Exhibit
10.34


Capstone
Turbine Corporation


inducement stock
option agreement


This Agreement
is entered into by and between Capstone Turbine Corporation (the “Company”) with
James D. Crouse (the “Optionee”)
to evidence the award of an option to purchase the common stock of the Company
that was made on February 5, 2007.


RECITALS:


WHEREAS, the
Company, through action of the compensation committee of its board of directors
taken on January 30, 2007, made a conditional option award to Optionee to
purchase the Company’s Common Stock (the “Option”) as an inducement to
encourage Optionee to accept an offer of employment as the Company’s Executive
Vice-President of Sales;


WHEREAS, the
parties, in connection therewith, entered into a letter agreement dated January
31, 2007, that sets forth general terms of employment of the Optionee by the
Company, including the terms of the Option that is evidenced by this Agreement,
which employment commenced on February 5, 2007;


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 AWARD


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
defined in this Article I:


	
  Date of Grant:

  	
   

  	
  February 5, 2007

  
	
   

  	
   

  	
   

  
	
  Exercise Price:

  	
   

  	
  $0.86 per Share

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares:

  	
   

  	
  850,000

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $731,000

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
  Non-Qualified Stock Option

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  10 years commencing on Date of Grant

  



 











Exercise and Vesting Schedule:


This Option shall vest and become exercisable 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 February 5, 2008,
Optionee shall be vested in and have the right to exercise the Option with
respect to 212,500 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 the 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 at the close of business on February 5, 2017; 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.  The Option evidenced in this
Agreement is intended by the parties to be granted in fulfillment of the
Company’s obligation to award a stock option pursuant to the letter agreement
between the parties dated January 31, 2007; the terms of this Agreement
completely replace and supersede the terms addressing the subject matter
contained in such letter agreement.


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
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.



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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 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 al of which shall constitute one document.


	
   

  	
   

  	
  CAPSTONE TURBINE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ DARREN R.
  JAMISON

  
	
   

  	
   

  	
   

  	
  Darren R. Jamison

  
	
   

  	
   

  	
   

  	
  President and Chief Executive Officer

  



OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THIS 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 INCORPROATED 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 the 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: February 5, 2007

  	
   

  	
  /s/ JAMES D. CROUSE

  	
   

  
	
   

  	
   

  	
  James D. Crouse

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Residence
  Address: 

  	
      on
  file

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						



 



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