Document:

Unassociated Document

    
      

      

      January
20, 2009

      

      Michael
K. Lee

      ****

      

      Dear
Michael:

      

      Concerning:    
Letter Agreement

      

      We are
extremely pleased that you (herein referred to as the “Director”) have agreed to
accept our offer to join the Board of Directors of Composite Technology
Corporation. We would very much like to have your commitment to become a member
of our Board of Directors and assist us to the growth of our
company.

      

      This
letter is intended to formalize the terms of your participation as a member of
the Board of Directors of Composite Technology Corporation, a Nevada Corporation
(the "Corporation").

      

      The term
of your role as a member of the Board of Directors for the Corporation will be
one (1) year or until the annual general meeting at which new directors are
selected.  You agree that the terms set out in the present letter
agreement will also govern any extension of such initial period by your
reelection as a member of the Board of Directors at any future annual general
meetings at which directors are selected on the same terms as those set out
herein, for a period of up to two (2) additional terms (for a total of up to
three (3) years).

      

      As
compensation for your good faith efforts to provide direction for the
Corporation as well as promote the business interests of the Corporation, the
Corporation will grant you a monthly payment of four thousand dollars ($4,000),
provided, that you are still participating as a Corporation Board Member as of
each month end (“Remuneration”).

      

      We
further are asking you to accept a position on the Compensation Committee, which
will be compensated by an additional $500 per month.  We are also
asking you to serve on the Audit Committee, which will be compensated by an
additional $500 per month.  Should you be selected to serve as the
Chairman of either committee, you would receive an additional $500 per
month.

      

      In
addition, the Corporation will grant you 500,000 options to purchase shares of
the Corporation’s common stock at a price of $0.35 per share (the “Granted
Options”).  The Granted Options will vest in 12 equal portions (with
any fraction vesting with the last to vest of such portions).  The
first portion of the Granted Options shall vest on that date three (3) months
following the date of the initial Board grant and each successive portion shall
thereafter vest at intervals of three (3) month.

      

      You shall
also be entitled, in accordance with the Corporation’s applicable policies and
rules in force, to reimbursement of reasonable expenses which are incurred (i)
in traveling to meetings more than 1 hour away and (ii) in performing your
responsibilities hereunder to the extent that incurring such expenses is
pre-approved by the Corporation.  The Corporation will also provide
you with the benefit of liability insurance as a member of the Corporation’s
Board of Directors.

      

      Since the
legislation and practice governing the attitudes, roles and responsibilities of
directors is evolving constantly, you are required to read and to understand the
duties and obligations that are incumbent on members of the Board of Directors
of the Corporation on an on-going basis to keep up to date.

      **** This material
has been omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.

      

      
        
          
            
              
                
                  
                    
                      	
                              

                            	
                              2026 McGaw Ave., Irvine, CA, 92614  T (949) 428-8500  F (949) 428-8515

                            	
                              

                            

                    

                  

                

              

            

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Your
responsibilities as a member of the Board shall include but are not limited
to:

      

      Attend a
minimum of four (4) quarterly meetings per calendar year and one (1) meeting
held immediately following the annual general meeting.  The
Corporation shall give appropriate advance notice of the scheduling of the
quarterly meetings; and

      
      

       

      
        	
                ●

              	Attend the Annual
      General Meeting of the Shareholders; and
	
                

                  

                    ●

                  

                

              	Be available for
      special meetings of the board by telephone for decisions which cannot wait
      until the quarterly board meetings; and
	
                

                  

                    ●

                  

                

              	Report in a timely
      fashion any and all matters required to be reported in accordance with
      applicable legislation including without limitation any dealing in the
      Corporation’s shares; and
	
                

                  ●

                

              	Promote the
      interests of the Corporation through raising its profile, making
      introductions to generate new business opportunities; and
	
                

                  ●

                

              	Introduce potential
      full time executives and employees and strengthening the Board of
      Directors and investor base of the Corporation; and
	
                

                  ●

                

              	
                As
      requested by the Board of Directors, serve on designated subcommittees of
      the Board of Directors including the audit committee, compensation
      committee, corporate governance committee,
etc.

              

      

       

      In
addition, the Corporation is required to take a number of routine and urgent
decisions by written resolution in particular pursuant to Section 78.315 of the
Nevada General Corporation Law.  In this respect it is your
responsibility to respond in timely fashion to requests to review, agree on an
acceptable text and execute such resolutions.

      

      In
performing your services on the Board of Directors, you will be an independent
contractor and not an employee of the Corporation.  You will not be
entitled to any additional compensation or participate in any benefit plans of
the Corporation in connection with your services hereunder.  You may
not bind the Corporation or act as a principal or agent thereof.

      

      You
represent and agree that you are accepting the Remuneration for your own account
and not with a view to or for sale in connection with any distribution
thereof.  You understand that such Remuneration will be subjected to
the restrictions in the Corporation's Charter and Bylaws and will not be freely
transferable and you represent that you either have a preexisting personal or
business relationship with the Corporation or its Board of Directors or
controlling persons or, by reason of your business or financial experience, have
the capacity to protect your own interest in connection with receiving any
Remuneration as compensation.  You further represent that you were not
solicited by publication of any advertisement in connection with the receipt of
such Remuneration and that you have consulted tax counsel as needed regarding
such Remuneration.

      

      Notwithstanding
anything to the contrary, your participation on the Corporation's Board of
Directors may be terminated at any time for any or no reason by you or the
Corporation upon written notice to the other party, provided, however that in
the event of your seeking to terminate your directorship such resignation must
be accepted by the Board of Directors in accordance with the terms of Section
3.12 of the Corporations Bylaws.  Upon such termination, the right to
compensation hereunder will terminate subject to the Corporation's obligation to
reimburse you any approved expenses already incurred, and your right to retain
the Granted Options to the extent such Options have vested prior to such
termination or the compensation committee shall allow any accelerated
vesting.

      

      While
serving as a director, you will acquire and have access to confidential or
proprietary information about the Corporation, for as long as you are a director
of the Corporation and for a period after you cease to be a Director you shall
maintain the confidentiality of any and all such information in accordance with
the terms of your “Proprietary Rights Agreement” signed concurrently herewith
(“PAA”). The terms of the PAA are incorporated herein and form a part of your
duties and obligations as a director.

      

      2026
McGaw Ave., Irvine, CA, 92614  T (949) 428-8500  F (949)
428-8515

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Execution
of the signature block (which may be in counterparts) below shall indicate
agreement to the terms outlined above.  This letter is to be construed
and enforced in accordance with the internal laws of the State of Nevada and
contains the entire agreement of the parties with respect to the subject matter
hereof.  This letter may not be assigned by either party.

      

      
        
          	
                  FOR:

                	
                  Composite
      Technology Corporation

                	 
      	
                  FOR:

                	
                  Michael
      K. Lee

                
	 
      	
                  (the
      Corporation)

                	 
      	 
      	
                  (the
      Director)

                
	 
      	 
      	 
      	 
      	 
      
	
                  By:

                	 
      	 
      	
                  By:

                	 
      
	 
      	
                  Benton
      H Wilcoxon

                	 
      	 
      	
                  Michael
      K. Lee

                
	 
      	
                  Chairman
      and CEO

                	 
      	 
      	
                  Representing
      himself personally

                

        

      

      

      2026
McGaw Ave., Irvine, CA, 92614  T (949) 428-8500  F (949)
428-8515Unassociated Document

     

    
      
        	
                Notice
      of Grant of Stock Options

                and
      Option Agreement

              	
                Composite
      Technology Corporation

                2026
      McGaw Avenue, Irvine, CA 92614

              
	 	 
	
                Name:
      Michael K. Lee

                Address:

              	
                Option
      Number:

                Optionee
      ID: ____ ____ ______

              

      

    

     

    Effective,
January 20, 2009 (the "Grant Date"), you have been granted a Non-Qualified Stock Option to purchase
500,000 shares of
Composite Technology Corporation, a Nevada corporation (the "Corporation"),
Common Stock at an exercise price of $0.35 per share (“Exercise
Price”), exercisable upon vesting as set forth below (the
"Option"):

     

    
      
        
          	
                  Portion Vesting

                	 	
                  Number of Months since

                  vesting start date

                	 	 	
                  % of Option

                  Grant Vesting

                	 	 	
                  Accumulated % of

                  Option Grant vesting

                	 	 	
                  Number of shares

                	 
	
                  1st
      Portion

                	 	 	
                  3

                	 	 	 	8.3	%	 	 	8.3	%	 	 	41,667	 
	
                  2nd
      Portion

                	 	 	
                  6

                	 	 	 	8.3	%	 	 	16.6	%	 	 	41,667	 
	
                  3rd
      Portion

                	 	 	
                  9

                	 	 	 	8.3	%	 	 	24.9	%	 	 	41,667	 
	
                  4th
      Portion

                	 	 	
                  12

                	 	 	 	8.3	%	 	 	33.2	%	 	 	41,667	 
	
                  5th
      Portion

                	 	 	
                  15

                	 	 	 	8.3	%	 	 	41.5	%	 	 	41,667	 
	
                  6th
      Portion

                	 	 	
                  18

                	 	 	 	8.3	%	 	 	49.8	%	 	 	41,667	 
	
                  7th
      Portion

                	 	 	
                  21

                	 	 	 	8.3	%	 	 	58.1	%	 	 	41,667	 
	
                  8th
      Portion

                	 	 	
                  24

                	 	 	 	8.3	%	 	 	66.4	%	 	 	41,667	 
	
                  9th
      Portion

                	 	 	
                  27

                	 	 	 	8.3	%	 	 	74.7	%	 	 	41,667	 
	
                  10th
      Portion

                	 	 	
                  30

                	 	 	 	8.3	%	 	 	83	%	 	 	41,667	 
	
                  11th
      Portion

                	 	 	
                  33

                	 	 	 	8.3	%	 	 	91.3	%	 	 	41,667	 
	
                  12th
      Portion

                	 	 	
                  36

                	 	 	 	8.7	%	 	 	100	%	 	 	41,663	 
	
                  XXXXXXX

                	 	
                     
      XX

                	 	 	
                  XXX

                	 	 	
                  XXX

                	 	 	
                  XXXXXXXX

                	 

        

      

    

    

    
      
        

      
The Option Shares shall vest and become exercisable as set forth
above.  The exercising and vesting of the Option Shares are subject to
the acceleration provisions set forth in the Corporation's Stock Option
Agreement referred to below.

    By your
signature and the Corporation's signature below, you and the Corporation agree
that this option is granted under and governed by the terms and conditions of
the 2008 Stock Option Plan (the “2008 Plan”) and Stock Option Agreement,
all of which are attached hereto and made a part of this document.

    If the
spousal consent below is not signed, you represent and warrant that you are not
married. 

      
        

      

    

    

    
      	
              For:

            	
              Composite
      Technology Corporation,

            	 
      	
              By:

            	
              Michael
      K. Lee

            
	 
      	
              a
      Nevada corporation

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              By:

            	 
      	 
      	 
      	 
      
	 
      	
              Benton
      H Wilcoxon,

            	 
      	
                  

            
	 
      	
              Chief
      Executive Officer

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              Date:

            	
              January
      20, 2009

            	 
      	
              Date:

            	
              January  ___,
      2009

            

    

    

    By his or
her signature below, the spouse of the Optionee acknowledges that he or she has
read the Agreement and is familiar with the terms and provisions thereof, and
agrees to be bound by all the terms and conditions of said
Agreement.

    

    
      
        
          
            
              
                	
                        Spouse:

                      	
                             

                      	 
      	
                         

                      	 
      
	 	 	 	
                        Date 

                      	 

              

            

          

        

      

    

    
       

      Composite
Technology Corporation 2008 Plan Option Agreement Version: 2009/1

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    COMPOSITE
TECHNOLOGY CORPORATION.

    STOCK
OPTION AGREEMENT

    (Immediately
Exercisable)

     

            Composite
Technology Corporation. has granted to the individual (the " Optionee
" ) named in the
Notice of Grant of Stock
Option (the "
Notice
" ) to which
this Stock Option Agreement (the " Option Agreement
" ) is attached
an option (the " Option
" ) to purchase
certain shares of Stock upon the terms and conditions set forth in the Notice
and this Option Agreement. The Option has been granted pursuant to and shall in
all respects be subject to the terms and conditions of the Composite Technology
Corporation. 2008 Stock Option Plan (the " Plan " ), as amended to the Date
of Option Grant, the provisions of which are incorporated herein by reference.
By signing the Notice, the Optionee: (a) represents that the Optionee has
read and is familiar with the terms and conditions of the Notice, the Plan and
this Option Agreement, including the Effect of Termination of Service set forth
in Section 7, the Unvested Share Repurchase Option set forth in
Section 11 and the Right of First Refusal set forth in Section 12,
(b) accepts the Option subject to all of the terms and conditions of the
Notice, the Plan and this Option Agreement, (c) agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under the Notice, the Plan or this Option Agreement, and
(d) acknowledges receipt of a copy of the Notice, the Plan and this Option
Agreement.

     

            1.
    Definitions
and Construction.     

     

            1.1
    Definitions.
    Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Notice or the
Plan.

     

            1.2
    Construction.
    Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. 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.

     

            2.
    Tax
Consequences.     

     

            2.1
    Tax
Status of Option.     This Option is intended to have
the tax status designated in the Notice.

     

            (a)
    Incentive
Stock Option.     If the Notice so designates, this
Option is intended to be an Incentive Stock Option within the meaning of
Section 422(b) of the Code, but the Company does not represent or warrant
that this Option qualifies as such. The Optionee should consult with the
Optionee's own tax advisor regarding the tax effects of this Option and the
requirements necessary to obtain favorable income tax treatment under
Section 422 of the Code, including, but not limited to, holding period
requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three
(3) months after the date on which you cease to be an Employee in
accordance with Section 7.1(c) of this Option Agreement (other than by
reason of your death or permanent and total disability as defined in
Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory
Stock Option and not as an Incentive Stock Option to the extent required by
Section 422 of the Code.)

     

            (b)
    Nonstatutory
Stock Option.     If the Notice so designates, this
Option is intended to be a Nonstatutory Stock Option and shall not be treated as
an Incentive Stock Option within the meaning of Section 422(b) of the
Code.

     

            2.2
    ISO
Fair Market Value Limitation.     If the Notice
designates this Option as an Incentive Stock Option, then to the extent that the
Option (together with all Incentive Stock Options granted to the Optionee under
all stock option plans of the Participating Company Group, including the Plan)
becomes exercisable for the first time during any calendar year for shares
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),
the portion of such options which exceeds such amount will be treated as
Nonstatutory Stock Options. For purposes of this Section 2.2, options
designated as Incentive Stock Options are taken into account in the order in
which they were granted, and the Fair Market Value of stock is 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 2.2, such different limitation shall be deemed incorporated herein
effective as of the date required or permitted by such amendment to the Code. If
the 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 2.2, 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. (NOTE TO OPTIONEE: If the aggregate Exercise Price
of the Option (that is, the Exercise Price multiplied by the Number of Option
Shares) plus the aggregate exercise price of any other Incentive Stock Options
you hold (whether granted pursuant to the Plan or any other stock option plan of
the Participating Company Group) is greater than $100,000, you should contact
the Chief Financial Officer of the Company to ascertain whether the entire
Option qualifies as an Incentive Stock Option.)

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

            2.3
    Election
Under Section 83(b) of the Code.     If the
Optionee exercises this Option to purchase shares of Stock that are both
nontransferable and subject to a substantial risk of forfeiture, the Optionee
understands that the Optionee should consult with the Optionee's tax advisor
regarding the advisability of filing with the Internal Revenue Service an
election under Section 83(b) of the Code, which must be filed no later than
thirty (30) days after the date on which the Optionee exercises the Option.
Shares acquired upon exercise of the Option are nontransferable and subject to a
substantial risk of forfeiture if, for example, they are unvested and are
subject to a right of the Company to repurchase such shares at the Optionee's
original purchase price if the Optionee's Service terminates. Failure to file an
election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges that the Optionee has
been advised to consult with a tax advisor prior to the exercise of the Option
regarding the tax consequences to the Optionee of the exercise of the Option. AN
ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON
WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE
OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.

     

            3.
    Administration.
    All questions of interpretation concerning this
Option Agreement shall be determined by the Board. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, 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, or election.

     

            4.
    Exercise of
the Option.     

     

            4.1
    Right
to Exercise.     Except as otherwise provided herein,
the Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option (as provided in Section 6) in an amount
not to exceed the number of Option Shares less the number of shares previously
acquired upon exercise of the Option, subject to the Company's repurchase rights
set forth in Section 11 and Section 12. In no event shall the Option
be exercisable for more shares than the Number of Option Shares.

     

            4.2
    Method
of Exercise.     Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by
full payment of the aggregate Exercise Price for the number of shares of Stock
being purchased and (ii) an executed copy, if required herein of the then
current form of escrow agreement reference below. The Option shall be deemed to
be exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed
agreement.

     

    
      4.3     Payment of Exercise Price.
    

    

     

     (a)
    Forms
of Consideration Authorized.     Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash,
by check, or cash equivalent, (ii) by tender to the Company, or attestation
to the ownership, of whole 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 aggregate Exercise Price, (iii) by means of a Cashless Exercise, as
defined in Section 4.3(b), or (iv) by any combination of the
foregoing.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

     (b)
    Limitations
on Forms of Consideration.     

     

            (i)
    Tender
of Stock.     Notwithstanding the foregoing, the
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. The 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.     A " Cashless Exercise
" means the delivery of a properly executed notice together with
irrevocable instructions to a broker in a form acceptable to the Company
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(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). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.

     

            4.4
    Tax
Withholding.     At the time the Option is exercised,
in whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation
providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to this Option Agreement until the
tax withholding obligations of the Participating Company Group have been
satisfied by the Optionee.

     

            4.5
    Certificate
Registration.     Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the
Optionee.

     

            4.6
    Restrictions
on Grant of the Option and Issuance of Shares.
    The grant of the Option and the issuance of
shares of Stock upon exercise of the Option shall be subject to compliance with
all applicable requirements of federal, state or foreign law with respect to
such securities. The Option 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, the Option may not be exercised unless (i) 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
(ii) 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 OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO
EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. 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 subject to the Option 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 the 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.

     

     4.7
    Fractional
Shares.     The Company shall not be required to
issue fractional shares upon the exercise of the Option.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

     5.
    Nontransferability
of the Option.     The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised
by the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.

     

     6.
    Termination
of the Option.     The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Expiration
Date, (b) the last date for exercising the Option following termination of
the Optionee's Service as described in Section 7, or (c) a Change in
Control to the extent provided in Section 8.

     

            7.
    Effect
of Termination of Service.     

     

            7.1
    Option
Exercisability.     

     

            (a)
    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 after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date.

     

            (b)
    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
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 after the Optionee's termination of Service.

     

            (c)
    Other
Termination of Service.     If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability or death, 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 other longer period of time as determined by the Board,
in its discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.

     

            7.2
    Additional
Limitation on Option Exercise.     Notwithstanding
the provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be acquired
upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.

     

            7.3
    Extension if
Exercise Prevented by Law.     Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6,
the Option shall remain exercisable until three (3) months 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.

     

            7.4
    Extension if
Optionee Subject to Section 16(b).
    Notwithstanding the foregoing, if a sale within
the applicable time periods set forth in Section 7.1 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.

     

            7.5
    Certain
Definitions.     

     

            (a)   "
Termination After Change in
Control " shall mean either of the following events occurring within
twelve (12) months after a Change in Control:

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

            (i)    termination
by the Participating Company Group of the Optionee's Service with the
Participating Company Group for any reason other than for Cause (as defined
below); or

     

            (ii)   the
Optionee's resignation for Good Reason (as defined below) from all capacities in
which the Optionee is then rendering Service to the Participating Company Group
within a reasonable period of time following the event constituting Good Reason.
Notwithstanding any provision herein to the contrary, Termination After Change
in Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is for Cause (as defined below);
(2) is a result of the Optionee's death or disability; (3) is a result
of the Optionee's voluntary termination of Service other than for Good Reason;
or (4) occurs prior to the effectiveness of a Change in
Control.

     

            (b)   "
Cause " shall mean any
of the following: (i) the Optionee's theft, dishonesty, or falsification of
any Participating Company documents or records; (ii) the Optionee' s
improper use or disclosure of a Participating Company's confidential or
proprietary information; (iii) any action by the Optionee which has a
detrimental effect on a Participating Company's reputation or business;
(iv) the Optionee's failure or inability to perform any reasonable assigned
duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material breach by
the Optionee of any employment agreement between the Optionee and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vi) the Optionee's conviction (including any plea of guilty
or nolo contendere) of any criminal act which impairs the Optionee's ability to
perform his or her duties with a Participating Company.

     

            (c)   "
Good Reason " shall
mean any one or more of the following:

     

              (i)  without
the Optionee's express written consent, the assignment to the Optionee of any
duties, or any limitation of the Optionee's responsibilities, substantially
inconsistent with the Optionee's positions, duties, responsibilities and status
with the Participating Company Group immediately prior to the date of the Change
in Control;

     

             (ii)  without
the Optionee's express written consent, the relocation of the principal place of
the Optionee's Service to a location that is more than fifty (50) miles
from the Optionee's principal place of Service immediately prior to the date of
the Change in Control, or the imposition of travel requirements substantially
more demanding of the Optionee than such travel requirements existing
immediately prior to the date of the Change in Control;

     

            (iii)  any
failure by the Participating Company Group to pay, or any material reduction by
the Participating Company Group of, (1) the Optionee's base salary in
effect immediately prior to the date of the Change in Control (unless reductions
comparable in amount and duration are concurrently made for all other employees
of the Participating Company Group with responsibilities, organizational level
and title comparable to the Optionee's), or (2) the Optionee's bonus
compensation, if any, in effect immediately prior to the date of the Change in
Control (subject to applicable performance requirements with respect to the
actual amount of bonus compensation earned by the Optionee); or

     

            (iv)  any
failure by the Participating Company Group to (1) continue to provide the
Optionee with the opportunity to participate, on terms no less favorable than
those in effect for the benefit of any employee or service provider group which
customarily includes a person holding the employment or service provider
position or a comparable position with the Participating Company Group then held
by the Optionee, in any benefit or compensation plans and programs, including,
but not limited to, the Participating Company Group's life, disability, health,
dental, medical, savings, profit sharing, stock purchase and retirement plans,
if any, in which the Optionee was participating immediately prior to the date of
the Change in Control, or their equivalent, or (2) provide the Optionee
with all other fringe benefits (or their equivalent) from time to time in effect
for the benefit of any employee or service provider group which customarily
includes a person holding the employment or service provider position or a
comparable position with the Participating Company Group then held by the
Optionee.

     

    
      
        
        

      

      
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            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; (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, or (v) the termination of employment
of Benton H Wilcoxon.

     

            (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 Board 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
Option.     

    

     

    (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.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

            8.3
    Fair
Market Value Limitation.     Should the
exercisability of this Option be accelerated in connection with a Change in
Control in accordance with Section 8.2, then to the extent that the aggregate
Fair Market Value of the shares of Stock with respect to which the Optionee may
exercise the Option for the first time during the calendar year of such
acceleration, when added to the aggregate Fair Market Value of the shares
subject to any other options designated as Incentive Stock Options granted to
the Optionee under all stock option plans of the Participating Company Group
prior to the Date of Option Grant with respect to which such options are
exercisable for the first time during the same calendar year, exceeds One
Hundred Thousand Dollars ($100,000) (or such other limit, if any, imposed by
Section 422 of the Code), the portion of the Option which exceeds such
amount shall be treated as a Nonstatutory Stock Option. For purposes of the
preceding sentence, 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 shares of stock shall be determined as of the time the option with respect to
such shares is granted.

     

            9.
    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, Exercise Price and
class of shares of stock subject to the Option. If a majority of the shares
which are of the same class as the shares that are subject to the Option are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the " New Shares
" ), the Board
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the Number of Option Shares and
the Exercise Price shall be adjusted in a fair and equitable manner, as
determined by the Board, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9
shall be rounded down to the nearest whole number, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 9 shall be final, binding and conclusive.

     

            10.
    Rights
as a Stockholder, Employee or Consultant.     The
Optionee shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9. If the Optionee is an Employee,
the Optionee understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and the
Optionee, the Optionee's employment is "at will" and is for no specified term.
Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's Service
as an Employee or Consultant, as the case may be, at any time.

     

            11.
    Unvested
Share Repurchase Option.     

     

            11.1
    Grant
of Unvested Share Repurchase Option.     In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
Unvested Shares, as defined in Section 11.2 below (the " Unvested Shares
" ), the Company
shall have the right to repurchase the Unvested Shares under the terms and
subject to the conditions set forth in this Section 11 (the " Unvested Share
Repurchase Option "
).

     

            11.2
    Unvested
Shares Defined.     The " Unvested Shares
" shall mean, on
any given date, the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.

     

            11.3
    Exercise of
Unvested Share Repurchase Option.     The Company may
exercise the Unvested Share Repurchase Option by written notice to the Optionee
within sixty (60) days after (a) termination of the Optionee's Service
(or exercise of the Option, if later) or (b) the Company has received
notice of the attempted disposition of Unvested Shares. If the Company fails to
give notice within such sixty (60) day period, the Unvested Share
Repurchase Option shall terminate unless the Company and the Optionee have
extended the time for the exercise of the Unvested Share Repurchase Option. The
Unvested Share Repurchase Option must be exercised, if at all, for all of the
Unvested Shares, except as the Company and the Optionee otherwise
agree.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

            11.4
    Payment for
Shares and Return of Shares to Company.     The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to
Section 9 (the "
Repurchase Price
" ). The Company
shall pay the aggregate Repurchase Price to the Optionee in cash within thirty
(30) days after the date of the written notice to the Optionee of the
Company's exercise of the Unvested Share Repurchase Option. For purposes of the
foregoing, cancellation of any purchase money indebtedness of the Optionee to
any Participating Company for the shares shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled. The shares being repurchased shall be delivered to the Company by the
Optionee at the same time as the delivery of the Repurchase Price to the
Optionee.

     

            11.5
    Assignment
of Unvested Share Repurchase Option.     The Company
shall have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such option is then exercisable, to one or more persons as may be
selected by the Company.

     

            11.6
    Ownership
Change Event.     Upon the occurrence of an Ownership
Change Event, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of the Optionee's ownership
of Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the terms "Stock" and "Unvested Shares" for all purposes
of the Unvested Share Repurchase Option with the same force and effect as the
Unvested Shares immediately prior to the Ownership Change Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Shares following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.

     

            12.
    Right
of First Refusal.     

     

            12.1
    Grant
of Right of First Refusal.     Except as provided in
Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the " Transfer Shares
" ) to any
person or entity, including, without limitation, any stockholder of a
Participating Company, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
Section 12 (the "
Right of First
Refusal "
).

     

            12.2
    Notice
of Proposed Transfer.     Prior to any proposed
transfer of the Transfer Shares, the Optionee shall deliver written notice (the
" Transfer Notice
" ) to the
Company describing fully the proposed transfer, including the number of Transfer
Shares, the name and address of the proposed transferee (the " Proposed
Transferee " )
and, if the transfer is voluntary, the proposed transfer price, and containing
such information necessary to show the bona fide nature of the proposed
transfer. In the event of a bona fide gift or involuntary transfer, the proposed
transfer price shall be deemed to be the Fair Market Value of the Transfer
Shares, as determined by the Board in good faith. If the Optionee proposes to
transfer any Transfer Shares to more than one Proposed Transferee, the Optionee
shall provide a separate Transfer Notice for the proposed transfer to each
Proposed Transferee. The Transfer Notice shall be signed by both the Optionee
and the Proposed Transferee and must constitute a binding commitment of the
Optionee and the Proposed Transferee for the transfer of the Transfer Shares to
the Proposed Transferee subject only to the Right of First Refusal.

     

            12.3
    Bona
Fide Transfer.     If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 12, and the Optionee shall have no
right to transfer the Transfer Shares without first complying with the procedure
described in this Section 12. The Optionee shall not be permitted to
transfer the Transfer Shares if the proposed transfer is not bona
fide.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

            12.4
    Exercise of
Right of First Refusal.     If the Company determines
the proposed transfer to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the
date the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.

     

            12.5
    Failure to
Exercise Right of First Refusal.     If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and the Optionee otherwise agree) within the period specified in
Section 12.4 above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than ninety
(90) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
Any proposed transfer on terms and conditions different from those described in
the Transfer Notice, as well as any subsequent proposed transfer by the
Optionee, shall again be subject to the Right of First Refusal and shall require
compliance by the Optionee with the procedure described in this
Section 12.

     

            12.6
    Transferees
of Transfer Shares.     All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 12 providing for the Right
of First Refusal with respect to any subsequent transfer. Any sale or transfer
of any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 12 are met.

     

            12.7
    Transfers
Not Subject to Right of First Refusal.     The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 12.9 below result in a termination of the
Right of First Refusal.

     

            12.8
    Assignment
of Right of First Refusal.     The Company shall have
the right to assign the Right of First Refusal at any time, whether or not there
has been an attempted transfer, to one or more persons as may be selected by the
Company.

     

            12.9
    Early
Termination of Right of First Refusal.     The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the
occurrence of a Change in Control, unless the Acquiring Corporation assumes the
Company's rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or
(b) the existence of a public market for the class of shares subject to the
Right of First Refusal. A "
public market
" shall be
deemed to exist if (i) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (ii) such stock is
traded on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.

     

            13.
    Escrow.
    

     

            113.1
    Establishment
of Escrow.     To ensure that shares subject to the
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate evidencing the shares which
the Optionee purchases upon exercise of the Option with an agent designated by
the Company under the terms and conditions of an escrow agreement approved by
the Company. If the Company does not require such deposit as a condition of
exercise of the Option, the Company reserves the right at any time to require
the Optionee to so deposit the certificate in escrow. Upon the occurrence of an
Ownership Change Event or a change, as described in Section 9, in the
character or amount of any of the outstanding stock of the corporation the stock
of which is subject to the provisions of this Option Agreement, any and all new,
substituted or additional securities or other property to which the Optionee is
entitled by reason of the Optionee's ownership of shares of Stock acquired upon
exercise of the Option that remain, following such Ownership Change Event or
change described in Section 9, subject to the Unvested Share Repurchase
Option shall be immediately subject to the escrow to the same extent as such
shares of Stock immediately before such event. The Company shall bear the
expenses of the escrow.

     

    
      
        
        

      

      
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            13.2
    Delivery of
Shares to Optionee.     As soon as practicable after
the expiration of the Unvested Share Repurchase Option, but not more frequently
than twice each calendar year, the escrow agent shall deliver to the Optionee
the shares and any other property no longer subject to such
restriction.

     

            13.3
    Notices and
Payments.     In the event the shares and any other
property held in escrow are subject to the Company's exercise of the Unvested
Share Repurchase Option or the Right of First Refusal, the notices required to
be given to the Optionee shall be given to the escrow agent, and any payment
required to be given to the Optionee shall be given to the escrow agent. Within
thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the
Optionee.

     

            14.
    Stock
Distributions Subject to Option Agreement.     If,
from time to time, there is any stock dividend, stock split or other change, as
described in Section 9, in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which the Optionee is entitled by reason
of the Optionee's ownership of the shares acquired upon exercise of the Option
shall be immediately subject to the Unvested Share Repurchase Option and the
Right of First Refusal with the same force and effect as the shares subject to
the Unvested Share Repurchase Option and the Right of First Refusal immediately
before such event.

     

            15.
    Notice
of Sales Upon Disqualifying Disposition.     The
Optionee shall dispose of the shares acquired pursuant to the Option only in
accordance with the provisions of this Option Agreement. In addition, if the Notice designates this Option
as an Incentive Stock Option, the Optionee shall (a) promptly notify
the Chief Financial Officer of the Company if the Optionee disposes of any of
the shares acquired pursuant to the Option within one (1) year after the
date the Optionee exercises all or part of the Option or within two
(2) years after the Date of Option Grant and (b) provide the Company
with a description of the circumstances of such disposition. Until such time as
the Optionee disposes of such shares in a manner consistent with the provisions
of this Option Agreement, unless otherwise expressly authorized by the Company,
the Optionee shall hold all shares acquired pursuant to the Option in the
Optionee's name (and not in the name of any nominee) for the one-year period
immediately after the exercise of the Option and the two-year period immediately
after Date of Option Grant. At any time during the one-year or two-year periods
set forth above, the Company may place a legend on any certificate representing
shares acquired pursuant to the Option requesting the transfer agent for the
Company's stock to notify the Company of any such transfers. The obligation of
the Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.

     

            16.
    Legends.
    The Company may at any time place legends
referencing the Unvested Share Repurchase Option and the Right of First Refusal
and any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:

     

            16.1 "THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR
RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."

     

            16.2 "THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE
REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

            16.3 "THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR
IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS
CORPORATION."

     

            16.4 "THE
SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN
SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED ("ISO " ). IN ORDER TO OBTAIN THE
PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE
TRANSFERRED PRIOR TO [ INSERT
DISQUALIFYING DISPOSITION DATE HERE ]. SHOULD THE REGISTERED HOLDER ELECT
TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT,
THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE
REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK
OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)
PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."

     

            17.
    Lock-Up
Agreement.     The Optionee hereby agrees that in the
event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after
the effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date
of the registration statement to be filed in connection with such public
offering. The foregoing limitation shall not apply to shares registered in the
public offering under the Securities Act.

     

            18.
    Restrictions
on Transfer of Shares.     No shares acquired upon
exercise of the Option may be sold, exchanged, transferred (including, without
limitation, any transfer to a nominee or agent of the Optionee), assigned,
pledged, hypothecated or otherwise disposed of, including by operation of law,
in any manner which violates any of the provisions of this Option Agreement and,
except pursuant to an Ownership Change Event, until the date on which such
shares become Vested Shares, and any such attempted disposition shall be void.
The Company shall not be required (a) to transfer on its books any shares
which will have been transferred in violation of any of the provisions set forth
in this Option Agreement or (b) to treat as owner of such shares or to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares will have been so transferred.

     

            19.
    Miscellaneous
Provisions.     

     

            19.1
    Binding
Effect.     Subject to the restrictions on transfer
set forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

     

            19.2
    Termination
or Amendment.     The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as provided
in Section 8 in connection with a Change in Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option, if designated an Incentive Stock Option in the
Notice, to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.

     

            19.3
    Notices.
    Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party's signature
or at such other address as such party may designate in writing from time to
time to the other party.

     

            19.4
    Integrated
Agreement.     The Notice, this Option Agreement and
the Plan constitute the entire understanding and agreement of the Optionee and
the Participating Company Group with respect to the subject matter contained
herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those
as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of the Notice and the Option Agreement shall
survive any exercise of the Option and shall remain in full force and
effect.

     

            19.5
    Applicable
Law.     This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.

     

            19.6
    Counterparts.
    The Notice may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    

    
      
        
          
            	
                    Incentive
      Stock Option

                  	 
      	
                    Optionee:

                  	 
      	
                       

                  
	 	 	 	 	 
	
                    Nonstatutory
      Stock Option

                  	 
      	
                    Date:

                  	 
      	
                     

                  

          

        

      

    

     

    STOCK
OPTION EXERCISE NOTICE

    (IMMEDIATELY
EXERCISABLE)

     

    Composite
Technology Corporation.

    Attention:
Chief Financial Officer

     

    
      

    

    

    
      
        

      

    

     

    Ladies
and Gentlemen:

     

            1.
    
Option
.
    I was granted an option (the " Option
" ) to purchase
shares of the common stock (the " Shares
" ) of Composite
Technology Corporation  (the " Company
" ) pursuant to
the Company's 2008 Stock Option Plan (the " Plan " ), my Notice of Grant of
Stock Option (the "
Notice
" ) and my Stock
Option Agreement (the "
Option Agreement
" ) as
follows:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            Grant
      Number:

                                          	 	 	

                                                                                     

                                          	 
	 
      	 	 	 	 
	
                                            Date
      of Option Grant:

                                          	 	 	

                                                                                     

                                          	 
	 
      	 	 	 	 
	
                                            Number
      of Option Shares:

                                          	 	 	

                                                                                     

                                          	 
	 
      	 	 	 	 
	
                                            Exercise
      Price per Share:

                                          	 	$	

                                                                                     

                                          	 

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

            2.
    
Exercise of
Option .
    I hereby elect to exercise the Option to purchase
the following number of Shares:

     

    
      
        
          
            
              
                
                  	
                          Vested
      Shares:

                        	 	 	

                                                                   

                        	 
	 
      	 	 	 	 
	
                          Unvested
      Shares:

                        	 	 	

                                                                   

                        	 
	 
      	 	 	 	 
	
                          Total
      Shares Purchased:

                        	 	 	

                                                                   

                        	 
	 
      	 	 	 	 
	
                          Total
      Exercise Price (Total Shares × Price per Share)

                        	 	$	

                                                                   

                        	 

                

              

            

          

        

      

    

     

            3.
    
Payments
.
    I enclose payment in full of the total exercise
price for the Shares in the following form(s), as authorized by my Option
Agreement:

     

    
      
        
          
            
              
                
                  	
                          TM
       Cash:

                        	 	$	    	 
	 
      	 	 	 	 
	
                          TM
       Check:

                        	 	$	    	 
	 
      	 	 	 	 
	
                          TM
       Tender of Company Stock:

                        	 	
                          Contact Plan Administrator

                        	 

                

              

            

          

        

      

    

    
       

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

            4.
    
Tax
Withholding .
    I authorize payroll withholding and otherwise
will make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the Option.
If I am exercising a Nonstatutory Stock Option, I enclose payment in full of my
withholding taxes, if any, as follows:

     

    (Contact
Plan Administrator for amount of tax due.)

     

    
      
        
          
            
              
                
                  	
                           Cash:

                        	 	$	 	 
	 
      	 	 	 	 
	
                           Check:

                        	 	$	
                                                                    

                        	 

                

              

            

          

        

      

    

     

            5.
    
Optionee
Information .
    

     

    
      
        
          
            	
                    My
      address is:

                  	 
      	
                       

                  	 
      
	 	 	 	 
	 
      	 
      	
                       

                  	 
      
	 
      	 
      	 
      	 
      
	
                    My
      Social Security Number is:

                  	
                       

                  	 
      

          

        

      

    

     

            6.
    
Notice of
Disqualifying Disposition .     If
the Option is an Incentive Stock Option, I agree that I will promptly notify the
Chief Financial Officer of the Company if I transfer any of the Shares within
one (1) year from the date I exercise all or part of the Option or within
two (2) years of the Date of Option Grant.

     

            7.
    
Binding Effect
.
    I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. If required by the Company, I
agree to deposit the certificate(s) evidencing the Shares, along with a blank
stock assignment separate from certificate executed by me, with an escrow agent
designated by the Company, to be held pursuant to the Company's standard Joint
Escrow Instructions.

     

            8.
    
Transfer
.
    I understand and acknowledge that the Shares have
not been registered under the Securities Act of 1933, as amended (the " Securities Act
" ), and that
consequently the Shares must be held indefinitely unless they are subsequently
registered under the Securities Act, an exemption from such registration is
available, or they are sold in accordance with Rule 144 or Rule 701
under the Securities Act. I further understand and acknowledge that the Company
is under no obligation to register the Shares. I understand that the certificate
or certificates evidencing the Shares will be imprinted with legends which
prohibit the transfer of the Shares unless they are registered or such
registration is not required in the opinion of legal counsel satisfactory to the
Company.

     

            I
am aware that Rule 144 under the Securities Act, which permits limited
public resale of securities acquired in a nonpublic offering, is not currently
available with respect to the Shares and, in any event, is available only if
certain conditions are satisfied. I understand that any sale of the Shares that
might be made in reliance upon Rule 144 may only be made in limited amounts
in accordance with the terms and conditions of such rule and that a copy of
Rule 144 will be delivered to me upon request.

     

            9.
    
Election Under
Section 83(b) of the Code .     I
understand and acknowledge that if I am exercising the Option to purchase
Unvested Shares (i.e., shares that remain subject to the Company's Unvested
Share Repurchase Option), that I should consult with my tax advisor regarding
the advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty
(30) days after the date on which I exercise the Option. I acknowledge that
I have been advised to consult with a tax advisor prior to the exercise of the
Option regarding the tax consequences to me of exercising the Option. AN
ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON
WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. I ACKNOWLEDGE THAT
TIMELY FILING OF A SECTION 83(b) ELECTION IS MY SOLE RESPONSIBILITY, EVEN IF I
REQUEST THE COMPANY OR ITS REPRESENTATIVES TO FILE SUCH ELECTION ON MY
BEHALF.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

            I
understand that I am purchasing the Shares pursuant to the terms of the Plan,
the Notice and my Option Agreement, copies of which I have received and
carefully read and understand.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	 
      	 
      	 
      	
                                  Very
      truly yours,

                                
	
                                      

                                	 
      	 
      	 
      	 
      
	
                                      

                                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                                  (Signature)

                                
	 	 	 
	
                                  Receipt
      of the above is hereby acknowledged.

                                	 
      	 
      
	 	 	 
	
                                  Composite
      Technology Corporation.

                                	 
      	 
      
	 	 	 	 	 
	
                                  By:

                                	 	
                                   
    

                                	 
      	 
       
	 	 	  
      	 	 
	
                                  Title:

                                	 
      	
                                   
    

                                	 
      	  
      
	 	 	 	 	 
	
                                  Dated:

                                	 
      	
                                   
    

                                	 
      	  
      

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      
        
        

      

      
        -15-

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