Document:

Exhibit 10.1

CAPSTONE TURBINE CORPORATION

INDUCEMENT STOCK
OPTION AGREEMENT

THIS AGREEMENT is
entered into on this 18th day of December, 2006 by and between Capstone Turbine
Corporation (the “Company”) with Darren R.
Jamison (the “Optionee”) to evidence the award of an option to
purchase the common stock of the Company that was made on December 18, 2006.

RECITALS:

WHEREAS, the
Company, through action of the compensation committee of its board of directors
taken on December 18, 2006, 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 president
and chief executive officer;

WHEREAS, the
parties, in connection therewith, entered into a letter agreement dated
December 1, 2006, 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;

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:

  	
  December 18, 2006

  
	
   

  	
   

  
	
  Exercise Price:

  	
  $1.27 per Share

  
	
   

  	
   

  
	
  Total Number of
  Shares:

  	
  2,000,000

  
	
   

  	
   

  
	
  Total Exercise
  Price:

  	
  $2,540,000.00

  
	
   

  	
   

  
	
  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 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 December 18, 2007, Optionee shall be vested
in and have the right to exercise the Option with respect to 500,000 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 December 18, 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. 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 December 1, 2006; 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 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 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/ WALTER J. MCBRIDE

  	
   

  
	
   

  	
   

  	
  Walter J. McBride

  
	
   

  	
   

  	
  Executive VP & Chief Financial 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 25, 2007

  	
  /s/ DARREN R. JAMISON

  	
   

  
	
   

  	
  Darren R. Jamison, Optionee

  
	
   

  	
   

  
	
   

  	
  Residence Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

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,               ,
20    , 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 December, 2006, as evidenced in an
agreement dated December    , 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.

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: Darren
  R. Jamison

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  TitleExhibit 10.2

CAPSTONE TURBINE
CORPORATION

RESTRICTED STOCK
AGREEMENT

THIS AGREEMENT is
entered into on this 18th day of December, 2006 by and between Capstone Turbine
Corporation (the “Company”) with Darren R.
Jamison (“Jamison”) to evidence the award of the common stock of the
Company that was made on December 18, 2006.

RECITALS:

WHEREAS, the
Company, through action of the compensation committee of its board of directors
taken on December 1, 2006, made a conditional award of the Company’s Common
Stock (the “Award”) as an inducement to encourage Executive to accept an offer
of employment as the Company’s president and chief executive officer;

WHEREAS, the
parties, in connection therewith, entered into a letter agreement dated
December 1, 2006, that sets forth general terms of employment of the Executive
by the Company, including the terms of the Award that is evidenced by this
Agreement;

WHEREAS, the
parties desire to set forth the terms of such Award 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 Award is granted separately from the
Capstone Turbine Corporation 2000 Equity Incentive Plan (the “2000 Plan”), but
desire that this Award 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 Award covered hereby:

I.                                         NOTICE
OF STOCK AWARD

Notice is hereby given of the grant of the Award, subject to the following
terms. References in this Agreement to certain terms of the Award shall be as
defined in this Article I:

	
  Date of Grant:

  	
  December 18, 2006

  
	
   

  	
   

  
	
  Total Number of
  Shares:

  	
  500,000

  
	
   

  	
   

  
	
  Type of Award:

  	
  Restricted Stock Units

  
	
   

  	
   

  
	
  Term for
  Vesting:

  	
  4 Years

  

 

Transfer of
Shares; Vesting Schedule:

Pursuant to the Award, ownership of the Common Stock
shall be transferred to Executive on the dates and in the amounts described in
this paragraph, subject to the Executive continuing to be either an Employee or
a Consultant to the Company on such dates:

	
  Transfer Date

  	
   

  	
  Shares Transferred

  
	
   

  	
   

  	
   

  
	
  December 18,
  2007

  	
   

  	
  125,000

  
	
  December 18,
  2008

  	
   

  	
  Additional
  125,000 shares

  
	
  December 18,
  2009

  	
   

  	
  Additional 125,000
  shares

  
	
  December 18,
  2010

  	
   

  	
  Additional
  125,000 shares

  

 

The Common Stock transferred to Executive pursuant to
this Award shall be fully vested and not subject to restrictions or forfeiture
on the respective transfer dates, except as provided in this Agreement. If
Executive’s employment is terminated by the Company other than for Cause prior
to the one-year anniversary of the Date of Grant, Executive shall become vested
in and have the vested right to receive a transfer of the Common Stock under
this Award with respect to 1/48th of
the number of Shares subject to the Award 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.

Award Termination:

The Award shall terminate on the date that Executive
ceases to be either an Employee or a Consultant of the Company. Upon
termination, any unvested portion of the Award will lapse.

II.                                     AGREEMENT

1.                                       Grant
of Award. This Award is subject to the terms set forth in Article I of this
Agreement and, except as expressly provided for herein, the terms, definitions
and provisions of the 2000 Plan regarding awards of Common Stock (including
Stock Bonus grants), 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 Award evidenced
in this Agreement is intended by the parties to be granted in fulfillment of
the Company’s obligation to award restricted stock pursuant to the letter
agreement between the parties dated December 1, 2006; the terms of this
Agreement completely replace and supersede the terms addressing the subject
matter contained in such letter agreement.

2.                                       Status
of Executive. The Executive shall not be deemed a stockholder of the
Company with respect to Common Stock covered by this Award and shall not be
entitled to receive dividends and exercise voting rights with respect thereto
until such Shares are Transferred to Executive on the dates described in
Article I of this Agreement. The Company is not required to deliver shares of
Common Stock to the Participant until all applicable requirements of law have
been complied with and such shares shall have been duly listed on any
securities exchange on which the Common Stock may then be listed. Any
certificates

representing the shares
of Common Stock awarded pursuant to this Agreement shall be issued in the
Participant’s name.

3.                                       Tax
Withholding. At the time
that any portion of the Award becomes vested and Shares are transferred to the
Executive, the Company shall withhold from the Shares to be delivered to
Executive a number of Shares that have a Fair Market Value equivalent to the
tax withholdings that are required to be remitted by the Company to the
appropriate governmental entity or entities on behalf of the Executive with
respect to such transaction.

4.                                       No Effect on Capital Structure.  This
Award shall not affect the right of the Company or any Subsidiary to reclassify,
recapitalize or otherwise change its capital or debt structure or to merge,
consolidate, convey any or all of its assets, dissolve, liquidate, windup, or
otherwise reorganize.

5.                                       Committee
Authority.  Any question concerning
the interpretation of this Agreement, any adjustments required to be made under
the Plan and any controversy that may arise under the Plan or this Agreement
shall be determined by the Committee in its sole discretion. Such decision by
the Committee shall be final and binding.

6.                                       Lock-Up
Period. Executive 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, Executive 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.

7.                                       Non-Transferability
of Award. The Award 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 Executive only by Executive. The terms of the Award shall be binding upon
the executors, administrators, heirs, successors and assigns of the Executive.

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/ WALTER J. MCBRIDE

  	
   

  
	
   

  	
   

  	
  Walter J.
  McBride

  
	
   

  	
   

  	
  Executive VP
  & Chief Financial Officer

  

 

EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE TRANSFER AND VESTING OF
SHARES PURSUANT TO THIS AWARD IS EARNED ONLY BY CONTINUING EMPLOYMENT OR
CONSULTANCY AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING

HIRED, BEING GRANTED THE AWARD OR ACQUIRING SHARES HEREUNDER).
EXECUTIVE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR
IN THE CAPSTONE TURBINE CORPORATION 2000 EQUITY INCENTIVE PLAN, WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON EXECUTIVE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH EXECUTIVE’S RIGHT OR THE COMPANY’S RIGHT TO
TERMINATE EXECUTIVE’S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

Executive hereby acknowledges receipt of the 2000 Plan
and a current prospectus for the offering represented by the grant of this
Award. Executive represents that he is familiar with the terms and provisions
of the 2000 Plan and this Agreement and does hereby accept the Award subject to
all of its terms. Executive 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 Award granted hereunder. Executive 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.
Executive further agrees to notify the Company upon any change in the residence
address indicated below.

	
  Dated: January 25, 2007

  	
  /s/ DARREN R. JAMISON

  	
   

  
	
   

  	
  Darren R. Jamison

  
	
   

  	
   

  
	
   

  	
  Residence Address:

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