


17.                                 Amendment and
Termination of the Plan.


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


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


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


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


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


 


17















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


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


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


 


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


 


	
   

  	
  CAPSTONE TURBINE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Walter J. McBride

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Executive
  Vice President & CFO

  	
   

  



 


18