APPENDIX C

CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE OF THE BOARD OF
DIRECTORS
OF
CAPSTONE TURBINE CORPORATION

     This Nominating and Corporate Governance Committee Charter (the “Charter”) has been adopted by the Board of Directors (the “Board”) of Capstone Turbine Corporation (the “Company”). This Charter, as adopted in amended form on January 27, 2004, shall become effective immediately, except as otherwise provided herein.

ARTICLE I.

Purpose

     The purpose of the Nominating and Corporate Governance Committee (the “Committee”) is to discharge the Board’s responsibilities relating to the nominations process and in the area of corporate governance.

ARTICLE II.

Organization and Composition

     The Committee shall consist of no fewer than three members of the Board. All members of the Committee shall be appointed by the Board, shall be independent of the Company and its affiliates, shall have no relationship to the Company or its affiliates that may interfere with the exercise of their independence and shall additionally, effective no later than the 2004 annual meeting of the stockholders of the Company, be deemed “Independent Directors” as defined in Marketplace Rule 4200 of the rules of The Nasdaq Stock Market, Inc. (“Nasdaq”).

     The Board will designate one member of the Committee to serve as its Chair. The Committee will meet no less than two times a year. Special meetings may be convened as required. The Chair of the Committee shall report orally to the full Board on the results of these meetings. The Committee may invite other Directors, Company management and such other persons as the Committee deems appropriate in order to carry out its responsibilities to its meetings. The Committee shall maintain written minutes of Committee meetings. The Committee may form and delegate authority to subcommittees when appropriate.

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ARTICLE III.

Roles and Responsibilities

The Committee has the following duties:

Corporate Governance Generally

 

Consider principles of corporate governance and recommend them to the Board for its consideration and approval;

 

 

Review and recommend any changes to the principles of corporate governance and the Company’s Code of Business Conduct and Code of Ethics for Senior Financial Officers and the Chief Executive Officer, as and when approved by the Board, to ensure that they remain relevant and are being complied with;

 

 

Ensure that the Company’s Code of Business Conduct applies to all directors, officers and employees of the Company, complies with the definition of a “code of ethics” as set out in the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, is publicly available and provides for an appropriate enforcement mechanism;

 

 

Refer to the Board, for its consideration and approval or disapproval, any requests for waivers of the Code of Business Conduct or Code of Ethics;

 

 

Periodically review the succession plan for the Chief Executive Officer and other corporate officers as appropriate; and

 

 

Review the Company’s reporting channels and processes for providing information to the Board for the quality and timeliness of the information received.

Board Composition, Evaluation and Nominating Activities

 

Review the composition and size of the Board and determine the criteria for Board membership including issues of character, judgment, diversity, age, expertise, corporate experience and the like;

 

 

Review annually the composition of the Board to ensure that a majority of the members are Independent Directors in accordance with Nasdaq Marketplace Rule 4200;

 

 

Evaluate the Board annually to determine whether the Board functions effectively by soliciting comments from all directors, provide a verbal report to the Board annually of the Committee’s findings and assessment of Board performance and, in such report, focus on the Board’s contributions to the Company and provide recommendations for improvement;

 

 

Consider and recommend candidates to fill new positions or vacancies on the Board, review any candidates recommended by stockholders in accordance with the bylaws and provide a process for receipt and consideration of any such recommendations and any other communications received from stockholders;

 

 

Evaluate the performance of current Board members proposed for reelection and recommend the Director nominees each year for approval by the Board and the stockholders; and

 

 

Retain and terminate any search firm to be used to identify Board candidates and approve the search firm’s fees and other retention terms. The Committee shall have the sole authority to undertake this task.

 

 

Board Committees

 

Periodically review the charter and composition of each Board committee and make recommendations to the Board for the creation of additional Board committees or for the change in mandate or dissolution of Board committees;

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Evaluate Board committees annually to determine whether the Board committees function effectively by soliciting comments from all directors, provide a verbal report to the Board annually of the Committee’s findings and assessment of Board committee performance and, in such report, focus on Board committees’ contributions to the Company and provide recommendations for improvement; and

 

 

Recommend to the Board persons to be members of the various Board committees, taking into consideration the applicable Nasdaq rules on committee composition.

Conflicts of Interest

 

Consider questions of possible conflicts of interest of Board members and of corporate officers; and

 

 

Review actual and potential conflicts of interest of Board members and corporate officers.

Other

 

Ensure that the Company certifies to Nasdaq that it has adopted a formal, written Nominating and Corporate Governance Charter addressing the nominations process and such related matters as may be required under the federal securities laws.