Composite
      Technology Corporation 

    2008
      STOCK OPTION PLAN 

     

            1.
          Establishment,
      Purpose and Term of Plan.     
      

     

            1.1
          Establishment.
          The
      Composite Technology Corporation’s 2008 Stock Option Plan (the "Plan"
      )
      is
      hereby established effective as of January 11, 2008. 

     

            1.2
          Purpose.
          The
      purpose of the Plan is to advance the interests of the Participating Company
      Group and its stockholders by providing an incentive to attract, retain and
      reward persons performing services for the Participating Company Group and
      by
      motivating such persons to contribute to the growth and profitability of the
      Participating Company Group. 

     

            1.3
          Term
      of Plan.     The
      Plan shall continue in effect until the earlier of its termination by the Board
      or the date on which all of the shares of Stock available for issuance under
      the
      Plan have been issued and all restrictions on such shares under the terms of
      the
      Plan and the agreements evidencing Options granted under the Plan have lapsed.
      However, all Options shall be granted, if at all, within ten (10) years
      from the earlier of the date the Plan is adopted by the Board or the date the
      Plan is duly approved by the stockholders of the Company. 

     

            2.
          Definitions
      and Construction.     
      

     

            2.1
          Definitions.
          Whenever
      used herein, the following terms shall have their respective meanings set forth
      below: 

     

    
      	(a)  	
              "
                Board
                "
                means
                the Board of Directors of the Company.


            


    

     

    
      	(b)  	
              "
                Code
                "
                means
                the Internal Revenue Code of 1986, as amended, and any applicable
                regulations promulgated thereunder.


            


    

     

    
      	(c)  	
              "
                Committee
                "
                means
                the Compensation Committee or other committee of the Board duly appointed
                to administer the Plan and having such powers as shall be specified
                by the
                Board. If no such Committee has been appointed, then “Committee” shall
                mean the Board. Each member of the Committee, while serving as such,
                shall
                be a disinterested person with the meaning of Rule 16b-3 promulgated
                under
                the Securities Act of 1934.

            


    

     

    
      	(d)  	
              "
                Company
                "
                means
                Composite Technology Corporation, a Nevada corporation, or any successor
                corporation thereto and any parent or subsidiary corporation of Composite
                Technology Corporation, as such terms are defined in Sections 425(e)
                and
                425(f), respectively, of the Code.

            


    

     

    
      	(e)  	
              "
                Consultant
                "
                means
                a person engaged to provide consulting or advisory services (other
                than as
                an Employee or a Director) to a Participating Company, provided that
                the
                identity of such person, the nature of such services or the entity
                to
                which such services are provided would not preclude the Company from
                offering or selling securities to such person pursuant to the Plan
                in
                reliance on either the exemption from registration provided by
                Rule 701 under the Securities Act or, if the Company is required to
                file reports pursuant to Section 13 or 15(d) of the Exchange Act,
                registration on a Form S-8 Registration Statement under the
                Securities Act. 

            


    

     

    
      	(f)  	
              "
                Director
                "
                means
                a member of the Board or of the board of directors of any other
                Participating Company. 

            


    

     

    
      	(g)  	
              "
                Disability
                "
                means
                the inability of the Optionee, in the opinion of a qualified physician
                acceptable to the Company, to perform the major duties of the Optionee's
                position with the Participating Company Group because of the sickness
                or
                injury of the Optionee. 

            


    

     

    
      	(h)  	
              "
                Employee
                "
                means
                any person treated as an employee (including an officer or a Director
                who
                is also treated as an employee) in the records of a Participating
                Company
                and, with respect to any Incentive Stock Option granted to such person,
                who is an employee for purposes of Section 422 of the Code; provided,
                however, that neither service as a Director nor payment of a director's
                fee shall be sufficient to constitute employment for purposes of
                the Plan.
                

            


    

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    
      	(i)  	
              "
                Exchange
                Act "
                means
                the Securities Exchange Act of 1934, as amended.
                

            


    

     

    
      	(j)  	
              "
                Fair
                Market Value "
                means,
                as of any date, the value of a share of Stock or other property as
                determined by the Committee, in its discretion, or by the Company,
                in its
                discretion, if such determination is expressly allocated to the Company
                herein, subject to the following: 

            


    

     

            (i)    If,
      on such date, the Stock is listed on a national or regional securities exchange
      or market system, the Fair Market Value of a share of Stock shall be the closing
      price of a share of Stock (or the mean of the closing bid and asked prices
      of a
      share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq Global
      Market, the Nasdaq Capital Market, the Over-the-Counter Bulletin Board or such
      other national or regional securities exchange or market system constituting
      the
      primary market for the Stock, as reported in The
      Wall Street Journal or
      such
      other source as the Company deems reliable. If the relevant date does not fall
      on a day on which the Stock has traded on such securities exchange or market
      system, the date on which the Fair Market Value shall be established shall
      be
      the last day on which the Stock was so traded prior to the relevant date, or
      such other appropriate day as shall be determined by the Committee, in its
      discretion. 

     

            (ii)   If,
      on such date, the Stock is not listed on a national or regional securities
      exchange or market system, the Fair Market Value of a share of Stock shall
      be as
      determined by the Committee in good faith without regard to any restriction
      other than a restriction which, by its terms, will never lapse. 

     

    
      	(j)  	
              "
                Incentive
                Stock Option "
                means
                an Option intended to be (as set forth in the Option Agreement) and
                which
                qualifies as an incentive stock option within the meaning of
                Section 422(b) of the Code. 

            


    

     

    
      	(k)  	
              "
                Insider
                "
                means
                an officer or a Director of the Company or any other person whose
                transactions in Stock are subject to Section 16 of the Exchange Act.
                

            


    

     

    
      	(l)  	
              "
                Nonstatutory
                Stock Option "
                means
                an Option not intended to be (as set forth in the Option Agreement)
                or
                which does not qualify as an Incentive Stock Option.
                

            


    

     

    
      	(m)  	
              "
                Option
                "
                means
                a right to purchase Stock (subject to adjustment as provided in
                Section 4.2) pursuant to the terms and conditions of the Plan. An
                Option may be either an Incentive Stock Option or a Nonstatutory
                Stock
                Option. 

            


    

     

    
      	(n)  	
              "
                Option
                Agreement "
                means
                a written agreement between the Company and an Optionee setting forth
                the
                terms, conditions and restrictions of the Option granted to the Optionee
                and any shares acquired upon the exercise thereof. An Option Agreement
                may
                consist of a form of "Notice of Grant of Stock Option" and a form
                of
                "Stock Option Agreement" incorporated therein by reference, or such
                other
                form or forms as the Committee may approve from time to time.
                

            


    

     

    
      	(o)  	
              "
                Optionee
                "
                means
                a person who has been granted one or more Options.
                

            


    

     

    
      	(p)  	
              "
                Parent
                Corporation "
                means
                any present or future "parent corporation" of the Company, as defined
                in
                Section 424(e) of the Code. 

            


    

     

    
      	(q)  	
              "
                Participating
                Company "
                means
                the Company or any Parent Corporation or Subsidiary Corporation.
                

            


    

     

    
      	(r)  	
              "
                Participating
                Company Group "
                means,
                at any point in time, all corporations collectively which are then
                Participating Companies. 

            


    

     

    
      	(s)  	
              "
                Rule 16b-3
                "
                means
                Rule 16b-3 under the Exchange Act, as amended from time to time, or
                any successor rule or regulation. 

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	(t)  	
              “Sarbanes-Oxley”,
                Sarbanes-Oxley Act, or SOX”
                means
                the Sarbanes-Oxley Act of 2002.

            


    

     

    
      	(u)  	
              "
                Securities
                Act "
                means
                the Securities Act of 1933, as amended.


            


    

     

    
      	(v)  	
              "
                Service
                "
                means
                an Optionee's employment or service with the Participating Company
                Group,
                whether in the capacity of an Employee, a Director or a Consultant.
                An
                Optionee's Service shall not be deemed to have terminated merely
                because
                of a change in the capacity in which the Optionee renders Service
                to the
                Participating Company Group or a change in the Participating Company
                for
                which the Optionee renders such Service, provided that there is no
                interruption or termination of the Optionee's Service. Furthermore,
                an
                Optionee's Service with the Participating Company Group shall not
                be
                deemed to have terminated if the Optionee takes any military leave,
                sick
                leave, or other bona fide leave of absence approved by the Company;
                provided, however, that if any such leave exceeds ninety (90) days,
                on the ninety-first (91st) day of such leave the Optionee's Service
                shall
                be deemed to have terminated unless the Optionee's right to return
                to
                Service with the Participating Company Group is guaranteed by statute
                or
                contract. Notwithstanding the foregoing, unless otherwise designated
                by
                the Company or required by law, a leave of absence shall not be treated
                as
                Service for purposes of determining vesting under the Optionee's
                Option
                Agreement. The Optionee's Service shall be deemed to have terminated
                either upon an actual termination of Service or upon the corporation
                for
                which the Optionee performs Service ceasing to be a Participating
                Company.
                Subject to the foregoing, the Company, in its discretion, shall determine
                whether the Optionee's Service has terminated and the effective date
                of
                such termination. 

            


    

     

    
      	(w)  	
              "
                Stock
                "
                means
                the common stock of the Company, as adjusted from time to time in
                accordance with Section 4.2. 

            


    

     

    
      	(x)  	
              "
                Subsidiary
                Corporation "
                means
                any present or future "subsidiary corporation" of the Company, as
                defined
                in Section 424(f) of the Code.


            


    

     

    
      	(y)  	
              "
                Ten
                Percent Owner Optionee "
                means
                an Optionee who, at the time an Option is granted to the Optionee,
                owns
                stock possessing more than ten percent (10%) of the total combined
                voting
                power of all classes of stock of a Participating Company within the
                meaning of Section 422(b)(6) of the Code.


            


    

     

            2.2
          Construction.
          Captions
      and titles contained herein are for convenience only and shall not affect the
      meaning or interpretation of any provision of the Plan. Except when otherwise
      indicated by the context, the singular shall include the plural and the plural
      shall include the singular. Use of the term "or" is not intended to be
      exclusive, unless the context clearly requires otherwise. 

     

            3.
          Administration.
          
      

     

            3.1
          Administration
      by the Committee.     The
      Plan shall be administered by the Committee. All questions of interpretation
      of
      the Plan or of any Option shall be determined by the Committee, and such
determinations
      shall be final and binding upon all persons having an interest in the Plan
      or
      such Option. 

     

            3.2
          Authority
      of Officers.     Any
      officer of a Participating Company shall have the authority to act on behalf
      of
      the Company with respect to any matter, right, obligation, determination or
      election which is the responsibility of or which is allocated to the Company
      herein, provided the officer has apparent authority with respect to such matter,
      right, obligation, determination or election. 

     

            3.3
          Powers
      of the Committee.     In
      addition to any other powers set forth in the Plan and subject to the provisions
      of the Plan, the Committee shall have the full and final power and authority,
      in
      its discretion: 

     

            (a)   to
      determine the persons to whom, and the time or times at which, Options shall
      be
      granted and the number of shares of Stock to be subject to each Option;


     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

            (b)   to
      designate Options as Incentive Stock Options or Nonstatutory Stock Options;
      

     

            (c)   to
      determine the Fair Market Value of shares of Stock or other property;


     

            (d)   to
      determine the terms, conditions and restrictions applicable to each Option
      (which need not be identical) and any shares acquired upon the exercise thereof,
      including, without limitation, (i) the exercise price of the Option,
      (ii) the method of payment for shares purchased upon the exercise of the
      Option, (iii) the method for satisfaction of any tax withholding obligation
      arising in connection with the Option or such shares, including by the
      withholding or delivery of shares of stock, (iv) the timing, terms and
      conditions of the exercisability of the Option or the vesting of any shares
      acquired upon the exercise thereof, (v) the time of the expiration of the
      Option, (vi) the effect of the Optionee's termination of Service with the
      Participating Company Group on any of the foregoing, and (vii) all other
      terms, conditions and restrictions applicable to the Option or such shares
      not
      inconsistent with the terms of the Plan; 

     

            (e)   to
      approve one or more forms of Option Agreement; 

     

            (f)    to
      amend, modify, extend, cancel or renew any Option or to waive any restrictions
      or conditions applicable to any Option or any shares acquired upon the exercise
      thereof; 

     

            (g)   to
      accelerate, continue, extend or defer the exercisability of any Option or the
      vesting of any shares acquired upon the exercise thereof, including with respect
      to the period following an Optionee's termination of Service with the
      Participating Company Group; 

     

            (h)   to
      prescribe, amend or rescind rules, guidelines and policies relating to the
      Plan,
      or to adopt supplements to, or alternative versions of, the Plan, including,
      without limitation, as the Committee deems necessary or desirable to comply
      with
      the laws of, or to accommodate the tax policy or custom of, foreign
      jurisdictions whose citizens may be granted Options; and 

     

            (i)    to
      correct any defect, supply any omission or reconcile any inconsistency in the
      Plan or any Option Agreement and to make all other determinations and take
      such
      other actions with respect to the Plan or any Option as the Committee may deem
      advisable to the extent not inconsistent with the provisions of the Plan or
      applicable law. 

     

            3.4
          Administration
      with Respect to Insiders.     With
      respect to participation by Insiders in the Plan, at any time that any class
      of
      equity security of the Company is registered pursuant to Section 12 of the
      Exchange Act, the Plan shall be administered in compliance with the
      requirements, if any, of Rule 16b-3 and the Sarbanes-Oxley
      Act.

     

            3.5
          Indemnification.
          In
      addition to such other rights of indemnification as they may have as members
      of
      the Board or officers or employees of the Participating Company Group, members
      of the Board and any officers or employees of the Participating Company Group
      to
      whom authority to act for the Board or the Company is delegated shall be
      indemnified by the Company against all reasonable expenses, including attorneys'
      fees, actually and necessarily incurred in connection with the defense of any
      action, suit or proceeding, or in connection with any appeal therein, to which
      they or any of them may be a party by reason of any action taken or failure
      to
      act under or in connection with the Plan, or any right granted hereunder, and
      against all amounts paid by them in settlement thereof (provided such settlement
      is approved by independent legal counsel selected by the Company) or paid by
      them in satisfaction of a judgment in any such action, suit or proceeding,
      except in relation to matters as to which it shall be adjudged in such action,
      suit or proceeding that such person is liable for gross negligence, bad faith
      or
      intentional misconduct in duties; provided, however, that within sixty
      (60) days after the institution of such action, suit or proceeding, such
      person shall offer to the Company, in writing, the opportunity at its own
      expense to handle and defend the same. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

            4.
          Shares
      Subject to Plan.     
      

     

            4.1
          Maximum
      Number of Shares Issuable.     Subject
      to adjustment as provided in Section 4.2, the maximum aggregate number of
      shares of Stock that may be issued under the Plan shall be 25,000,000 and shall
      consist of authorized but unissued or reacquired shares of Stock or any
      combination thereof. If an outstanding Option for any reason expires or is
      terminated or canceled or if shares of Stock are acquired upon the exercise
      of
      an Option subject to a Company repurchase option and are repurchased by the
      Company at the Optionee's exercise price, the shares of Stock allocable to
      the
      unexercised portion of such Option or such repurchased shares of Stock shall
      again be available for issuance under the Plan. Notwithstanding the foregoing,
      at any such time as the offer and sale of securities pursuant to the Plan is
      subject to compliance with Section 260.140.45 of Title 10 of the California
      Code of Regulations ( "
      Section 260.140.45
      "
      ),
      the
      total number of shares of Stock issuable upon the exercise of all outstanding
      Options (together with options outstanding under any other stock option plan
      of
      the Company) and the total number of shares provided for under any stock bonus
      or similar plan of the Company shall not exceed thirty percent (30%) (or such
      other higher percentage limitation as may be approved by the stockholders of
      the
      Company pursuant to Section 260.140.45) of the then outstanding shares of
      the Company as calculated in accordance with the conditions and exclusions
      of
      Section 260.140.45. 

     

            4.2
          Adjustments
      for Changes in Capital Structure.     In
      the event of any stock dividend, stock split, reverse stock split,
      recapitalization, combination, reclassification or similar change in the capital
      structure of the Company, appropriate adjustments shall be made in the number
      and class of shares subject to the Plan and to any outstanding Options and
      in
      the exercise price per share of any outstanding Options. If a majority of the
      shares which are of the same class as the shares that are subject to outstanding
      Options are exchanged for, converted into, or otherwise become (whether or
      not
      pursuant to an Ownership Change Event, as defined in Section 8.1) shares of
      another corporation (the "
      New
      Shares "),
      the
      Committee may unilaterally amend the outstanding Options to provide that such
      Options are exercisable for New Shares. In the event of any such amendment,
      the
      number of shares subject to, and the exercise price per share of, the
      outstanding Options shall be adjusted in a fair and equitable manner as
      determined by the Committee, in its discretion. Notwithstanding the foregoing,
      any fractional share resulting from an adjustment pursuant to this
      Section 4.2 shall be rounded down to the nearest whole number, and in no
      event may the exercise price of any Option be decreased to an amount less than
      the par value, if any, of the stock subject to the Option. The adjustments
      determined by the Committee pursuant to this Section 4.2 shall be final,
      binding and conclusive. 

     

            5.
          Eligibility
      and Option Limitations.     
      

     

            5.1
          Persons
      Eligible for Options.     Options
      may be granted only to Employees, Consultants, and Directors. For purposes
      of
      the foregoing sentence, "Employees," "Consultants" and "Directors" shall include
      prospective Employees, prospective Consultants and prospective Directors to
      whom
      Options are granted in connection with written offers of an employment or other
      service relationship with the Participating Company Group. Eligible persons
      may
      be granted more than one (1) Option. 

     

            5.2
          Option
      Grant Restrictions.     Any
      person who is not an Employee on the effective date of the grant of an Option
      to
      such person may be granted only a Nonstatutory Stock Option. An Incentive Stock
      Option granted to a prospective Employee upon the condition that such person
      become an Employee shall be deemed granted effective on the date such person
      commences Service with a Participating Company, with an exercise price
      determined as of such date in accordance with Section 6.1. 

     

            5.3
          Fair
      Market Value Limitation.     To
      the extent that options designated as Incentive Stock Options (granted under
      all
      stock option plans of the Participating Company Group, including the Plan)
      become exercisable by an Optionee for the first time during any calendar year
      for stock having a Fair Market Value greater than One Hundred Thousand Dollars
      ($100,000), the portions of such options which exceed such amount shall be
      treated as Nonstatutory Stock Options. For purposes of this Section 5.3,
      options designated as Incentive Stock Options shall be taken into account in
      the
      order in which they were granted, and the Fair Market Value of stock shall
      be
      determined as of the time the option with respect to such stock is granted.
      If
      the Code is amended to provide for a different limitation from that set forth
      in
      this Section 5.3, such different limitation shall be deemed incorporated
      herein effective as of the date and with respect to such Options as required
      or
      permitted by such amendment to the Code. If an Option is treated as an Incentive
      Stock Option in part and as a Nonstatutory Stock Option in part by reason of
      the
      limitation set forth in this Section 5.3, the Optionee may designate which
      portion of such Option the Optionee is exercising. In the absence of such
      designation, the Optionee shall be deemed to have exercised the Incentive Stock
      Option portion of the Option first. Separate certificates representing each
      such
      portion shall be issued upon the exercise of the Option. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

            6.
          Terms
      and Conditions of Options.     Options
      shall be evidenced by Option Agreements specifying the number of shares of
      Stock
      covered thereby, in such form as the Committee shall from time to time
      establish. No Option or purported Option shall be a valid and binding obligation
      of the Company unless evidenced by a fully executed Option Agreement. Option
      Agreements may incorporate all or any of the terms of the Plan by reference
      and
      shall comply with and be subject to the following terms and conditions:


     

            6.1
          Exercise
      Price.     The
      exercise price for each Option shall be established in the discretion of the
      Committee; provided, however, that (a) the exercise price per share for an
      Incentive Stock Option shall be not less than the Fair Market Value of a share
      of Stock on the effective date of grant of the Option, (b) the exercise
      price per share for a Nonstatutory Stock Option shall be not less than
      eighty-five percent (85%) of the Fair Market Value of a share of Stock on the
      effective date of grant of the Option, and (c) no Option granted to a Ten
      Percent Owner Optionee shall have an exercise price per share less than one
      hundred ten percent (110%) of the Fair Market Value of a share of Stock on
      the
      effective date of grant of the Option. Notwithstanding the foregoing, an Option
      (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
      granted with an exercise price lower than the minimum exercise price set forth
      above if such Option is granted pursuant to an assumption or substitution for
      another option in a manner qualifying under the provisions of
      Section 424(a) of the Code. 

     

            6.2
          Exercisability
      and Term of Options.     Options
      shall be exercisable at such time or times, or upon such event or events, and
      subject to such terms, conditions, performance criteria and restrictions as
      shall be determined by the Committee and set forth in the Option Agreement
      evidencing such Option; provided, however, that (a) no Option shall be
      exercisable after the expiration of ten (10) years after the effective date
      of grant of such Option, (b) no Incentive Stock Option granted to a Ten
      Percent Owner Optionee shall be exercisable after the expiration of five
      (5) years after the effective date of grant of such Option, (c) no
      Option granted to a prospective Employee, prospective Consultant or prospective
      Director may become exercisable prior to the date on which such person commences
      Service with a Participating Company, and (d) with the exception of an
      Option granted to an officer, Director or Consultant, no Option shall become
      exercisable at a rate less than twenty percent (20%) per year over a period
      of
      five (5) years from the effective date of grant of such Option, subject to
      the Optionee's continued Service. Subject to the foregoing, unless otherwise
      specified by the Committee in the grant of an Option, any Option granted
      hereunder shall terminate ten (10) years after the effective date of grant
      of the Option, unless earlier terminated in accordance with its provisions.
      

     

            6.3
          Payment
      of Exercise Price.     
      

     

            (a)
          Forms
      of Consideration Authorized.     Except
      as otherwise provided below, payment of the exercise price for the number of
      shares of Stock being purchased pursuant to any Option shall be made (i) in
      cash, by check or cash equivalent, (ii) by tender to the Company, or
      attestation to the ownership, of shares of Stock owned by the Optionee having
      a
      Fair Market Value (as determined by the Company without regard to any
      restrictions on transferability applicable to such stock by reason of federal
      or
      state securities laws or agreements with an underwriter for the Company) not
      less than the exercise price, (iii) by delivery of a properly executed
      notice together with irrevocable instructions to a broker providing for the
      assignment to the Company of the proceeds of a sale or loan with respect to
      some
      or all of the shares being acquired upon the exercise of the Option (including,
      without limitation, through an exercise complying with the provisions of
      Regulation T as promulgated from time to time by the Board of Governors of
      the Federal Reserve System) (a "
      Cashless
      Exercise "
      ),
      (iv) provided that the Optionee is an Employee (unless otherwise not
      prohibited by law, including, without limitation, any regulation promulgated
      by
      the Board of Governors of the Federal Reserve System) and in the Company's
      sole
      discretion at the time the Option is exercised, by delivery of the Optionee's
      promissory note in a form approved by the Company for the aggregate exercise
      price, provided that, if the Company is incorporated in the State of Delaware,
      the Optionee shall pay in cash that portion of the aggregate exercise price
      not
      less than the par value of the shares being acquired, (v) by such other
      consideration as may be approved by the Committee from time to time to the
      extent permitted by applicable law, or (vi) by any combination thereof. The
      Committee may at any time or from time to time, by approval of or by amendment
      to the standard forms of Option Agreement described in Section 7, or by
      other means, grant Options which do not permit all of the foregoing forms of
      consideration to be used in payment of the exercise price or which otherwise
      restrict one or more forms of consideration. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

            (b)
          Limitations
      on Forms of Consideration.     
      

     

            (i)
          Tender
      of Stock.     Notwithstanding
      the foregoing, an Option may not be exercised by tender to the Company, or
      attestation to the ownership, of shares of Stock to the extent such tender
      or
      attestation would constitute a violation of the provisions of any law,
      regulation or agreement restricting the redemption of the Company's stock.
      Unless otherwise provided by the Committee, an Option may not be exercised
      by
      tender to the Company, or attestation to the ownership, of shares of Stock
      unless such shares either have been owned by the Optionee for more than six
      (6) months or were not acquired, directly or indirectly, from the Company.


     

            (ii)
          Cashless
      Exercise.     The
      Company reserves, at any and all times, the right, in the Company's sole and
      absolute discretion, to establish, decline to approve or terminate any program
      or procedures for the exercise of Options by means of a Cashless Exercise.
      At no
      time shall a cashless exercise be allowed if by so doing it would violate any
      section of the Sarbanes-Oxley Act.

     

            (iii)
          Payment
      by Promissory Note.     No
      promissory note shall be permitted if the exercise of an Option using a
      promissory note would be a violation of any law including the applicable
      sections of the Sarbanes-Oxley Act. Any permitted promissory note shall be
      on
      such terms as the Committee shall determine at the time the Option is granted.
      The Committee shall have the authority to permit or require the Optionee to
      secure any promissory note used to exercise an Option with the shares of Stock
      acquired upon the exercise of the Option or with other collateral acceptable
      to
      the Company. Unless otherwise provided by the Committee, if the Company at
      any
      time is subject to the regulations promulgated by the Board of Governors of
      the
      Federal Reserve System or any other governmental entity affecting the extension
      of credit in connection with the Company's securities, any promissory note
      shall
      comply with such applicable regulations, and the Optionee shall pay the unpaid
      principal and accrued interest, if any, to the extent necessary to comply with
      such applicable regulations. 

     

            6.4
          Tax
      Withholding.     The
      Company shall have the right, but not the obligation, to deduct from the shares
      of Stock issuable upon the exercise of an Option, or to accept from the Optionee
      the tender of, a number of whole shares of Stock having a Fair Market Value,
      as
      determined by the Company, equal to all or any part of the federal, state,
      local
      and foreign taxes, if any, required by law to be withheld by the Participating
      Company Group with respect to such Option or the shares acquired upon the
      exercise thereof. Alternatively or in addition, in its discretion, the Company
      shall have the right to require the Optionee, through payroll withholding,
      cash
      payment or otherwise, including by means of a Cashless Exercise, to make
      adequate provision for any such tax withholding obligations of the Participating
      Company Group arising in connection with the Option or the shares acquired
      upon
      the exercise thereof. The Fair Market Value of any shares of Stock withheld
      or
      tendered to satisfy any such tax withholding obligations shall not exceed the
      amount determined by the applicable minimum statutory withholding rates. The
      Company shall have no obligation to deliver shares of Stock or to release shares
      of Stock from an escrow established pursuant to the Option Agreement until
      the
      Participating Company Group's tax withholding obligations have been satisfied
      by
      the Optionee. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

            6.5
          Repurchase
      Rights.     Shares
      issued under the Plan may be subject to a right of first refusal, one or more
      repurchase options, or other conditions and restrictions as determined by the
      Committee in its discretion at the time the Option is granted. The Company
      shall
      have the right to assign at any time any repurchase right it may have, whether
      or not such right is then exercisable, to one or more persons as may be selected
      by the Company. Upon request by the Company, each Optionee shall execute any
      agreement evidencing such transfer restrictions prior to the receipt of shares
      of Stock hereunder and shall promptly present to the Company any and all
      certificates representing shares of Stock acquired hereunder for the placement
      on such certificates of appropriate legends evidencing any such transfer
      restrictions. 

     

            6.6
          Effect
      of Termination of Service.     
      

     

            (a)
          Option
      Exercisability.     Subject
      to earlier termination of the Option as otherwise provided herein and unless
      otherwise provided by the Committee in the grant of an Option and set forth
      in
      the Option Agreement, an Option shall be exercisable after an Optionee's
      termination of Service only during the applicable time period determined in
      accordance with this Section 6.6 and thereafter shall terminate:


     

            (i)
          Disability.
          If
      the Optionee's Service with the Participating Company Group terminates because
      of the Disability of the Optionee, the Option, to the extent unexercised and
      exercisable on the date on which the Optionee's Service terminated, may
be
      exercised by the Optionee (or the Optionee's guardian or legal representative)
      at any time prior to the expiration of twelve (12) months (or such longer
      period of time as determined by the Committee, in its discretion) after the
      date
      on which the Optionee's Service terminated, but in any event no later than
      the
      date of expiration of the Option's term as set forth in the Option Agreement
      evidencing such Option (the "
      Option
      Expiration Date "
      ).
      

     

            (ii)
          Death.
          If
      the Optionee's Service with the Participating Company Group terminates because
      of the death of the Optionee, the Option, to the extent unexercised and
      exercisable on the date on which the Optionee's Service terminated, may be
      exercised by the Optionee's legal representative or other person who acquired
      the right to exercise the Option by reason of the Optionee's death at any time
      prior to the expiration of twelve (12) months (or such longer period of
      time as determined by the Committee, in its discretion) after the date on which
      the Optionee's Service terminated, but in any event no later than the Option
      Expiration Date. The Optionee's Service shall be deemed to have terminated
      on
      account of death if the Optionee dies within three (3) months (or such
      longer period of time as determined by the Committee, in its discretion) after
      the Optionee's termination of Service. 

     

            (iii)
          Termination
      After Change in Control.     
      See section 8.2 for the treatment of options upon a Change in Control
      event.

     

    (iv)
          Other
      Termination of Service.     If
      the Optionee's Service with the Participating Company Group terminates for
      any
      reason, except Disability or death or as described in section 8.2, the Option,
      to the extent unexercised and exercisable by the Optionee on the date on which
      the Optionee's Service terminated, may be exercised by the Optionee at any
      time
      prior to the expiration of three (3) months (or such longer period of time
      as determined by the Committee, in its discretion) after the date on which
      the
      Optionee's Service terminated, but in any event no later than the Option
      Expiration Date.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

            (b)
          Extension
      if Exercise Prevented by Law.     Notwithstanding
      the foregoing or as described in section 8.2, if the exercise of an Option
      within the applicable time periods set forth in Section 6.6(a) is prevented
      by the provisions of Section 10 below, the Option shall remain exercisable
      until three (3) months (or such longer period of time as determined by the
      Committee, in its discretion) after the date the Optionee is notified by the
      Company that the Option is exercisable, but in any event no later than the
      Option Expiration Date. 

     

            (c)
          Extension
      if Optionee Subject to Section 16(b).     Notwithstanding
      the foregoing, if a sale within the applicable time periods set forth in
      Sections 6.6(a) or 8.2 of shares acquired upon the exercise of the Option
      would subject the Optionee to suit under Section 16(b) of the Exchange Act,
      the Option shall remain exercisable until the earliest to occur of (i) the
      tenth (10th) day following the date on which a sale of such shares by the
      Optionee would no longer be subject to such suit, (ii) the one hundred and
      ninetieth (190th) day after the Optionee's termination of Service, or
      (iii) the Option Expiration Date. 

     

            6.7
          Transferability
      of Options.     During
      the lifetime of the Optionee, an Option shall be exercisable only by the
      Optionee or the Optionee's guardian or legal representative. No Option shall
      be
      assignable or transferable by the Optionee, except by will or by the laws of
      descent and distribution. Notwithstanding the foregoing, to the extent permitted
      by the Committee, in its discretion, and set forth in the Option Agreement
      evidencing such Option, a Nonstatutory Stock Option shall be assignable or
      transferable subject to the applicable limitations, if any, described in
      Section 260.140.41 of Title 10 of the California Code of Regulations,
      Rule 701 under the Securities Act, and the General Instructions to
      Form S-8 Registration Statement under the Securities Act. 

     

            6.8
          No
      Right to Future Employment.     The
      granting of a Stock Option in any year shall not give the Optionee any right
      to
      similar grants in future years or any right to be retained in the employ or
      service of the Company, and all Employees and Consultants shall remain subject
      to discharge to the same extent as if the Plan were not in effect.

     

            6.9
          No
      Stockholder Rights.     The
      granting of a Stock Option in any year shall not give the Optionee any rights
      as
      a stockholder until the exercise of such Option.

     

            7.
          Standard
      Forms of Option Agreement.     
      

     

            7.1
          Option
      Agreement.     Unless
      otherwise provided by the Committee at the time the Option is granted, an Option
      shall comply with and be subject to the terms and conditions set forth in the
      form of Option Agreement approved by the Committee concurrently with its
      adoption of the Plan and as amended from time to time. 

     

            7.2
          Authority
      to Vary Terms.     The
      Committee shall have the authority from time to time to vary the terms of any
      standard form of Option Agreement described in this Section 7 either in
      connection with the grant or amendment of an individual Option or in connection
      with the authorization of a new standard form or forms; provided, however,
      that
      the terms and conditions of any such new, revised or amended standard form
      or
      forms of Option Agreement are not inconsistent with the terms of the Plan.
      

     

            8.
          Change
      in Control.     
      

     

            8.1
          Definitions.     
      

     

            (a)   An
      "
      Ownership
      Change Event "
      shall
      be
      deemed to have occurred if any of the following occurs with respect to the
      Company: (i) the direct or indirect sale or exchange in a single or series
      of related transactions by the stockholders of the Company of more than thirty
      percent (30%) of the voting stock of the Company; (ii) a merger or
      consolidation in which the Company is a party (except a merger or consolidation
      in which the Company is the surviving entity and the stockholders of the Company
      prior to such transaction hold seventy percent (70%) or more of the surviving
      entity’s outstanding equity securities); (iii) the sale, exchange, or
      transfer of all or substantially all of the assets of the Company; (iv) a
      liquidation or dissolution of the Company; (v) the sale of all or substantially
      all of the assets of the Company or (vi) the termination of employment of Benton
      H Wilcoxon as an officer of the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

            (b)   A
      "
      Change
      in Control "
      shall
      mean an Ownership Change Event or a series of related Ownership Change Events
      (collectively, a "
      Transaction
      "
      )
      wherein
      the stockholders of the Company immediately before the Transaction do not retain
      immediately after the Transaction, in substantially the same proportions as
      their ownership of shares of the Company's voting stock immediately before
      the
      Transaction, direct or indirect beneficial ownership of more than thirty percent
      (30%) of the total combined voting power of the outstanding voting stock of
      the
      Company or the corporation or corporations to which the assets of the Company
      were transferred (the "
      Transferee
      Corporation(s) "
      ),
      as the
      case may be. For purposes of the preceding sentence, indirect beneficial
      ownership shall include, without limitation, an interest resulting from
      ownership of the voting stock of one or more corporations which, as a result
      of
      the Transaction, own the Company or the Transferee Corporation(s), as the case
      may be, either directly or through one or more subsidiary corporations. The
      Committee shall have the right to determine whether multiple sales or exchanges
      of the voting stock of the Company or multiple Ownership Change Events are
      related, and its determination shall be final, binding and conclusive.


     

    
      	8.2  	
              Effect
                of Change in Control on Options.     

            


    

     

    (a)
      In
      the event of a Change in Control, the surviving, continuing, successor, or
      purchasing corporation or other business entity or parent thereof, as the case
      may be (the "
      Acquiring
      Corporation "
      ),
      may,
      without the consent of any Optionee, either 

     

    
      	i)  	
              assume
                the Company's rights and obligations under outstanding Options;
                

            


    

     

    
      	ii)  	
              substitute
                for outstanding Options substantially equivalent options for the
                Acquiring
                Corporation's stock or 

            


    

     

    
      	iii)  	
              pay
                consideration, in cash or a form and manner consistent with the
                consideration given in exchange for common shares of the Company
                and equal
                to the fair value of the outstanding Options (defined as the consideration
                given or closing market price of a share of common stock valued as
                of the
                date of the Change in Control, reduced by the exercise price of the
                option).

            


    

     

    (b)
      In
      the event the Acquiring Corporation elects not to assume or substitute for
      outstanding Options or pay the Optionee the fair value of the outstanding
      Options, as defined in section 8.2(a) in connection with a Change in Control,
      the exercisability and vesting of each such outstanding Option and any shares
      acquired upon the exercise thereof held by Optionees whose Service has not
      terminated prior to such date shall be accelerated, effective as of the date
      ten
      (10) days prior to the date of the Change in Control, to such extent, if
      any, as shall have been determined by the Committee, in its discretion, and
      set
      forth in the Option Agreement evidencing such Option. In such an event, the
      Optionee shall have twelve (12) months from the date of the Change in Control
      to
      exercise the Option and upon such exercise shall have the rights to any
      financial consideration given or provided to an equivalent share of Stock as
      of
      the date of the Change in Control.

     

    (c)
      The
      exercise or vesting of any Option and any shares acquired upon the exercise
      thereof that was permissible solely by reason of this Section 8.2 and the
      provisions of such Option Agreement shall be conditioned upon the consummation
      of the Change in Control. Notwithstanding the foregoing, shares acquired upon
      exercise of an Option prior to the Change in Control and any consideration
      received pursuant to the Change in Control with respect to such shares shall
      continue to be subject to all applicable provisions of the Option Agreement
      evidencing such Option except as otherwise provided in such Option Agreement.
      

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (d)
      The
      Committee may, in its discretion, provide in any Option Agreement that if the
      Optionee's Service terminates either voluntarily with Good Reason or
      involuntarily without Cause (and not due to death or Disability) within twelve
      (12) months following the Change in Control or is substantially modified in
      the
      scope of Service as a result of a “Change in Control" (as defined in such Option
      Agreement), then (1) the Option, to the extent unexercised and exercisable
      on the date on which the Optionee's Service terminated or changed, may be
      exercised by the Optionee (or the Optionee's guardian or legal representative)
      at any time prior to the expiration of twelve (12) months (or such longer
      period of time as determined by the Committee, in its discretion) after the
      date
      on which the Optionee's Service terminated or changed, but in any event no
      later
      than the Option Expiration Date, and (2) the exercisability and vesting of
      the Option and any shares acquired upon the exercise thereof shall be
      accelerated effective as of the date on which the Optionee's Service terminated
      or was substantially modified to such extent, if any, as shall have been
      determined by the Committee, in its discretion, and set forth in the Option
      Agreement. “Good Reason” and “Cause” shall be defined in the Option
      Agreement.         

     

            9.
          Provision
      of Information.     At
      least annually, copies of the Company's balance sheet and income statement
      for
      the just completed fiscal year shall be made available to each Optionee and
      purchaser of shares of Stock upon the exercise of an Option. The Company shall
      not be required to provide such information to key employees whose duties in
      connection with the Company assure them access to equivalent information.


     

            10.
          Compliance
      with Applicable Law.     The
      grant of Options and the issuance of shares of Stock upon exercise of Options
      shall be subject to compliance with all applicable requirements of federal,
      state and foreign law with respect to such securities, including Section 409A
      of
      the Code to the extent applicable. Options may not be exercised if the issuance
      of shares of Stock upon exercise would constitute a violation of any applicable
      federal, state or foreign securities laws or other law or regulations or the
      requirements of any stock exchange or market system upon which the Stock may
      then be listed. In addition, no Option may be exercised unless (a) a
      registration statement under the Securities Act shall at the time of exercise
      of
      the Option be in effect with respect to the shares issuable upon exercise of
      the
      Option or (b) in the opinion of legal counsel to the Company, the shares
      issuable upon exercise of the Option may be issued in accordance with the terms
      of an applicable exemption from the registration requirements of the Securities
      Act. The inability of the Company to obtain from any regulatory body having
      jurisdiction the authority, if any, deemed by the Company's legal 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. As
      a
      condition to the exercise of any Option, the Company may require the Optionee
      to
      satisfy any qualifications that may be necessary or appropriate, to evidence
      compliance with any applicable law or regulation and to make any representation
      or warranty with respect thereto as may be requested by the Company.


     

            11.
          Termination
      or Amendment of Plan.     The
      Committee may terminate or amend the Plan at any time. However, subject to
      changes in applicable law, regulations or rules that would permit otherwise,
      without the approval of the Company's stockholders, there shall be (a) no
      increase in the maximum aggregate number of shares of Stock that may be issued
      under the Plan (except by operation of the provisions of Section 4.2),
      (b) no change in the class of persons eligible to receive Incentive Stock
      Options, and (c) no other amendment of the Plan that would require approval
      of the Company's stockholders under any applicable law, regulation or rule.
      No
      termination or amendment of the Plan shall affect any then outstanding Option
      unless expressly provided by the Committee. In any event, no termination or
      amendment of the Plan may adversely affect any then outstanding Option without
      the consent of the Optionee, unless such termination or amendment is required
      to
      enable an Option designated as an Incentive Stock Option to qualify as an
      Incentive Stock Option or is necessary to comply with any applicable law,
      regulation or rule. 

     

            12.
          Stockholder
      Approval.     The
      Plan or any increase in the maximum aggregate number of shares of Stock issuable
      thereunder as provided in Section 4.1 (the "Authorized
      Shares"
      )
      shall
      be approved by the stockholders of the Company within twelve (12) months of
      the date of adoption thereof by the Board. Options granted prior to stockholder
      approval of the Plan or in excess of the Authorized Shares previously approved
      by the stockholders shall become exercisable no earlier than the date of
      stockholder approval of the Plan or such increase in the Authorized Shares,
      as
      the case may be. 

     

    
      
        
        

      

      
        11