Leonard M. Shulman - Bar No. 126349
Mark Bradshaw - Bar No. 192540
SHULMAN HODGES & BASTIAN LLP
26632 Towne Centre Drive, Suite 300
Foothill Ranch, California 92610-2808
Telephone:   (949) 340-3400
Facsimile:   (949) 340-3000


General Counsel for the Debtor and Debtor in Possession
Composite Technology Corporation, a Nevada corporation


                         UNITED STATES BANKRUPTCY COURT
               CENTRAL DISTRICT OF CALIFORNIA, SANTA ANA DIVISION


In re                                       Case No.  SA 05-13107 JR

COMPOSITE TECHNOLOGY CORPORATION,
a Nevada corporation,                       Chapter  11

                                            STIPULATION RESOLVING CLAIM
                                            ASSERTED BY JOHN NUNLEY(CLAIM NO.
                                            83); AND ORDER THEREON

Debtor.

                                            [No Hearing Set]

----------------------------------------

      TO THE HONORABLE JOHN E. RYAN, UNITED STATES BANKRUPTCY JUDGE:

      Composite Technology Corporation, a Nevada corporation ("Debtor") and John
Nunley, hereby agree and stipulate based on the following recitals.

                                    RECITALS

      A. The Debtor filed a voluntary petition for relief under Chapter 11 of
Title 11 of the United States Bankruptcy Code on May 5, 2005 (the "Petition
Date"). The Debtor is continuing in the operation and management of its business
pursuant to Bankruptcy Code Sections 1107 and 1108.


                                       1
<PAGE>

      B. The Debtor's Stock is traded on the Over-The-Counter Bulletin Board
under the symbol "CPTCQ."

      C. The Debtor provides engineering, product design, manufactured products
and other services related to full commercial design, production and
installation of Debtor's products for the global electrical utility industry,
all of which are designed to improve the performance and capacity of
transmission and distribution power lines.

      D. On July 18, 2005, the Court entered an order approving the Debtor's
Fourth Amended Disclosure Statement Describing Third Amended Chapter 11 Plan of
Reorganization.

      E. The hearing on confirmation of the Debtor's Third Amended Chapter 11
Plan of Reorganization Plan ("Plan") is currently scheduled for October 12, 2005
at 10:30 A.M.

      F. On or about August 2, 2005, Nunley filed a general unsecured claim
against the Debtor's bankruptcy estate ("Estate") in the amount of $2,836,138.16
("Nunley Claim"), which was assigned Claim No. 83 by the Court. A true and
correct copy of the Nunley Claim is attached hereto as Exhibit A.

      G. The Nunley Claim amount is based on the alleged amounts due under an
Employment Agreement dated September 15, 2003, a copy of which is attached to
the Nunley Claim.

      H. Nunley asserts that under the Employment Agreement his monthly
compensation was set at $20,833.33 (for an annual compensation of $250,000.) The
following chart sets forth the alleged amounts. Nunley asserts that he was owed
for wages in 2003, 2004 and 2005, the amounts that were paid and that the
amounts that are still due total $191,138.16:

--------------------------------------------------------------------------------
Description              Alleged Wages         Alleged Wages       Alleged Wage
                         Accrued               Paid                Amounts Due
--------------------------------------------------------------------------------
2003                     $62,500.00            $30,000.00           $32,500.00
--------------------------------------------------------------------------------
2004                     $250,000.00           $144,615.53          $105,384.47
--------------------------------------------------------------------------------
January 2005             $11,424.73            $5,076.72            $6,348.01
--------------------------------------------------------------------------------
Unused Vacation          $10,096.15            $4,857.13            $5,239.02
(84.19 Hours)
--------------------------------------------------------------------------------
60 Days Notice           $41,666.66            $.00                 $41,666.66
--------------------------------------------------------------------------------
Total Wages              $375,687.54           $184,549.38          $191,138.16
--------------------------------------------------------------------------------


                                       2
<PAGE>

      I. Nunley asserts that under the Employment Agreement he is owed
additional monthly compensation totaling $125,000 representing six months of his
monthly compensation that would be remaining in an alleged escrow account upon
termination of the Employment Agreement. Nunley asserts that the Employment
Agreement provided that an escrow account was to be set up containing two years
worth of salary ($500,000). Nunley further asserts that the Employment Agreement
provides that if he was terminated any time between the first anniversary and
second anniversary of the effective date of the Employment Agreement, he would
be entitled to receive whatever remained in the escrow account up to a maximum
of six months salary ($125,000). The alleged effective date of the Employment
Agreement was October 1, 2003 and Nunley was terminated on January 18, 2005.
Nunley asserts that he was employed for 15 and 1/2/ months plus 2 months
severance (or notice) and therefore there was 6 and 1/2 months remaining in the
two year period of the Employment Agreement. Nunley asserts he is owed $125,000
under this provision of the Employment Agreement.

      J. Nunley asserts that under the Employment Agreement he is entitled to at
least 400,000 shares of the Debtor's common stock. Nunley further asserts he is
entitled to the cash value of the stock at the time he alleges he should have
had the shares in his possession for a total of $2,520,000.

      K. The Debtor disputes that Mr. Nunley's monthly compensation was set at
$20,833.33, disputes that Mr. Nunly is owed for unpaid wages totaling
$191,138.16, disputes that Mr. Nunley is entitled to $125,000 from the alleged
escrow account and disputes that Mr. Nunley is entitled to 400,000 shares of the
Debtor's common stock or its cash value.

      L. In order to eliminate the need for costly litigation of the Nunley
Claim, the Debtor and Nunley desire to settle and resolve any and all disputes,
claims, actions, causes of action, demands and damages regarding the Nunley
Claim.


                                       3
<PAGE>

                                    AGREEMENT

         WHEREFORE, the Debtor and Nunley (collectively the "Parties") agree
that it is in their mutual best interests to resolve any and all potential
disputes regarding the Nunley Claim, in consideration of the promises, the
mutual obligations and undertakings set forth hereunder, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Parties, the Parties hereto agree as follows:

      1. Recitals. The recitals set forth above are incorporated herein to
describe the context in which this Agreement is made, and to provide information
respecting the Parties' disputes and transactions and litigation, including by
an illustrative but not complete description of events and allegations that
reflect the divergent positions of the Parties hereto in the foregoing matters.
Neither the recitals, nor any other provisions of this Agreement, are or should
be construed or interpreted to be concessions, admissions, or used as evidence
for any purpose either for or against the interest of any of the Parties hereto,
consistent with Evidence Code Section 1152

      2. Allowance of the Nunley Claim. The Nunley Claim shall be allowed as a
nonpriority general unsecured claim in the amount of One Hundred Sixty-Five
Thousand Dollars ($165,000) ("Allowed Claim") which shall be satisfied in full
as follows: Eighty-Seven Thousand Three Hundred and Two (87,302) shares of the
Debtor's common stock shall be issued to Nunley on the Plan Effective Date
pursuant to Bankruptcy Code Section 1145 in a single certificate, which
certificate shall not contain any transfer restrictions. Issuance of the shares
as part of the Allowed Claim is conditioned upon confirmation of the Plan.

      3. Representations or Warranties Relating to the Nunley Claim. Nunley
represents that it he is the owner of the Nunley Claim and has not previously
assigned or transferred to any other person his rights in the Nunley Claim.

      4. Waiver of Claims Against the Estate. Except for as provided by this
Agreement, Nunley waives any and all claims against the Estate, including the
Nunley Claim, any other filed proofs of claim or informal claims, and agrees
that he is not entitled to share in any distribution from the Estate other than
as provided by this Agreement.


                                       4
<PAGE>

      5. Reliance. Except as set forth herein, the Parties hereto acknowledge
that they have relied solely upon their own judgment, belief and knowledge of
the existence, nature and extent of each claim, demand, or cause of action that
each party may have against the other, and that each such party has not been
influenced to any extent in entering into this Agreement by any representation
or statement regarding any such claim, demand or cause of action made by any
other party hereto.

      6. Attorneys' Fees and Costs. All Parties hereto shall bear their own
attorneys' fees, expenses, and costs incurred in connection with the disputes
between the Parties hereto and in the preparation of this Agreement. In the
event of any action or proceeding brought by either party against the other
under this Agreement, the prevailing party shall be entitled to recover for the
fees of its attorneys in such action or proceeding, including costs of appeal,
if any, in such amount as the court may adjudge reasonable as attorneys' fees.

      7. Execution of Additional Documents. The Parties agree that they will
execute any and all additional documents and take all additional steps which may
be necessary or convenient to consummate this settlement and accomplish the
purposes thereof.

      8. Integration of Entire Agreement. This Agreement contains the entire
agreement of the Parties, and no representations, warranties, inducements or
promises not included herein by express provision or contained in a document or
instrument identified herein and executed contemporaneously herewith shall be
binding on any party hereto.

      9. Provisions Severable. It is the belief of the parties that this
Agreement does not contain any provision contrary to law. However, if any
provision of this Agreement, or portion thereof, shall be determined to be
illegal, invalid, or unenforceable, that provision (or portion thereof) shall be
severed and the remaining parts shall be valid and enforceable, so long as the
remaining parts continue to fulfill the original intent of the parties and there
is no material failure of consideration.


                                       5
<PAGE>

      10. Authority to Sign. Each individual executing this Agreement on behalf
of a corporation, partnership or other entity represents that he or she is duly
authorized to execute and deliver this Agreement on behalf of the corporation,
partnership or entity and agrees to deliver evidence of his or her authority and
power if requested by the other party.

      11. Bankruptcy Court Approval. This Agreement is subject to approval by
the United States Bankruptcy Court, Central District of California, Santa Ana
Division and entry of a Final Order and termination of any appeals related
thereto in the Debtor's bankruptcy case. In the event the Bankruptcy Court does
not approve this Agreement, all claims will be restored as originally asserted
by and between the Parties, subject to any and all defenses and counter-claims
held by the Parties.

      12. Counterparts. This Agreement may be executed in any number of
original, fax or copied counterparts, and all counterparts shall be considered
together as one agreement. A faxed or copied counterpart shall have the same
force and effect as an original signed counterpart. Each of the Parties hereby
expressly forever waives any and all rights to raise the use of a fax machine to
deliver a signature, or the fact that any signature or agreement or instrument
was transmitted or communicated through the use of a fax machine, as a defense
to the formation of a contract.

      13. Binding. This Stipulation shall be binding on the Parties hereto when
each such Party has executed at least one counterpart.

      14. Ownership of Claims. Each of the Parties to this agreement expressly
warrants and represents that it is the sole and lawful owner of all right, title
and interest in and to every claim and other matter which it purports to release
herein, and it has not assigned or transferred, or purported to assign or
transfer to any person or entity any claims or other matters herein released.

      15. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective Parties and their heirs,
executors, administrators, agents, representatives, successors and assigns.


                                       6
<PAGE>

      16. Governing Law. This Agreement is to be governed by and construed in
accordance with federal bankruptcy law, to the extent applicable, and where
state law is implicated, the laws of the State of California shall govern.

      17. Jurisdiction of the Bankruptcy Court. Should any dispute arise
regarding this Agreement, the United States Bankruptcy Court for the Central
District of California, Santa Ana Division shall have exclusive jurisdiction to
determine the same.

      18. Headings. The headings of all sections of this Agreement are inserted
solely for the convenience of reference and are not a part of and are not
intended to govern, limit or aid in the construction or interpretation of any
term or provision hereof.


Dated: September _____ , 2005
                                     -------------------------------------------
                                     John Nunley


Dated: September _____ , 2005        COMPOSITE TECHNOLOGY CORPORATION,
                                     a Nevada corporation


                                     -------------------------------------------
                                     Benton H Wilcoxon,
                                     Chief Executive Officer


APPROVED AS TO FORM.

Dated: September _____ , 2005        SHULMAN HODGES & BASTIAN LLP


                                     -------------------------------------------
                                     Leonard M. Shulman
                                     Mark Bradshaw
                                     Attorneys for the Debtor and Debtor in
                                     Possession Composite Technology Corporation

                                      ORDER

      IT IS SO ORDERED.

Dated:

                                     -------------------------------------------
                                     JOHN E. RYAN
                                     UNITED STATES BANKRUPTCY JUDGE


                                       7
<PAGE>

                                PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF ORANGE

I am employed in the City of Foothill Ranch, County of Orange, State of
California. I am over the age of 18 years and not a party to the within action.
My business address is 26632 Towne Centre, Suite 300, Foothill Ranch, California
92610.

On September ____, 2005, I served the documents named below on the parties as
follows:

DOCUMENT(S) SERVED:          STIPULATION RESOLVING CLAIM ASSERTED BY JOHN NUNLEY
                             (CLAIM NO. 83); AND ORDER THEREON

SERVED UPON:                 SEE THE ATTACHED SERVICE LIST

|X|   (BY MAIL) I caused each such envelope, with postage thereon fully prepaid,
      to be placed in the United States mail at Foothill Ranch, California. I am
      readily familiar with the practice of Shulman Hodges & Bastian LLP for
      collection and processing of correspondence for mailing, said practice
      being that in the ordinary course of business, mail is deposited in the
      United States Postal Service the same day as it is placed for collection.
      I am aware that on motion of party served, service is presumed invalid if
      postal cancellation date or postage meter date is more than one day after
      date of deposit for mailing in affidavit.

|_|   (BY FACSIMILE) Pursuant to C.R.C. 2009(i), I either caused, or had someone
      cause, the transmitting machine to properly transmit the attached
      documents to the facsimile numbers shown on the service list. The
      above-referenced document was transmitted by facsimile transmission and
      the transmission was reported as completed and without error.

|_|   (BY FEDERAL EXPRESS OR OVERNITE EXPRESS) I am readily familiar with the
      practice of Shulman Hodges & Bastian LLP for collection and processing of
      documents for overnight delivery and know that the document(s) described
      herein will be deposited in a box or other facility regularly maintained
      by such overnight delivery company for overnight delivery.

|_|   (BY PERSONAL SERVICE) I delivered to an authorized courier or driver
      authorized by ASAP Corporate Service to receive documents to be delivered
      on the same date. A proof of service signed by the authorized courier will
      be filed forthwith.

|_|   (STATE) I declare under penalty of perjury under the laws of the State of
      California that the above is true and correct.

|X|   (FEDERAL) I declare that I am employed in the office of a member of the
      bar of this court, at whose direction this service was made.

Executed on September ____, 2005, at Foothill Ranch, California.


                                     -------------------------------------------
                                     Lorre E. Clapp

<PAGE>

                                  SERVICE LIST
                                  ------------


Interested Party
----------------
Michael Hauser, Esq.
Office of the United States Trustee
Ronald Reagan Federal Building
and United States Courthouse
411 West Fourth Street Suite 9041
Santa Ana, CA 92701-8000


Debtor
------
Composite Technology Corporation
Attn C William Arrington, St VP
2026 McGaw Ave
Irvine, CA 92614


Attorneys for the Unsecured Creditors Committee
-----------------------------------------------
Mike D. Neue, Esq.
Irell & Manella LLP
840 Newport Center Drive, Suite 400
Newport Beach, CA  92660-6324


Claimant
--------
John Nunley
2508 Sagebrush Ave
Cheyenne, WY 82009-4426

<PAGE>

--------------------------------------------------------------------------------

In re          (SHORT TITLE)                             CHAPTER 11 CASE NUMBER:

COMPOSITE TECHNOLOGY CORPORATION,                        SA 05-13107 JR
a Nevada corporation,

Debtor.
--------------------------------------------------------------------------------

                      NOTICE OF ENTRY OF JUDGMENT OR ORDER
                           AND CERTIFICATE OF MAILING

TO ALL PARTIES IN INTEREST ON THE ATTACHED SERVICE LIST:

1.    You are hereby notified, pursuant to Local Bankruptcy Rule
      9021-1(a)(1)(E), that a judgment or order entitled (specify):

      STIPULATION RESOLVING CLAIM ASSERTED BY JOHN NUNLEY(CLAIM NO. 83); AND
      ORDER THEREON

      was entered on (specify date): __________________________.

2.       I hereby certify that I mailed a copy of this notice and a true copy of
         the order or judgment to the persons and entities on the attached
         service list on (specify date): __________________________.


Dated:                              JON D. CERETTO
                                    CLERK OF THE BANKRUPTCY COURT


                                    By:
                                        ----------------------------------------
                                                     Deputy Clerk

--------------------------------------------------------------------------------

<PAGE>

                                  SERVICE LIST
                                  ------------


Interested Party
----------------
Michael Hauser, Esq.
Office of the United States Trustee
Ronald Reagan Federal Building
and United States Courthouse
411 West Fourth Street Suite 9041
Santa Ana, CA 92701-8000


Debtor
------
Composite Technology Corporation
Attn C William Arrington, St VP
2026 McGaw Ave
Irvine, CA 92614


Attorneys for the Debtor
------------------------
Mark Bradshaw, Esq.
Shulman Hodges & Bastian LLP
26632 Towne Center Drive Suite 300
Foothill Ranch, CA 92610


Counsel for the Committee of Unsecured Creditors
------------------------------------------------
Alan J Friedman Esq
Mike D. Neue Esq
Irell & Manella LLP
840 Newport Center Drive Suite 400
Newport Beach, CA 92660-6324


Claimant
--------
John Nunley
2508 Sagebrush Ave
Cheyenne, WY 82009-4426