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;

 

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(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.

 

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(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;

 

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(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.

 

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(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;

 

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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;

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(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.

 

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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.

 

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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.

 

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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;

 

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(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.

 

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(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.

 

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(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.

 

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( 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.

 

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(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.

 

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(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 .

 

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(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.

 

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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

 

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Exhibit 10.2

 

DEVELOPMENT AND LICENSE AGREEMENT

 

THIS DEVELOPMENT AND LICENSE AGREEMENT, including Attachments and Exhibits attached hereto and incorporated herein by reference , (this “ Agreement ”) is entered into as of the 4th day of September, 2007 (the “ Effective Date ”) by and between UTC Power Corporation , a corporation organized and existing under the laws of the State of Delaware and the successor in interest to UTC Power, LLC, having its principal office at 195 Governor’s Highway, South Windsor, Connecticut (“ UTCP ”) and Capstone Turbine Corporation , a corporation organized and existing under the laws of the State of Delaware and having its principal office at 21211 Nordhoff Street, Chatsworth, California (“ Capstone ”). UTCP and Capstone shall be hereinafter individually referred to as a “ Party ” and collectively referred to as the “ Parties .”

 

RECITALS

 

WHEREAS , Capstone designs, develops, manufactures and sells certain MicroTurbine generator systems, controls and accessories; and

 

WHEREAS , Capstone has established a development program for the commercialization of a 200 kW MicroTurbine generator system meeting the C200 System Specifications (defined below in Article 1 ) and may in the future make changes to such 200 kW MicroTurbine and the C200 System Specifications, pursuant to the terms set forth herein. For the purposes of this Agreement, “ C200 System ” is defined below in Article 1 ; and

 

WHEREAS , Capstone desires UTCP to invest in Capstone’s C200 System development and commercialization efforts and UTCP is willing to make such investment through cash and in-kind contributions; and

 

WHEREAS , in exchange for UTCP’s investment in Capstone’s development and commercialization of the C200 System, Capstone is willing to provide UTCP: (1) favorable pricing pursuant to Section 9 of this Agreement and (2) royalty payments for the sale of all other C200 Systems; and

 

WHEREAS , in exchange for UTCP’s investment in Capstone’s development and commercialization of the C200 System, Capstone is willing to grant UTCP, subject to the terms and conditions of this Agreement, a non-exclusive, perpetual, fully paid up, worldwide license to the C200 System with royalty payments to Capstone, should Capstone fail to complete the Development and Commercialization of the C200 System as stated herein;

 

NOW, THEREFORE , in consideration of the foregoing, and of the mutual promises, covenants and undertakings contained herein, the Parties hereto agree as follows:

 

1.                                        Definitions .

 

1.1                                  “ Affiliate ” shall mean a parent or subsidiary of a corporation or other business entity (e.g., firm, limited liability company, partnership, or joint venture) that directly or indirectly controls or is controlled by a Party, or is under common control with a Party. For the purpose of this definition, “control” means the possession of more than 50% of the voting securities of a Party or to direct or cause the direction of the management and policies of such Party, whether through the ownership of voting securities, by contract or otherwise.

 

 

1.2                                  “ Agreement ” shall have the meaning as set forth in the Recitals.

 

1.3                                  “ C200 Data ” shall have the meaning as set forth in Section 7.1 .

 

1.4                                  “ C200 Investment ” shall mean the Cash Payment and the value of the In-Kind Services performed by UTCP pursuant to the terms of this Agreement.

 

1.5                                  “ C200 System ” shall mean a 200 kW MicroTurbine generator system meeting the C200 System Specifications and all engineering supporting documentation, including any future changes to the 200 kW MicroTurbine generator system, the C200 System Specifications, and the engineering supporting documentation.

 

1.6                                  “ C200 System Specifications ” shall mean the technical specifications of the C200 System as set forth in Attachment A hereto and as amended in writing from time to time pursuant to Section 3.3 below.

 

1.7                                  “ Capstone ” shall have the meaning as set forth in the Preamble.

 

1.8                                  “ Cash Payment ” shall have the meaning set forth in Article 4 .

 

1.9                                  “ Commercialization ” shall have the meaning as set forth in Section 7.2 .

 

1.10                            “ Confidential Information ” shall have the meaning set forth in Section 10.2 .

 

1.11                            “ Deliverables ” shall mean the deliverables of Development as set forth in Attachment B .

 

1.12                            “ Development ” shall mean the work necessary to develop the C200 System in accordance with this Agreement and such that the C200 System meets the then current C200 System Specifications.

 

1.13                            “ Disclosing Party ” shall have the meaning set forth in Section 10.1 .

 

1.14                            “ Dispute ” shall mean any dispute, controversy, claim or disagreement between the Parties hereto arising from, relating to or in connection with the Agreement or other document referred to herein or delivered in connection herewith, or the relationships of the Parties hereunder, including questions regarding the interpretation, meaning or performance of the Agreement, the release of the information in the Escrow Account, and including claims based on contract, tort, common law, equity, statute, regulation, order or otherwise.

 

1.15                            “ Effective Date ” shall have the meaning as set forth in the Preamble.

 

1.16                            “ Escrow Account ” shall have the meaning as set forth in Section 7.1 .

 

1.17                            “ Force Majeure Events ” shall have the meaning as set forth in Section 15.1 .

 

1.18                            “ In-Kind Services ” shall mean the Development commitments of UTCP as set forth in Attachment D and Attachment E hereto.

 

1.19                            “ Intellectual Property ” means all: (i) patents, trademarks, service marks, trade names, patent and trademark applications, utility models, rights in licenses, designs, copyrights (including rights in computer software), and all rights or forms of protection of similar nature or having equivalent effect to any of the foregoing which may subsist anywhere in the world; (ii) whether or not registered and including applications for any of the foregoing; (iii) know-how, Project results and Confidential Information, including trade secrets, industrial models, processes, designs, methodologies, computer programs (including all source code) and related documentation, technical information and manufacturing, engineering and technical drawings; and (iv) the C200 Data.

 

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1.20                            “ Losses ” shall have the meaning set forth in Section 12.1 .

 

1.21                            “ OEM Agreement ” shall mean the March 23, 2005 OEM Agreement executed by the Parties, or an OEM Agreement executed by the Parties subsequent to that date (whichever is the most recently executed).

 

1.22                            “ Parties ” or “ Party ” shall have the meaning as set forth in the Preamble.

 

1.23                            “ Program Task Sheet ” shall have the meaning as set forth in Section 3.4 .

 

1.24                            “ Project ” shall mean the Development of the C200 System in accordance with this Agreement.

 

1.25                            “ Project Change ” shall have the meaning set forth in Section 3.3 .

 

1.26                            “ Project Meeting ” shall have the meaning set forth in Section 3.2 .

 

1.27                            “ Receiving Party ” shall have the meaning set forth in Section 10.1 .

 

1.28                            “ Representatives ” shall have the meaning set forth to it in Section 3.1 .

 

1.29                            “ UTCP ” shall have the meaning as set forth in the Preamble.

 

1.30                            “ Withdrawal Event ” shall have the meaning as set forth in Section 7.2 .

 

2.                                        Commitments .

 

2.1                                  Development Commitments .

 

2.1.1                         Capstone Development Commitments . Capstone shall conduct the Development in accordance with this Agreement and shall deliver to UTCP the Deliverables as set forth in Attachment B hereto. Any time references concerning the delivery of the Deliverables in Attachment B are estimates only and are subject to change upon written notice by Capstone to UTCP and UTCP’s written approval of any such changes. UTCP’s written approval shall not be unreasonably withheld such that it does not impact Commercialization.

 

2.1.2                         Capstone Right to Subcontract Development Commitments . Capstone may subcontract any part of the Development to a third party. Capstone shall impose on such third party the same obligations as Capstone owes UTCP hereunder and shall ensure that all such subcontractors comply with and abide by the terms and conditions of this Agreement.

 

2.1.3                         UTCP Development Commitments and Right to Subcontract Development Commitments . UTCP shall perform all In-Kind Services hereunder, pursuant to the terms of this Agreement, in support of the Development and shall complete such tasks, or cause such tasks to be completed, at UTCP’s sole expense, except as otherwise agreed to by the Parties in writing. UTCP may subcontract any part of the Development to a third party. UTCP shall impose on such third party the same obligations as UTCP owes Capstone hereunder and shall ensure that all such subcontractors comply with and abide by the terms and conditions of this Agreement.

 

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2.1.4                         Joint Development Commitments . During Development, the Parties shall work jointly to: (i) reduce costs and improve manufacturability of the C200 System by using each Party’s processes to address manufacturing shop floor issues and (ii) facilitate continuous improvement.

 

2.2                                  Other Capstone Commitments .

 

2.2.1                         Extension of the OEM Agreement . Capstone agrees to execute an amendment to extend the term of the OEM Agreement as necessary to ensure that the OEM Agreement is in effect for a six (6) month period of time following Commercialization, as defined herein.

 

2.2.2                         Non Compete Provisions . Capstone is prohibited from designing, marketing or selling the C200 System in conjunction with any energy system that would compete with UTCP products in the combined heating, cooling and power market (“the Market”). Capstone is prohibited from collaborating with any third party to design, market, or sell the C200 System in conjunction with any energy system that would compete with UTCP products in the Market. Subject to the foregoing, Capstone may manufacture the C200 System for any third party.

 

2.2.3                         Assignment of Agreements with Solar Turbines, Incorporated . Upon the occurrence of a Withdrawal Event and UTCP’s request, Capstone shall use its best efforts to assign to UTCP the agreements executed between Capstone and Solar Turbines, Incorporated, as set forth in Section 1 of Attachment H, attached hereto.

 

2.2.4                         ADG Compatibility. Capstone shall achieve ADG compatibility with respect to the C200 System within twelve (12) months of Commercialization.

 

3.                                        Project Management .

 

3.1                                  Project Representatives . Each Party shall appoint an equal number of representatives to facilitate the Development and management of the Project (the “ Representatives ”). A Party may replace a Representative by providing prior notice in writing to the other Party of its intent to replace the applicable Representative. The Parties have appointed their initial respective Representatives as listed in Attachment F hereto.

 

3.2                                  Project Meetings . At least quarterly, the Parties will conduct face-to-face project meetings (each a “ Project Meeting ”) consistent with the development milestones identified in Attachment B hereto until Commercialization is achieved at Capstone’s development facility. Each Project Meeting shall require attendance of at least the project manager, development and commercial Representatives. During a Project Meeting, the Parties shall address the following:

 

(i)		Progress against the then current estimated Project time schedule;
(ii)		Achievement of milestones, including, without limitation, milestones related to payments;
(iii)		Current list of contractual amendments to date to be considered by the Parties;
(iv)		Current list of Disputes between the Parties, with complete description of issue, position, and impact on the Project (including, without limitation, with respect to cost and schedule and a summary of the status of any Dispute);
(v)		Current list of identified risks associated with the Project, with complete description of issue, impact on the Project (including, without limitation, with respect to cost and schedule), and mitigating actions to be taken;
(vi)		Project Change(s); and
(vii)		Joint Development Commitments, as set forth in Section 2.1.4 of this Agreement.

 

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3.3.                               Project Changes . If either Party wishes to change the scope of the Project (a “ Project Change ”) as identified by the C200 System Specifications, it shall consult with the other Party in a timely manner so that the Parties can study and estimate the feasibility of such change. A Project Change shall be effective and binding only upon execution of a change order signed by a project manager and a corporate officer of each of the Parties. Prior to Commercialization, as defined within this Agreement, Capstone reserves the right to make commercially reasonable changes to the C200 System Specifications; provided, however, any such change that materially affects the fit, form, function, cost, or Commercialization schedule of the C200 System shall be effective only upon 30 days prior written notice to UTCP and the written approval of UTCP.

 

3.4                                  In-Kind Services . UTCP shall not provide any In-Kind Services without a “Program Task Sheet” as defined in Attachment G, approved by each of the Parties pursuant to the terms of this Section, setting forth the specific In-Kind Services to be provided, the time and place of such services, the valuation of the work to be provided, the completion date, and such other relevant criteria as may be reasonably specified by the program task sheet, which shall be prepared by Capstone and delivered to UTCP pursuant to Attachment B. Each Program Task Sheet shall be executed by each of the Parties’ respective designees as identified in Attachment F and no In-Kind Services shall be provided except pursuant to the applicable Program Task Sheet. Capstone and UTCP have already identified a list of proposed tasks in Attachment D and Attachment E with task descriptions, deliverables, and estimated costs of $829,900, which UTCP has agreed to support and will be confirmed with Program Task Sheets. The value of UTCP’s In-Kind Services shall be adjusted, pursuant to mutual written agreement of the Parties, based on actual cost of the In-Kind Services.

 

4.                                        UTCP Obligations . UTCP shall also make the C200 Investment as follows: (i) $12,000,000 in cash pursuant to the Milestone schedule attached hereto as Attachment B (the “ Cash Payment ”). UTCP shall not make any subsequent payments, pursuant to the Milestone schedule set forth in Attachment B, after the initial payment of $1,500,000, until any and all due or previously due Milestones and Deliverables (as set forth within the schedule) have been satisfied and delivered, respectively, as agreed upon by both Parties; and (ii) the provision of In-Kind Services as further described in Section 3.4 above.

 

5.                                        Purchase of the C200 System . UTCP shall purchase the C200 System in accordance with terms and conditions of the OEM Agreement applicable to equipment purchases only, or, in the event there is no OEM Agreement in effect, terms and conditions that are substantially similar and no less favorable. In addition, UTCP shall provide Capstone twelve (12) month rolling forecasts for its projected C200 System purchases on a monthly basis. C200 System orders shall be accepted by Capstone upon receipt of such orders from UTCP for standard equipment using Capstone’s then current published standard lead times. Subsequent to Commercialization, as defined within this Agreement, Capstone reserves the right to make commercially reasonable changes to the C200 System Specifications; provided, however, any such change that materially affects the fit, form, cost, or function of the C200 System shall be effective only upon 90 days prior written notice to UTCP and the written approval of UTCP.

 

6.                                        Intellectual Property Ownership . Subject to the License granted in Article 7 hereof, as between the Parties, Capstone shall own all right title and interest in and to all Intellectual Property relating to the C200 System. Each Party shall own all right title and interest in and to its own Background Intellectual Property.

 

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7.                                        C200 System License .

 

7.1                                  Escrow Account .

 

7.1.1                         Capstone shall select an escrow agent, subject to UTCP’s prior written approval of such escrow agent, and establish and maintain an escrow account within sixty (60) days following the Effective Date of this Agreement (the “ Escrow Account ”) and shall deposit in such Escrow Account all data and information controlled by Capstone relating to the C200 System, including, but not limited to: (i) all design, development, manufacturing, overhaul, repair and maintenance data and information then in its possession or otherwise necessary to design, develop, manufacture, overhaul, repair and maintain the C200 System; and (ii) a written identification of all know-how and trade secrets in its possession or otherwise necessary to design, develop, manufacture, overhaul, repair and maintain the C200 System, which written identification shall include a list of the individuals that possess such information reasonably necessary to practice all such know-how or trade secrets (collectively, the “ C200 Data ”).

 

7.1.2                         For purposes of Section 7.1, “controlled by” means the possession of the ability to grant a license or sublicense as provided herein without violating terms of any third party agreements. For purposes of Section 7.1, “Third Party Agreements” shall mean any and all such agreements or arrangements that would prevent or in any way limit the deposit of any data or information in the Escrow Account, if such data or information would otherwise be deposited into the Escrow Account and included as C200 Data, but for Capstone’s inability to grant a license or sublicense pursuant to the definition of “controlled by” set forth above (“Third Party Data”). With respect to any Third Party Agreements existing prior to, or as of, the Effective Date, Capstone shall make all commercially reasonable efforts to secure for UTCP a license or sublicense to any Third Party Data; if Capstone is unable to secure such a license or sublicense for UTCP, then Capstone shall set forth, in Attachment H attached hereto: (i) a description of the Third Party Agreement (including the parties and date of execution) and (ii) a description, reasonably acceptable to UTCP, of the Third Party Data and the information relevant to the development of the C200 System (including information on form, fit and function) which shall be deposited in the Escrow Account. With respect to any Third Party Agreement that may come into existence after the Effective Date, Capstone shall make all commercially reasonable efforts to secure for UTCP a license or sublicense to the Third Party Data; if Capstone is unable to secure such a license or sublicense for UTCP, Capstone shall, prior to execution of the Third Party Agreement: (i) provide written notice to UTCP, (ii) provide UTCP with a description, reasonably acceptable to UTCP, of the Third Party Data and information relevant to the development of the C200 System (including information on form, fit and function) which shall be deposited in the Escrow Account, and (iii) obtain UTCP’s written approval of the arrangement.

 

7.1.3                         Both the records of Capstone and the C200 Data deposited in the Escrow Account shall be subject to inspection and audit by a mutually acceptable third party to determine whether the deposited materials represent the C200 Data to comply with this Section 7.1 . The audit shall be conducted at a time and place reasonably convenient to Capstone, and each Party shall be responsible for fifty percent (50%) of expenses related to the audit. Capstone shall update the Escrow Account at least once every calendar quarter and upon completion of major elements of the continued design, Development and manufacture of the C200 System, upon any material redesign of all or a material portion of the C200 System, or upon the reasonable request of UTCP.

 

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7.2                                  Escrow Account Release Conditions . Upon the occurrence of any of the following events and ten (10) days prior written notice to Capstone, (each, a “ Withdrawal Event ”) UTCP shall have the right to access the Escrow Account and receive copies of all C200 Data deposited therein:

 

(i)                                      Failure by Capstone, to complete, or take reasonable action to complete, the Development, commercialization and product readiness of the C200 System; including, but not limited to, the failure by Capstone to make significant capital investment in, or establish, manufacturing facilities and equipment for the C200 System (collectively, “ Commercialization ”) by February 28, 2009. If Capstone fails to meet this Commercialization deadline, Capstone shall be granted a six (6) month grace period in which to cure such failure. If Capstone fails to achieve Commercialization of the C200 System during the six (6) month grace period, the cure period shall be extended for six (6) months during which time Capstone shall pay to UTCP liquidated damages of $25,000 per week until Commercialization is achieved or the cure period expires, whichever occurs first. UTCP shall have the right to access the Escrow Account only upon the expiration of the cure period; provided, however, if the delay in Commercialization is caused by UTCP’s failure to timely deliver the In-Kind Services in accordance with the applicable agreed upon Program Task Sheet, Capstone’s supply issues out of Capstone’s reasonable control or other issues out of Capstone’s reasonable control, or if UTCP fails to make timely Cash Payments pursuant to the terms of this Agreement, all deadlines shall be extended on a day-for-day basis for the period of such delay and the Parties’ rights shall remain intact;

 

(ii)                                   Capstone fails to take reasonable actions to fulfill UTCP purchase orders made in accordance with Article 5 above. Capstone shall be provided a reasonable time to respond to any material changes to the (12) month rolling forecast in accordance with Article 5 above. Capstone shall communicate product requirement changes to UTCP with (90) days advanced written notice.

 

(iii)                                Capstone voluntarily or involuntarily transfers all or substantially all of its assets or business or all or substantially all of the assets necessary for the continued delivery of the C200 System to UTCP to any third party, including through any merger or acquisition, and such third party is incapable or unwilling to fulfill Capstone’s obligations to UTCP related to the C200 System, including delivery of C200 equipment to meet UTCP C200 System order forecast, in accordance with this Agreement.

 

7.3                                  Standby License .

 

7.3.1                         License Grant . Upon the occurrence of a Withdrawal Event, Capstone shall grant to UTCP, its successors and assigns, a perpetual, fully paid up, worldwide license to all C200 Data either then deposited in the Escrow Account or otherwise necessary for the exercise of the rights and purposes set forth in this Agreement, as well as all intellectual property rights pertaining to such C200 Data:

 

(i)                                      To make, or have made, use, sell, or have sold, to end-use customers the C200 System (and any spare parts thereof) in conjunction with any energy systems and excluding the right to make, use or sell individual components of the C200 System separate from an integrated energy system;

 

and

 

(ii)                                   To provide, or cause to be provided, all services associated with the installation, maintenance, repair and overhaul of the C200 System in conjunction with energy systems.

 

Such license to the C200 Data shall be non-exclusive; provided, Capstone shall be prohibited from granting to a third party a license to the C200 Data for the specific purposes set forth above that would compete with UTCP products in the Market. Subject to the provisions of Section 2.2.2, the grant of this license shall not prohibit Capstone or its successors and assigns from: (i) marketing, manufacturing and selling the C200 System, or (ii) granting Licenses to other third parties for purposes other than any of the purposes set forth within this section 7.3.1.

 

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7.3.2                         Standby License Fees . In connection with the grant of the foregoing license in Section 7.3 hereof, UTCP shall pay to Capstone, or its successor, a royalty equal to three percent (3%) of the C200 System burdened manufacturing cost for all C200 Systems sold by UTCP or its Affiliates as part of any energy system.

 

7.3.3                         Termination of License . UTCP’s right to withdraw the C200 Data and obtain a license to the C200 Data shall terminate if the Parties mutually agree in writing either: to a proposed alternative product or to product obsolescence. Once the C200 Data has been withdrawn, this Section 7.3.3 shall have no force and effect.

 

8.                                        UTCP Royalties .

 

8.1                                  Upon the sale of each C200 System by Capstone to an entity other than UTCP or its Affiliates, Capstone shall pay to UTCP a royalty equal to ten percent (10%) of the sale price of each such third party C200 System until the aggregate cash value of UTCP’s C200 Investment has been recovered by UTCP and, thereafter, the royalty shall be reduced to five percent (5%) of the sale price.

 

8.2                                  All royalties shall be paid to UTCP on a quarterly basis and are due when Capstone recognizes such revenue for a sale of a C200 System or when a C200 System is delivered to a party leasing a C200 System from Capstone.

 

9.                                        C200 System Discounts . With respect to all sales of the C200 System to UTCP by Capstone, UTCP shall receive: (i) a discount of 25% less (or 30% less in the event the C200 System fails to receive CARB 2007 Certification) than the advertised list price at the time of the applicable sale; or (ii) pricing as favorable as any other customer, distributor or other channel partner of Capstone at the time of the applicable sale, whichever results in a lower price to UTCP. All discounts hereunder shall only be provided on a prospective basis and UTCP shall not be entitled to retroactive discounts on the C200 System, unless UTCP demonstrates that lower, or more favorable, pricing was, or has been, previously available to another party; upon such a demonstration, UTCP shall be entitled to the lower, or more favorable pricing, and shall be entitled to credits pursuant to UTCP’s past purchases to account for the difference in pricing.

 

10.                                  Confidentiality.

 

10.1                            Confidentiality Obligations . Each Party (in such capacity, the “ Receiving Party ”) acknowledges and agrees to maintain the confidentiality of Confidential Information provided by the other Party (in such capacity, the “ Disclosing Party ”) hereunder. Unless it has the prior written consent of the Disclosing Party, the Receiving Party shall not disclose or disseminate the Disclosing Party’s Confidential Information to any person other than those employees, and contractors of the Receiving Party who have a need to know it in order to assist the Receiving Party in performing its obligations under this Agreement and the Project. In addition, the Receiving Party (i) shall take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (ii) shall not use the Disclosing Party’s Confidential Information, or authorize other persons or entities to use the Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its obligations hereunder. As used herein, “reasonable steps” means steps that a Party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps shall in no event be less than a reasonable standard of care.

 

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10.2                            The term “ Confidential Information, ” as used herein, shall mean the C200 Data, all business strategies, plans and procedures, proprietary information, software, drawings, test data, tools, processes, methodologies, data and trade secrets, and other confidential information and materials of the Disclosing Party and any Intellectual Property that may be developed as a result of this Agreement. Confidential Information specifically includes, without limitations, any technology, data, results, Deliverables or other information developed or created during Capstone’s performance under the terms of this Agreement and which relate to the C200 System.

 

10.3                            The provisions of this Article 10 shall not apply to the extent that such Confidential Information is: (i) already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (ii) subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (iii) is or becomes publicly available through no wrongful act of the Receiving Party or any third party; (iv) can be demonstrated by actual written evidence as being independently developed by the Receiving Party without reference to or use of any Confidential Information of the Disclosing Party; or (v) is required to be disclosed pursuant to an applicable law, rule, regulation, government requirement or court order, or the rules of any stock exchange (provided, however, that the Receiving Party shall advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such disclosure).

 

10.4                            The Receiving Party shall advise its employees and contractors of the Receiving Party’s obligations of confidentiality and non-use under this Article 10 and shall be responsible for ensuring compliance by its and its’ affiliates employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party shall require all persons and entities who are provided access to the Disclosing Party’s Confidential Information, other than the Receiving Party’s employees, accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions reasonably similar to those set forth in this Article 10 . The Receiving Party shall promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such persons or entities and shall be responsible, to the extent of and pursuant to the standards, terms and conditions of Article 10, for any breach of an obligation of confidentiality by its employees who have had access to the Disclosing Party’s Confidential Information.

 

10.5                            Upon the Disclosing Party’s written request following expiration or termination of this Agreement, the Receiving Party promptly shall return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided hereunder, including all copies thereof. If requested by the Disclosing Party, the Receiving Party shall certify in writing its compliance with the provisions of this Article 10 . The obligations of confidentiality and non-use of Confidential Information shall survive termination or expiration of this Agreement for three (3) years or as long as the Confidential Information is protectable as a trade secret under applicable law.

 

10.6                            The Parties shall issue a joint press release concerning this Agreement upon its execution and upon the written approval of both Parties of such joint press release prior to any release or publication.

 

10.7                            Notwithstanding anything to the contrary herein, the Parties acknowledge that a breach or threatened breach of the confidentiality provisions of this Agreement cannot be adequately compensated by monetary damages and would cause irreparable injury and damage. Accordingly, in the event of such breach or threatened breach of confidentiality, the injured Party shall be entitled to seek injunctive or other equitable relief in addition to recovery of monetary damages in accordance with the provisions of Article 11 of this Agreement.

 

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11.                                  Warranties and Limitation of Damages .

 

11.1                            EXCEPT AS PURSUANT TO THE TERMS OF THE OEM AGREEMENT (OR TERMS NO LESS FAVORABLE), CAPSTONE MAKES NO WARRANTIES TO UTCP, EXPRESS OR IMPLIED, WITH RESPECT TO THE C200 SYSTEM AND ANY SERVICES OR DELIVERABLES PROVIDED HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED.

 

11.2                            UTCP MAKES NO WARRANTIES TO CAPSTONE, EXPRESS OR IMPLIED, WITH RESPECT TO THE IN KIND SERVICES AND ANY SERVICES OR DELIVERABLES PROVIDED HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANT ABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED.

 

11.3                            A PARTY SHALL NOT BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES WHETHER IN CONTRACT, TORT OR OTHER THEORIES OF LAW, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

11.4                            THE TOTAL, CUMULATIVE MONETARY LIABILITY OF EITHER PARTY TO THE OTHER PARTY WITH RESPECT TO A BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE 10 OF THIS AGREEMENT SHALL NOT EXCEED TWELVE MILLION DOLLARS ($12,000,000.00). IN THE EVENT OF A BREACH BY UTCP OF ITS CONFIDENTIALITY OBLIGATIONS WITH RESPECT TO CAPSTONE’S AIR BEARING TECHNOLOGY UTCP’S TOTAL, CUMULATIVE MONETARY LIABILITY SHALL NOT EXCEED THIRTY-FIVE MILLION DOLLARS ($35,000,000.00). A PARTY’S RIGHT TO SEEK AND RECOVER MONETARY DAMAGES WITH RESPECT TO THE OTHER PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 10 OF THIS AGREEMENT SHALL BE WITHOUT PREJUDICE TO RECEIPT OF ADDITIONAL INJUNCTIVE OR OTHER EQUITABLE NON-MONETARY RELIEF.

 

11.5                            EXCEPT FOR A BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE 10 HEREOF, THE TOTAL CUMULATIVE LIABILITY OF EITHER PARTY WITH RESPECT TO ALL OTHER CLAIMS PERTAINING TO THIS AGREEMENT SHALL NOT EXCEED THE LESSER OF: (A) THE TOTAL AMOUNT PAID TO CAPSTONE UNDER THE AGREEMENT AT THE TIME OF SUCH CLAIM OR (B) TWELVE MILLION DOLLARS ($12,000,000.00).

 

12.                                  Indemnity .

 

12.1                            Capstone Indemnification . Capstone shall indemnify, defend and hold harmless UTCP and its Affiliates and their respective officers, directors, employees, agents, successors and assigns, from any and all costs, expenses, damages, liabilities, losses and judgments, including reasonable attorneys’ fees and legal expenses (collectively, “ Losses ”), and threatened Losses arising from, or in connection with: (i) any intentional misconduct of Capstone or its employees in the design, manufacture, supply or delivery of the C200 System, or execution of this Agreement; (ii) any claims of infringement or misappropriation of any patent, trademark, trade secret, copyright arising out of the Development, the C200 System or Deliverables provided by Capstone to UTCP, or otherwise caused by Capstone; and (iii) Capstone’s breach of its obligations with respect to UTCP’s Confidential Information. Capstone’s obligations under this paragraph shall not apply to any infringement claim or Loss to the extent it is not caused in whole or part by Capstone and arises from or concerns: (a) a Deliverable prepared in accordance with UTCP’s specific technical designs or instructions; (b) inclusion in a Deliverable of any content or other materials provided by UTCP and the infringement or Loss relates to or arises from such UTCP provided material; (c) modification of a Deliverable or the C200 System made by UTCP and not approved by Capstone; (d) use of the Deliverable in combination with C200 System not provided by Capstone or otherwise not approved by Capstone under the applicable documentation and specification; or (e) use by UTCP of an outdated or superseded version of a Deliverable.

 

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12.2                            UTCP Indemnification . UTCP shall indemnify, defend and hold harmless Capstone and its Affiliates and their respective officers, directors, employees, agents, successors and assigns, from all Losses and threatened Losses arising from, or in connection with, (i) any intentional misconduct of UTCP or its employees in the performance of this Agreement; (ii) UTCP’s breach of its obligations with respect to Capstone’s Confidential Information; and (iii) any claims of infringement or misappropriation of any patent, trademark, trade secret, copyright to the extent that the Loss or threatened Loss is not caused by Capstone and arises from or concerns: (a) UTCP provided material; (b) modification of a Deliverable or the C200 System made by UTCP and not approved by Capstone; or (iv) use of the Deliverable or the C200 System in combination with products not provided by Capstone or otherwise not approved by Capstone under the applicable documentation and specification; or (iii) UTCP’s use of an outdated or superseded version of a Deliverable.

 

13.                                  Term & Termination .

 

13.1                            Term . Unless earlier terminated pursuant to Section 13.2 , this Agreement shall, be effective for the product life of the C200 System.

 

13.2                            Termination . Either Party may terminate this Agreement by written notice to the other Party, if any material breach of this Agreement has not been cured within sixty (60) days after delivery of written notice demanding remedy of such material breach. This Agreement shall be deemed immediately terminated without the requirement of further action or notice by either Party in the event the other Party: (i) shall become subject to voluntary or involuntary bankruptcy, insolvency, receivership, conservatorship or like proceedings pursuant to applicable law; (ii) ceases to conduct its normal and customary business operations.

 

13.3                            Survival . The provisions of Sections 1, 6, 8, 10, 11, 12, 13, 14, 15, including subsections, hereof shall survive the termination or expiration of this Agreement. The provisions of Section 2.2 and Articles 7 and 9, including subsections, shall also survive termination or expiration of this Agreement, unless the termination of this Agreement is caused, in whole part, by UTCP’s breach of its obligation to make payments of the Cash Payment to Capstone, pursuant to the terms and conditions of this Agreement.

 

13.4                            Disputes . Disputes not otherwise resolved by the Parties shall be resolved pursuant to Attachment C hereto.

 

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14.                                  Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been duly given if: (a) delivered personally to the recipient; (b) sent to the recipient by reputable express courier service (charges prepaid); (c) mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid; or (d) transmitted by facsimile to the recipient with a confirmation copy to follow the next day to be delivered by express courier. Such notices, demands and other communications shall be sent to the addresses indicated below:

 

If to Capstone:				If to UTCP:
	Capstone Turbine Corporation				UTC Power Corporation
	21211 Nordhoff Street				195 Governor’s Highway
	Chatsworth, CA 91311				South Windsor, CT 06074
	United States				United States
	Ann: EVP & CTO				Attn: Vice President Onsite Power
					Solutions
	With copy to:				With copy to:
	Waller Lansden Dortch & Davis, LLP				UTC Power Corporation
	520 South Grand Avenue				195 Governor’s Highway
	Suite 800				South Windsor, CT 06074
	Los Angeles, CA 90071				United States
	United States				Attn: Legal Department, Counsel
	Ann E. Lee Horton, Esq.

 

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Date of service of such notice shall be: (i) the date such notice is personally delivered; (ii) three (3) days after the date of mailing if sent by certified or registered mail; (iii) the next business day after the date of delivery to the overnight courier if sent by overnight courier; or (iv) the date of transmittal by facsimile, if transmitted on a business day, or the next business day following transmittal, if transmitted other than on a business day.

 

15.                                  General Provisions .

 

15.1                            In addition to any other provisions of this Agreement regarding due dates or times of performance, neither Party shall be liable to the other Party for, and shall be excused from, any failure or delay in performing an obligation under this Agreement that is due to causes beyond its reasonable control, such as natural catastrophes, governmental acts or omissions, laws or regulations, disruptions in the supply of public utilities, labor strikes or difficulties, transportation stoppages or slowdowns, failures or disruptions caused by suppliers, terrorism, or other similar disruptions or interferences (“ Force Majeure Events ”). If the occurrence of any of the Force Majeure Events prevent or delay a Party’s performance for a period of less than twenty (20) consecutive days, the time for that performance shall be extended on a day-for-day basis. If the Force Majeure events cause a delay of twenty (20) or more consecutive days the Party’s time for performance shall be extended on a day-for-day basis plus ten (10) days from the end of the Force Majeure Events. The occurrence of Force Majeure Events shall not, however, excuse the performance of a Party’s payment obligations under this Agreement for a period in excess of seven (7) days.

 

15.2                            The Parties may not assign this Agreement except with the other Party’s prior written consent or as specifically provided herein.

 

15.3                            Unless otherwise specifically provided herein, nothing in this Agreement, whether express or implied, shall be construed as granting to either Party any license with regard to intellectual property rights of the other Party.

 

15.4                            This Agreement sets forth the entire understanding of the Parties, and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof. No modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by both parties to this Agreement.

 

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15.5                            This Agreement shall be construed and controlled by the laws of the State of New York, without regard to New York’s rules relating to conflicts of law, and United States federal law applicable to patents, copyrights and trademarks, as such laws are applied to contracts made and to be performed entirely within the State of New York. In the event either Party brings an action to enforce its rights under this Agreement, the prevailing Party shall be entitled to recover all reasonable attorneys’ fees and expenses from the other Party arising out of such action.

 

15.6                            The Parties shall resolve all disputes, controversies or differences that may arise between the Parties in accordance with Attachment C .

 

15.7                            Each Party at its own expense shall keep records of all C200 Systems it sells. From time to time during regular business hours, on reasonable prior written notice, each Party or its authorized representatives may examine the other Party’s sales records for the C200 System.

 

15.8                            Failure by either Party to enforce any provisions of this Agreement or any rights that may arise as a result of breach of this Agreement by the other Party shall not be construed as a waiver of any of its rights, nor affect the validity of this Agreement, nor prejudice either Party as regards any subsequent action.

 

15.9                            If any court of competent jurisdiction finds any provision of this Agreement to be unenforceable or invalid, then the provision shall be ineffective to the extent of the court’s finding, without affecting the enforceability or validity of this Agreement’s remaining provisions.

 

15.10                      In making and performing this Agreement each Party shall be deemed to be acting as an independent contractor and shall not be deemed an employee, agent, legal representative, joint venturer or partner of the other Party. Neither Party is authorized to bind the other to any obligation, affirmation or commitment with respect to any other person or entity.

 

15.11                      This Agreement and shall be deemed executed by both Parties when any one or more counterparts hereof, individually or taken together, bears the signatures of each of the Parties.

 

15.12                      Unless this Agreement expressly provides that an approval, consent, waiver, acceptance, concurrence or permission may be given or withheld in the “sole discretion” of a Party (or words of similar import), then such Party may not unreasonably withhold, delay or condition any approvals, consents, waiver, acceptances, concurrences and permissions required to be given or made by any Party hereunder taking into account relevant business and economic factors.

 

IN WITNESS WHEREOF , the Parties have caused this Agreement to be executed in duplicate, one executed original to be retained by each Party.

 

Capstone Turbine Corporation						UTC Power Corporation
Name:		Darren R. Jamison				Name:		Jan van Dokkum
Signature:			/s/ Darren R. Jamison			Signature:			/s/ Jan van Dokkum
Title:	President & CEO					Title:	President
Date:	September 4, 2007					Date:	September 4, 2007

 

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