Document:

Unassociated Document

    Exhibit
      10.3

    EXHIBIT
      B

    

    FORM
      OF WARRANT

    

    

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
      OR
      (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
      NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
      THE
      SECURITIES.

    

    COMPOSITE
      TECHNOLOGY CORPORATION

    

    Warrant
      To Purchase Common Stock

    

    Warrant
      No.: [__] 

    Date
      of
      Issuance: February 12, 2007 (“Issuance
      Date”)

    

    Warrant
      Shares:  This
      Warrant shall be exercisable for _____ shares of Common Stock with the exact
      number of shares determined as follows: 

    

    (Principal
      Amount X 0.5)  ̧  Initial
      Conversion Price 

    

    For
      purposes of calculating the number of Warrant Shares hereunder, “Principal
      Amount” shall mean the original principal amount of the Debentures purchased by
      the Holder (or assignor who was the original Buyer) under the Securities
      Purchase Agreement (defined below), as set forth on Exhibit A thereto;
“Conversion Price” shall have the meaning assigned to such term in the
      Debentures issued pursuant to Section 1 of the Securities Purchase Agreement.
      

    

    Composite
      Technology Corporation, a Nevada corporation (the “Company”),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [NAME OF BUYER], the registered
      holder hereof or its permitted assigns (the “Holder”),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase Common Stock (including any Warrants to Purchase Common
      Stock issued in exchange, transfer or replacement hereof, the “Warrant”),
      at
      any time or times on or after the date hereof, but not after 5:00 p.m., Pacific
      time, on the Expiration Date (as defined below), the number of validly issued,
      fully paid nonassessable shares of Common Stock (as defined below) determined
      in
      accordance with Section 1(a) below (the
      “Warrant
      Shares”).
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 15. This Warrant is one of a series of
      warrants to purchase Common Stock (the “Warrants”)
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      February 1, 2007 (the “Subscription
      Date”),
      by
      and among the Company and the investors (the “Buyers”)
      referred to therein (the “Securities
      Purchase Agreement”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1. EXERCISE
      OF WARRANT. 

     

    (a) Warrant
      Shares.
      This
      Warrant shall be exercisable for the number of shares of Common Stock of the
      Company as set forth in the formula on the cover page of this Warrant
      (“Warrant
      Shares”).
      

     

    (b) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(g)), this Warrant may be exercised by the
      Holder on any day on or after the date hereof, in whole or in part, by
      (i) delivery of a written notice, in the form attached hereto as
Exhibit
      A
      (the
“Exercise
      Notice”),
      of
      the Holder’s election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate
      Exercise Price”)
      in
      cash or wire transfer of immediately available funds or (B) by notifying the
      Company that this Warrant is being exercised in a Cashless Exercise pursuant
      to
      and subject to the conditions set forth in Section 1(d); provided, however,
      that
      this Warrant may not be exercised in a Cashless Exercise during the first year
      of the Warrant or if the Warrant Shares have been registered under the Act
      (as
      defined below). The Holder shall not be required to deliver the original Warrant
      in order to effect an exercise hereunder. Execution and delivery of the Exercise
      Notice with respect to less than all of the Warrant Shares shall have the same
      effect as cancellation of the original Warrant and issuance of a new Warrant
      evidencing the right to purchase the remaining number of Warrant Shares. On
      or
      before the first Business Day following the date on which the Company has
      received each of the Exercise Notice and the Aggregate Exercise Price (or notice
      of a Cashless Exercise) (the “Exercise
      Delivery Documents”),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company’s transfer
      agent (the “Transfer
      Agent”).
      On or
      before the third Business Day following the date on which the Company has
      received all of the Exercise Delivery Documents (the “Share
      Delivery Date”),
      the
      Company shall issue and dispatch by overnight courier to the address as
      specified in the Exercise Notice, a certificate, registered in the Company’s
      share register in the name of the Holder or its designee, for the number of
      shares of Common Stock to which the Holder is entitled pursuant to such
      exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
      referred to in clause (ii)(A) above or notification to the Company of a Cashless
      Exercise referred to in Section 1(d), the Holder shall be deemed for all
      corporate purposes to have become the holder of record of the Warrant Shares
      with respect to which this Warrant has been exercised, irrespective of the
      date
      of delivery of the certificates evidencing such Warrant Shares. If this Warrant
      is submitted in connection with any exercise pursuant to this Section 1(b)
      and
      the number of Warrant Shares represented by this Warrant submitted for exercise
      is greater than the number of Warrant Shares being acquired upon an exercise,
      then the Company shall as soon as practicable and in no event later than three
      Business Days after any exercise and at its own expense, issue a new Warrant
      (in
      accordance with Section 7(d)) representing the right to purchase the number
      of
      Warrant Shares purchasable immediately prior to such exercise under this
      Warrant, less the number of Warrant Shares with respect to which this Warrant
      is
      exercised. No fractional shares of Common Stock are to be issued upon the
      exercise of this Warrant, but rather the number of shares of Common Stock to
      be
      issued shall be rounded up to the nearest whole number. The Company shall pay
      any and all taxes which may be payable with respect to the issuance and delivery
      of Warrant Shares upon exercise of this Warrant. 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (c) Exercise
      Price.
      For
      purposes of this Warrant, “Exercise
      Price”
means
      $[ ]1 ,
      subject
      to adjustment as provided herein.

     

    (d) Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, if at any time after the one (1)
      year
      anniversary of the Closing Date a registration statement covering the Warrant
      Shares that are the subject of an Exercise Notice (the “Unavailable
      Warrant Shares”)
      is not
      available for the resale of such Unavailable Warrant Shares at the time of
      exercise, the Holder may, in its sole discretion, exercise this Warrant in
      whole
      or in part and, in lieu of making the cash payment otherwise contemplated to
      be
      made to the Company upon such exercise in payment of the Aggregate Exercise
      Price, elect instead to receive upon such exercise the “Net Number” of shares of
      Common Stock determined according to the following formula (a “Cashless
      Exercise”):

     

    Net
      Number = (A
      x
      B) - (A x C)

    B

     

    For
      purposes of the foregoing formula:

     

    A=
      the
      total number of shares with respect to which this Warrant is then being
      exercised.

     

    B=
      the
      Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
      on
      the date immediately preceding the date of the Exercise Notice.

     

    C=
      the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

     

      
        

      

    

    1
      Price
      equal to 120% of Initial Market Price (VWAP over 10 trading days prior to
      close).

    

    
      
         

      

      
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    (e) Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall promptly issue
      to the Holder the number of Warrant Shares that are not disputed and resolve
      such dispute in accordance with Section 12.

     

    (f) Limitations
      on Exercises; Beneficial Ownership.
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Person (together with such Person’s affiliates) would
      beneficially own in excess of 9.99% of the shares of Common Stock outstanding
      immediately after giving effect to such exercise. For purposes of the foregoing
      sentence, the aggregate number of shares of Common Stock beneficially owned
      by
      such Person and its affiliates shall include the number of shares of Common
      Stock issuable upon exercise of this Warrant with respect to which the
      determination of such sentence is being made, but shall exclude shares of Common
      Stock which would be issuable upon (i) exercise of the remaining, unexercised
      portion of this Warrant beneficially owned by such Person and its affiliates
      and
      (ii) exercise or conversion of the unexercised or unconverted portion of any
      other securities of the Company beneficially owned by such Person and its
      affiliates (including, without limitation, any convertible notes or convertible
      preferred stock or warrants) subject to a limitation on conversion or exercise
      analogous to the limitation contained herein. Except as set forth in the
      preceding sentence, for purposes of this paragraph, beneficial ownership shall
      be calculated in accordance with Section 13(d) of the Securities Exchange Act
      of
      1934, as amended. For purposes of this Warrant, in determining the number of
      outstanding shares of Common Stock, the Holder may rely on the number of
      outstanding shares of Common Stock as reflected in (1) the Company’s most recent
      Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with
      the
      Securities and Exchange Commission, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock outstanding.
      For any reason at any time, upon the written or oral request of the Holder,
      the
      Company shall within two Business Days confirm orally and in writing to the
      Holder the number of shares of Common Stock then outstanding. In any case,
      the
      number of outstanding shares of Common Stock shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      Securities issued under the Securities Purchase Agreement and the Warrants,
      by
      the Holder and its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. By written notice to the
      Company, the Holder may from time to time increase or decrease the Maximum
      Percentage to any other percentage not in excess of 9.99% specified in such
      notice; provided that (i) any such increase will not be effective until the
      sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of
      Warrants.

     

    (g) Insufficient
      Authorized Shares.
      If at
      any time while any of the Warrants remain outstanding the Company does not
      have
      a sufficient number of authorized and unreserved shares of Common Stock to
      satisfy its obligation to reserve for issuance upon exercise of the Warrants
      at
      least a number of shares of Common Stock equal to 100% (the “Required
      Reserve Amount”)
      of the
      number of shares of Common Stock as shall from time to time be necessary to
      effect the exercise of all of the Warrants then outstanding (an “Authorized
      Share Failure”),
      then
      the Company shall immediately take all action necessary to increase the
      Company’s authorized shares of Common Stock to an amount sufficient to allow the
      Company to reserve the Required Reserve Amount for the Warrants then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than sixty (60) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders’ approval of such increase in authorized shares of Common Stock and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

    
      
         

      

      
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    2. ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and the number of Warrant Shares shall be adjusted from time
      to
      time as follows:

     

    (a) Weighted
      Average Adjustment of Exercise Price upon Issuance of Common
      Stock.
      If the
      Company issues any shares
      of
Common
      Stock (including the issuance or sale of shares
      of
Common
      Stock owned or held by or for the account of the Company, but excluding
shares
      of
Common
      Stock deemed to have been issued or sold by the Company in connection with
      any
      Excluded Securities) for a consideration per share (the “New
      Issuance Price”)
      less
      than the applicable Exercise Price (“Applicable
      Price”)
      in
      effect immediately prior to such issue or sale (the foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to a price determined by multiplying such
      Exercise Price by a fraction, the numerator of which shall be a sum equal to
      the
      number of shares of Common Stock outstanding and deemed issued pursuant to
      Section 2(b) immediately prior to such issuance, plus the number of shares
      of
      Common Stock that the aggregate consideration received by this Company for
      such
      issuance would purchase at such Exercise Price; and the denominator of which
      shall be the number of shares of Common Stock outstanding and deemed issued
      pursuant to Section 2(b) immediately prior to such issuance plus the number
      of
      shares of such Additional Stock. 

     

    (b) Provisions
      Applicable to Exercise Price Adjustments.
      For
      purposes of determining the adjusted Exercise Price under Section 2(a) above,
      the following provisions shall apply: 

     

    (1) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options (other than any Excluded
      Securities) and the lowest price per share for which one share
      of
Common
      Stock is issuable upon the exercise of any such Option or upon conversion or
      exchange or exercise of any Convertible Securities issuable upon exercise of
      such Option is less than the Applicable Price, then such share
      of
Common
      Stock shall be deemed to be outstanding and to have been issued and sold by
      the
      Company at the time of the granting or sale of such Option for such price per
      share. For purposes of this Section 2(b)(1), the “lowest price per share for
      which one share
      of
Common
      Stock is issuable upon the exercise of any such Option or upon conversion or
      exchange or exercise of any Convertible Securities issuable upon exercise of
      such Option” shall be equal to the sum of the lowest amounts of consideration
      (if any) received or receivable by the Company with respect to any one
share
      of
Common
      Stock upon granting or sale of the Option, upon exercise of the Option and
      upon
      conversion or exchange or exercise of any Convertible Security issuable upon
      exercise of such Option. No further adjustment of the Exercise Price shall
      be
      made upon the actual issuance of such share of Common Stock or of such
      Convertible Securities upon the exercise of such Options or upon the actual
      issuance of such Common Stock upon conversion or exchange or exercise of such
      Convertible Securities.

     

    
      
         

      

      
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    (2) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities (other than
      Excluded Securities) and the lowest price per share for which one share of
      Common Stock is issuable upon such conversion or exchange or exercise thereof
      is
      less than the Applicable Price, then such share of Common Stock shall be deemed
      to be outstanding and to have been issued and sold by the Company at the time
      of
      the issuance of sale of such Convertible Securities for such price per share.
      For the purposes of this Section 2(b)(2), the “price per share for which one
      share of Common Stock is issuable upon such conversion or exchange or exercise”
shall be equal to the sum of the lowest amounts of consideration (if any)
      received or receivable by the Company with respect to any one share of Common
      Stock upon the issuance or sale of the Convertible Security and upon the
      conversion or exchange or exercise of such Convertible Security. No further
      adjustment of the Exercise Price shall be made upon the actual issuance of
      such
      share of Common Stock upon conversion or exchange or exercise of such
      Convertible Securities, and if any such issue or sale of such Convertible
      Securities is made upon exercise of any Options for which adjustment of the
      Exercise Price had been or are to be made pursuant to other provisions of this
      Section 2(b), no further adjustment of the Exercise Price shall be made by
      reason of such issue or sale.

     

    (3) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options (other than Excluded Securities),
      the
      additional consideration, if any, payable upon the issue, conversion, exchange
      or exercise of any Convertible Securities, or the rate at which any Convertible
      Securities (other than Excluded Securities) are convertible into or exchangeable
      or exercisable for Common Stock is changed, the Exercise Price in effect at
      the
      time of such change shall be adjusted to the Exercise Price which would have
      been in effect at such time had such Options or Convertible Securities provided
      for such changed purchase price, additional consideration or changed conversion
      rate, as the case may be, at the time initially granted, issued or sold. For
      purposes of this Section 2(b)(3), if the terms of any Option or Convertible
      Security that was outstanding as of the Closing Date are changed in the manner
      described in the immediately preceding sentence, then such Option or Convertible
      Security and the Common Stock deemed issuable upon exercise, conversion or
      exchange thereof shall be deemed to have been issued as of the date of such
      change. No adjustment shall be made if such adjustment would result in an
      increase of the Exercise Price then in effect.

     

    
      
         

      

      
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    (4) Definition
      of Excluded Securities.
      For
      purposes of this Agreement, “Excluded
      Securities”
shall
      mean: 

     

    (A) shares
      of
      Common Stock issued pursuant to a transaction described in Section 2(c)
      hereof;

     

    (B) shares
      of
      Common Stock issued or deemed issued to employees, consultants, attorneys,
      officers or directors (if in transactions with primarily non-financing purposes)
      of this Company directly or pursuant to an Approved Stock Plan (as defined
      in
      the Securities Purchase Agreement);

     

    (C) shares
      of
      Common Stock issued or issuable (1) in a bona fide, underwritten public offering
      under the Act resulting in aggregate gross proceeds of at least $10,000,000,
      or
      (2) upon exercise of warrants or rights granted to underwriters in
      connection with such a public offering;

     

    (D) shares
      of
      Common Stock issued pursuant to the conversion or exercise of convertible or
      exercisable securities outstanding as of the date hereof including the
      Debentures, the Warrants and the Placement Agent Warrants (as defined in the
      Securities Purchase Agreement) or subsequently issued, provided such securities
      are not amended after the date hereof to increase the number of shares of Common
      Stock issuable thereunder or to lower the exercise or conversion price
      thereof;

     

    (E) shares
      of
      Common Stock issued or issuable in connection with a bona fide business
      acquisition of or by this Company, whether by merger, consolidation, sale of
      assets, sale or exchange of stock or otherwise, each as approved by the Board
      of
      Directors of this Company, however, excluding shares issued or issuable in
      connection with a transaction between the Company and an Affiliate;

     

    (F) shares
      of
      Common Stock issued pursuant to the payment of interest accrued under the
      Debentures, or

     

    (G) shares
      of
      Common Stock issued or issuable in connection with any transaction where such
      securities so issued are deemed included in the definition of “Excluded
      Securities” by the affirmative vote or written consent of the Required Holders.

     

    (5) Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (A) to receive a dividend or other distribution payable in Common
      Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
      Common Stock, Options or Convertible Securities, then such record date will
      be
      deemed to be the date of the issue or sale of the Common Stock deemed to have
      been issued or sold upon the declaration of such dividend or the making of
      such
      other distribution or the date of the granting of such right of subscription
      or
      purchase, as the case may be.

     

    
      
         

      

      
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    (6) Dividends.
      In case
      the Company shall declare a dividend or make any other distribution upon any
      stock of the Company (other than the Common Stock) payable in Common Stock,
      Options or Convertible Securities, then any Common Stock, Options or Convertible
      Securities, as the case may be, issuable in payment of such dividend or
      distribution shall be deemed to have been issued or sold without consideration;
      provided, that if any adjustment is made to the Exercise Price as a result
      of a
      declaration of a dividend and such dividend is rescinded, the Exercise Price
      shall be appropriately readjusted to the Exercise Price in effect had such
      dividend not been declared;

     

    (7) Calculation
      of Consideration.
      In case
      any shares of Common Stock, Options or Convertible Securities shall be issued
      or
      sold for cash, the consideration received therefor shall be deemed to be the
      net
      amount received by the Company therefor, after deduction therefrom of any
      expenses incurred or any underwriting commissions or concessions paid or allowed
      by the Company in connection therewith. In case any shares of Common Stock,
      Options or Convertible Securities shall be issued or sold for a consideration
      other than cash, the amount of the consideration other than cash received by
      the
      Company shall be deemed to be the fair value of such consideration as determined
      in good faith by the Board, after deduction of any expenses incurred or any
      underwriting commissions or concessions paid or allowed by the Company in
      connection therewith. In case any Options shall be issued in connection with
      the
      issuance and sale of other securities of the Company, together comprising one
      integral transaction in which no specific consideration is allocated to such
      Options by the parties thereto, such Options shall be deemed to have been issued
      for such consideration as determined in good faith by the Board of Directors
      of
      the Company. If Common Stock, Options or Convertible Securities shall be issued
      or sold by the Company and, in connection therewith, other Options or
      Convertible Securities (the “Additional Rights”) are issued, then the
      consideration received or deemed to be received by the Company shall be reduced
      by the fair market value of the Additional Rights (as determined using the
      Black-Scholes option pricing model or another method mutually agreed to by
      the
      Company and the Holder). The Board shall respond promptly, in writing, to an
      inquiry by the Holder as to the fair market value of the Additional Rights.
      

     

    (c) Adjustment
      upon Subdivision or Combination of Common Stock.
      If the
      Company at any time on or after the Closing Date subdivides (by any stock split,
      stock dividend, recapitalization or otherwise) one or more classes of its
      outstanding shares of Common Stock into a greater number of shares, the Exercise
      Price in effect immediately prior to such subdivision will be proportionately
      reduced and the number of Warrant Shares will be proportionately increased.
      If
      the Company at any time on or after the Closing Date combines (by combination,
      reverse stock split or otherwise) one or more classes of its outstanding shares
      of Common Stock into a smaller number of shares, the Exercise Price in effect
      immediately prior to such combination will be proportionately increased and
      the
      number of Warrant Shares will be proportionately decreased. Any adjustment
      under
      this Section 2(c) shall become effective at the close of business on the date
      the subdivision or combination becomes effective. 

     

    
      
         

      

      
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    3. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Articles of Incorporation, Bylaws or through any reorganization, transfer
      of
      assets, consolidation, merger, scheme of arrangement, dissolution, issue or
      sale
      of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, so long as any of the Warrants are
      outstanding, take all action necessary to reserve and keep available out of
      its
      authorized and unissued shares of Common Stock, solely for the purpose of
      effecting the exercise of the Warrants, 100% of the number of shares of Common
      Stock as shall from time to time be necessary to effect the exercise of the
      Warrants then outstanding (without regard to any limitations on exercise).
      

     

    4. WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person’s
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
      any of the rights of a stockholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a stockholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 4, the Company shall provide the Holder with copies
      of the same notices and other information given to the stockholders of the
      Company generally, contemporaneously with the giving thereof to the
      stockholders.

     

    5. REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 5(d)), registered as
      the
      Holder may request, representing the right to purchase the number of Warrant
      Shares being transferred by the Holder and, if less then the total number of
      Warrant Shares then underlying this Warrant is being transferred, a new Warrant
      (in accordance with Section 5(d)) to the Holder representing the right to
      purchase the number of Warrant Shares not being transferred. Applicable transfer
      taxes, if any, shall be paid by the Holder.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Warrant, the Company shall execute and deliver to the
      Holder a new Warrant (in accordance with Section 5(d)) representing the right
      to
      purchase the Warrant Shares then underlying this Warrant.

     

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 5(d)) representing in the aggregate the right to purchase the
      number of Warrant Shares then underlying this Warrant, and each such new Warrant
      will represent the right to purchase such portion of such Warrant Shares as
      is
      designated by the Holder at the time of such surrender; provided, however,
      that
      no Warrants for fractional shares of Common Stock shall be given.

     

    (d) Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 5(a) or Section 5(c), the Warrant
      Shares designated by the Holder which, when added to the number of shares of
      Common Stock underlying the other new Warrants issued in connection with such
      issuance, does not exceed the number of Warrant Shares then underlying this
      Warrant), and (iii) shall have an issuance date, as indicated on the face of
      such new Warrant which is the same as the Issuance Date.

     

    6. NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least fifteen days prior to the date on which the Company
      closes its books or takes a record (A) with respect to any dividend or
      distribution upon the shares of Common Stock, (B) with respect to any grants,
      issuances or sales of any Options, Convertible Securities or rights to purchase
      stock, warrants, securities or other property to holders of shares of Common
      Stock or (C) for determining rights to vote with respect to any Fundamental
      Transaction, dissolution or liquidation, provided in each case that such
      information shall be made known to the public prior to or in conjunction with
      such notice being provided to the Holder.

     

    7. AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant may be amended
      and
      the Company may take any action herein prohibited, or omit to perform any act
      herein required to be performed by it, only if the Company has obtained the
      written consent of the Required Holders; provided that no such action may (i)
      increase the exercise price of any Warrants issued under the Securities Purchase
      Agreement or decrease the number of shares or change the class of stock
      obtainable upon exercise of any Warrants issued under the Securities Purchase
      Agreement, (ii) modify Section 1(d) or 1(g) of this Warrant or (iii)
      disproportionately affect the Holder in a materially and adversely manner
      (except as a result of holding a greater percentage of Warrant Shares) without
      the written consent of the Holder. No such amendment shall be effective to
      the
      extent that it applies to less than all of the holders of the Warrants then
      outstanding.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    8. GOVERNING
      LAW.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof.

     

    9. CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and all the Holders
      and shall not be construed against any person as the drafter hereof. The
      headings of this Warrant are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Warrant. 

     

    10. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall submit the
      disputed determinations or arithmetic calculations via facsimile within two
      Business Days of receipt of the Exercise Notice giving rise to such dispute,
      as
      the case may be, to the Holder. If the Holder and the Company are unable to
      agree upon such determination or calculation of the Exercise Price or the
      Warrant Shares within three Business Days of such disputed determination or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within two Business Days submit via facsimile (a) the disputed determination
      of
      the Exercise Price to an independent, reputable investment bank selected by
      the
      Company and approved by the Holder or (b) the disputed arithmetic calculation
      of
      the Warrant Shares to the Company’s independent, outside accountant. The Company
      shall cause at its expense the investment bank or the accountant, as the case
      may be, to perform the determinations or calculations and notify the Company
      and
      the Holder of the results no later than ten Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank’s or
      accountant’s determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

     

    11. TRANSFER. This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(f)
      of
      the Securities Purchase Agreement.

     

    12. CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (b) “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      the City of New York are authorized or required by law to remain
      closed.

     

    (c) “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00 p.m., New York Time, as reported
      by
      Bloomberg, or, if the Principal Market is not the principal securities exchange
      or trading market for such security, the last closing bid price or last trade
      price, respectively, of such security on the principal securities exchange
      or
      trading market where such security is listed or traded as reported by Bloomberg,
      or if the foregoing do not apply, the last closing bid price or last trade
      price, respectively, of such security in the over-the-counter market on the
      electronic bulletin board for such security as reported by Bloomberg, or, if
      no
      closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 10. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    (d) “Common
      Stock”
means
      (i) the Company’s shares of Common Stock, par value $0.001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

    (e) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    (f) “Eligible
      Market”
means
      the Principal Market, the American Stock Exchange, The New York Stock Exchange,
      Inc., the Nasdaq National Market or The Nasdaq SmallCap Market.

     

    (g) “Expiration
      Date”
means
      the date thirty six (36) months after the Issuance Date or, if such date falls
      on a day other than a Business Day or on which trading does not take place
      on
      the Principal Market (a “Holiday”),
      the
      next date that is not a Holiday; provided, that the Expiration Date may be
      accelerated pursuant to the provisions of Section 1(h).

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (h) “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company, including intellectual property, to another Person,
      or
      (iii) allow another Person to make a purchase, tender or exchange offer that
      is
      accepted by the holders of more than the 50% of either the outstanding shares
      of
      Common Stock (not including any shares of Common Stock held by the Person or
      Persons making or party to, or associated or affiliated with the Persons making
      or party to, such purchase, tender or exchange offer), or (iv) consummate a
      stock purchase agreement or other business combination (including, without
      limitation, a reorganization, recapitalization, spin-off or scheme of
      arrangement) with another Person whereby such other Person acquires more than
      the 50% of the outstanding shares of Common Stock (not including any shares
      of
      Common Stock held by the other Person or other Persons making or party to,
      or
      associated or affiliated with the other Persons making or party to, such stock
      purchase agreement or other business combination), (v) reorganize, recapitalize
      or reclassify its Common Stock (other than a forward or reverse stock split),
      or
      (vi) any “person” or “group” (as these terms are used for purposes of Sections
      13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
      of
      50% of the aggregate ordinary voting power represented by issued and outstanding
      Common Stock.

     

    (i) “Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    (j) “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (k) “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    (l) “Principal
      Market”
means
      the OTC Bulletin Board.

     

    

     

    (m) “Required
      Holders”
means
      the holders of the Warrants representing at least a majority of shares of Common
      Stock underlying the Warrants then outstanding.

     

    (n) “Securities”
means
      the Notes issued pursuant to the Securities Purchase Agreement.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (o) “Successor
      Entity”
means
      the Person (or, if so elected by the Required Holders, the Parent Entity) formed
      by, resulting from or surviving any Fundamental Transaction or the Person (or,
      if so elected by the Required Holders, the Parent Entity) with which such
      Fundamental Transaction shall have been entered into.

     

     

    

    [Signature
      Page Follows]

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
      to
      be duly executed as of the Issuance Date set out above.

    

    
      	 	 	 
	 	COMPOSITE
              TECHNOLOGY CORPORATION 
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              
Benton
              H. Wilcoxon 
	 	Chief
              Executive Officer

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    EXHIBIT
      A

    

    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

    COMPOSITE
      TECHNOLOGY CORPORATION

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock (“Warrant
      Shares”)
      of
      Composite Technology Corporation, a Nevada corporation (the “Company”),
      evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    1.
      Form
      of Exercise Price.
      The
      Holder intends that payment of the Exercise Price shall be made as:

    

    __________ a
      “Cash
      Exercise”
      with
      respect to _________________ Warrant Shares; and/or

    

    __________ a
      “Cashless
      Exercise”
      with
      respect to _______________ Warrant Shares.

    

    2.
      Payment
      of Exercise Price.
      In the
      event that the holder has elected a Cash Exercise with respect to some or all
      of
      the Warrant Shares to be issued pursuant hereto, the holder shall pay the
      Aggregate Exercise Price in the sum of $___________________ to the Company
      in
      accordance with the terms of the Warrant.

    

    3.
      Delivery
      of Warrant Shares.
      The
      Company shall deliver to the holder __________ Warrant Shares in accordance
      with
      the terms of the Warrant.

    

    4.
      Acknowledgement.
      The
      undersigned holder hereby represents and warrants that after giving effect
      to
      the exercise of the Warrant contemplated by this Exercise Notice, such holder
      will not be in violation of the beneficial ownership limits specified in Section
      1(g) of the Warrant, as increased or decreased pursuant to terms contained
      therein.

    

    Date:
      _______________ __, ______

    

     

    ________________________________

    Name
      of
      Registered Holder

     

    

    By:
      ____________________________    

    Name:

    Title:

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

    

    

    The
      Company hereby acknowledges this Exercise Notice and hereby directs [Insert
      Name of Transfer Agent]
      to issue
      the above indicated number of shares of Common Stock in accordance with the
      Transfer Agent Instructions dated _______________ from the Company and
      acknowledged and agreed to by [Insert
      Name of Transfer Agent].

    

    

    
      	 	 	 
	 	COMPOSITE
              TECHNOLOGY CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              
Name:

	 	Title:
              Chief Executive Officer

    
      
         

      

        17Unassociated Document

    Exhibit
      10.4

    

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of February 12, 2007, by and among Composite Technology Corporation, a
      Delaware corporation (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto dated February 12, 2007 (the "Securities
      Purchase Agreement"),
      the
      Company, has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer
      (i) senior convertible debentures of the Company (the "Debentures"),
      which
      will, among other things, be convertible into shares of the Company's common
      stock, $0.001 par value per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Debentures, and (ii) warrants (the
      "Warrants"),
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations thereunder, or any similar
      successor statute (collectively, the "1933
      Act"),
      and
      applicable state securities laws.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Buyers hereby agree as
      follows:

     

    1.  Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a.  "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the City of New York are authorized or required by law to remain
      closed.

     

    b.  "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    c.  "Effective
      Date"
      means
      the date the Registration Statement has been declared effective by the
      SEC.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    d.  "Effectiveness
      Deadline"
      means,
      with respect to the First Registration Statement, the date which is 90 days
      after the Filing Deadline of the First Registration Statement, or if there
      is a
      review of such Registration Statement by the SEC, 120 days after the Filing
      Deadline of the First Registration Statement; and, with respect to the Second
      Registration Statement, the date which is 90 days after the Filing Deadline
      of
      the Second Registration Statement, or if there is a review of such Registration
      Statement by the SEC, 120 days after the Filing Deadline of the Second
      Registration Statement;

     

    e.  "Filing
      Date"
      means
      the date the applicable Registration Statement has been filed with the SEC.
      

     

    f.  "Filing
      Deadline"
      means,
      with respect to the First Registration Statement, 30 Business Days after the
      date hereof; and with respect to the Second Registration Statement, no more
      than
      15 Business Days after the First Registration Statement has been declared
      effective.

     

    g.  "Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement and who agrees to become bound by the provisions of this
      Agreement in accordance with Section 9 and any transferee or assignee thereof
      to
      whom a transferee or assignee assigns its rights under this Agreement and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

     

    h.  "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    i.  "register,"
      "registered,"
      and
      "registration"
      refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the 1933 Act and pursuant
      to
      Rule 415 and the declaration or ordering of effectiveness of such Registration
      Statement(s) by the SEC.

     

    j.  "Registrable
      Securities"
      means
      (i) the Conversion Shares issued or issuable upon conversion of the
      Debentures, (ii) the Warrant Shares issued or issuable upon exercise of the
      Warrants, (iii) the Interest Shares (as defined in the Debenture) issued or
      issuable upon payment of accrued interest in kind, and (iv) any shares of
      capital stock of the Company issued or issuable with respect to the Conversion
      Shares, the Interest Shares, the Debentures, the Warrant Shares and the Warrants
      as a result of any stock split, stock dividend, recapitalization, exchange
      or
      similar event or otherwise, without regard to any limitations on conversions
      of
      the Debentures or exercises of the Warrants.

     

    k.  "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    l.  "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    m.  "Required
      Registration Amount"
      for the
      Registration Statement means the sum of (i) 100% of the number of Conversion
      Shares issued and issuable pursuant to the Debentures as of the trading day
      immediately preceding the applicable date of determination, and (ii) 100% the
      number of Warrant Shares issued and issuable pursuant to the Warrants as of
      the
      trading day immediately preceding the applicable date of determination, all
      subject to adjustment as provided in Section 2(b), without regard to any
      limitations on conversions of the Debentures or exercise of the Warrants;
      provided, however, that the 100% of the number of Warrant Shares shall be
      reduced to the extent necessary in the event the SEC will not declare the
      Registration Statement effective without such reduction.

     

    n.  "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

     

    o.  "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2.  Registration.

     

    a.  Mandatory
      Registration.
      

     

    (i)
      First Registration Statement.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Filing Deadline, file with the SEC a Registration Statement on Form S-1
      or
      Form S-3 covering the resale of at least 50% of the Registrable Securities, all
      of which shall constitute Conversion Shares (“First
      Registration Statement”).
      In
      the event that Form S-1 or Form S-3 is unavailable for such a registration,
      the
      Company shall use such other form as is available for such a registration on
      another appropriate form reasonably acceptable to the Required Holders, subject
      to the provisions of Section 2(d).

     

    (ii)
      Second
      Registration Statement.
      Promptly after the First Registration Statement has been declared effective
      by
      the Securities and Exchange Commission, the Company shall prepare, and, as
      soon
      as practicable but in no event later than the Filing Deadline, file with the
      SEC
      the Registration Statement on Form S-1 or Form S-3 covering the resale of the
      balance of the Required Registration Amount. In the event that Form S-1 or
      Form
      S-3 is unavailable for such a registration, the Company shall use such other
      form as is available for such a registration on another appropriate form
      reasonably acceptable to the Required Holders, subject to the provisions of
      Section 2(d). 

     

    (iii)
      Both Registration Statements shall contain (except if otherwise directed by
      the
      Required Holders) the “Plan
      of Distribution”
section
      in substantially the form attached hereto as Exhibit
      A.
      The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than sooner
      of the Effectiveness Deadline or within three (3) Business Days of receipt
      by
      the Company of a written or oral communication from the SEC that the
      Registration Statement will not be reviewed or that the SEC has no further
      comments. The Company shall cause such Registration Statements to remain
      effective during the Registration Period. 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    b.  Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover all of the Registrable
      Securities required under Section 2(a)(ii) to be covered by such Registration
      Statement, the Company shall amend the applicable Registration Statement, or
      file a new Registration Statement, or both, so as to cover at least the Required
      Registration Amount as of the trading day immediately preceding the date of
      the
      filing of such amendment or new Registration Statement, in each case, as soon
      as
      practicable, but in any event not later than thirty (30) days after the
      necessity therefor arises. The Company shall use its best efforts to cause
      such
      amendment and/or new Registration Statement to become effective as soon as
      practicable following the filing thereof, but no later than three (3) Business
      Days of receipt by the Company of a written or oral communication from the
      SEC
      that such Registration Statement will not be reviewed or that the SEC has no
      further comments. For purposes of the foregoing provision, the number of shares
      available under a Registration Statement shall be deemed “insufficient to cover
      all of the Registrable Securities” if at any time the number of shares of Common
      Stock available for resale under the Registration Statement is less than the
      Required Registration Amount. 

     

    c.  Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby (as determined on the date of this Agreement) and required
      to
      be filed by the Company pursuant to Section 2(a) or (b) of this Agreement is
      (A)
      not filed with the SEC on or before the Filing Deadline (a "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the earlier of (x) the
      Effectiveness Deadline or (y) three (3) Business Days of receipt by the Company
      of a written or oral communication from the SEC that the Registration Statement
      will not be reviewed or that the SEC has no further comments (an "Effectiveness
      Failure")
      or (C)
      the Company does not file a request for acceleration of effectiveness of such
      Registration Statement to a time and date not later than 48 hours after the
      submission of such request within two (2) Business Days after the Company learns
      that no review of a particular Registration Statement will be made by the staff
      of the SEC or that the staff has no further comments on a particular
      Registration Statement and the National Association of Securities Dealers,
      Inc.
      (the “NASD”)
      shall
      have cleared such Registration Statement pursuant to the Rule 2710 of the NASD,
      (ii) on any day after the Effective Date and before the Termination Date, sales
      of all of the Registrable Securities required to be included on such
      Registration Statement cannot be made (other than during a Grace Period (as
      defined in Section 3(l)) pursuant to such Registration Statement (including,
      without limitation, because of a failure to keep such Registration Statement
      effective, to disclose such information as is necessary for sales to be made
      pursuant to such Registration Statement or to register a sufficient number
      of
      shares of Common Stock) (a "Maintenance
      Failure")
      then,
      as partial relief for the damages to any holder by reason of any such delay
      in
      or reduction of its ability to sell the underlying shares of Common Stock (which
      remedy shall not be exclusive of any other remedies available at law or in
      equity), the Company shall pay to each holder of Registrable Securities relating
      to such Registration Statement an amount in cash equal to one percent (1.0%)
      of
      the principal amount of such Investor's Debentures (“Principal Amount”), the
      Registrable Securities attributable to which are required to be included in
      such
      Registration Statement on each of the following dates: (i) the day of a Filing
      Failure and on every thirtieth day after a Filing Failure until such Filing
      Failure is cured; (ii) the day of an Effectiveness Failure and on every
      thirtieth day after an Effectiveness Failure until such Effectiveness Failure
      is
      cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth
      day (or partial period) after a Maintenance Failure until such Maintenance
      Failure is cured; provided,
      however,
      the
      aggregate amount of Registration Delay Payments shall not exceed twenty-four
      percent (24%) of such Principal Amount; provided,
      further,
      that
      amounts payable as Registration Delay Payments shall cease when the Investor
      no
      longer holds any Debentures, Warrants and Conversion Shares or in the event
      the
      Investor’s Conversion Shares or Warrant Shares can be immediately sold by the
      Investor in reliance on Rule 144(k) without any volume restrictions and the
      Company has removed legends restricting resale from the Warrant Shares and
      the
      Conversion Shares.
      The
      payments to which a holder shall be entitled pursuant to this Section 2(c)
      are
      referred to herein as "Registration
      Delay Payments."
      

     

    
      
         

      

      
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    d.  Piggyback
      Registration.
      After
      the date hereof, if the Company proposes to register (including for this purpose
      a registration statement effected by the Company for stockholders ) any of
      its
      stock or other securities under the 1933 Act (other than a registration relating
      solely to the sale of securities to participants in a Company employee stock
      or
      similar plan on Form S-8 and an exchange registration on Form S-4), the Company
      shall, at such time, promptly give each holder of Registrable Securities written
      notice of such registration. Upon the written request of each holder of
      Registrable Securities given within twenty (20) days after mailing of such
      notice by the Company, the Company shall, cause in such registration to be
      registered under the 1933 Act all of the Registrable Securities that each such
      holder has requested to be registered. 

     

    3.  Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), the Company will use its best efforts to effect the
      registration of the Registrable Securities in accordance with the intended
      method of disposition thereof and, pursuant thereto, the Company shall have
      the
      following obligations:

     

    a.  The
      Company shall submit to the SEC, within two (2) Business Days after the Company
      learns that no review of a particular Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on a particular
      Registration Statement, as the case may be, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The Company shall keep each
      Registration Statement effective pursuant to Rule 415 at all times until the
      earlier of (i) the date as of which the Investors may sell all of the
      Registrable Securities covered by such Registration Statement without
      restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
      under
      the 1933 Act or (ii) the date on which the Investors shall have sold all of
      the
      Registrable Securities covered by such Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading.

     

    b.  The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    c.  Provide
      copies to and permit counsel designated by the Investors to review each
      Registration Statement and all amendments and supplements thereto prior to
      their
      filing with the SEC and not file any document to which such counsel reasonably
      objects.

     

    d.  Upon
      reasonable request, the Company shall furnish to the Investors and their legal
      counsel, without charge, (i) copies of any correspondence from the SEC or the
      staff of the SEC to the Company or its representatives relating to any
      Registration Statement, (ii) promptly after the same is prepared and filed
      with
      the SEC, one copy of any Registration Statement and any amendment(s) thereto,
      including financial statements and schedules, all documents incorporated therein
      by reference, if requested by an Investor, and all exhibits and (iii) upon
      the
      effectiveness of any Registration Statement, one copy of the prospectus included
      in such Registration Statement and all amendments and supplements thereto.
      

     

    e.  Upon
      request, the Company shall furnish to each Investor whose Registrable Securities
      are included in any Registration Statement, without charge, (i) promptly after
      the same is prepared and filed with the SEC, at least one copy of such
      Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference,
      if
      requested by an Investor, all exhibits and each preliminary prospectus, (ii)
      upon the effectiveness of any Registration Statement, ten (10) copies of the
      prospectus included in such Registration Statement and all amendments and
      supplements thereto (or such other number of copies as such Investor may
      reasonably request) and (iii) such other documents, including copies of any
      preliminary or final prospectus, as such Investor may reasonably request from
      time to time in order to facilitate the disposition of the Registrable
      Securities owned by such Investor.

     

    f.  The
      Company shall notify each Investor in writing of the happening of any event,
      as
      promptly as practicable after becoming aware of such event, as a result of
      which
      the prospectus included in a Registration Statement, as then in effect, includes
      an untrue statement of a material fact or omission to state a material fact
      required to be stated therein or necessary to make the statements therein,
      in
      the light of the circumstances under which they were made, not misleading
      (provided that in no event shall such notice contain any material, nonpublic
      information), and, promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission.

     

    g.  The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify each Investor who holds Registrable Securities being sold of the issuance
      of such order and the resolution thereof or its receipt of actual notice of
      the
      initiation or threat of any proceeding for such purpose.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    h.  The
      Company shall use its best efforts to maintain the authorization for quotation
      of the Company's Common Stock on the Principal Market or any Eligible Market
      (as
      defined in the Debenture).

     

    i.  The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    j.  The
      Company shall use its best efforts to cause the Registrable Securities covered
      by a Registration Statement to be registered with or approved by such other
      governmental agencies or authorities as may be necessary to consummate the
      disposition of such Registrable Securities.

     

    k.  The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

     

    l.  Notwithstanding
      anything to the contrary herein, at any time after the Effective Date, for
      not
      more than twenty (20) consecutive days or for a total of not more than
      forty-five (45) days in any twelve (12) month period, the Company may delay
      the
      disclosure of material, non-public information concerning the Company (A) the
      disclosure of which at the time is not, in the good faith opinion of the Board
      of Directors of the Company and its outside legal counsel, in the best interest
      of the Company and, in the opinion of counsel to the Company, otherwise required
      or (B) to the extent the Company is required to file a post-effective amendment
      to the Registration Statement (a "Grace
      Period");
      provided, that the Company shall promptly (a) notify the Investors in writing
      of
      the existence of (but in no event, without the prior written consent of a
      Investor, shall the Company disclose to such Investor any of the facts or
      circumstances regarding) material non-public information giving rise to a Grace
      Period, (b) advise the Investors in writing to cease all sales under the
      Registration Statement until the end of the Grace Period and (c) use
      commercially reasonable efforts to terminate a Grace Period as promptly as
      practicable.

     

    4.  Obligations
      of the Investors.

     

    a.  At
      least
      four (4) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor's Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it as shall be reasonably required to effect the
      effectiveness of the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    b.  Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    c.  Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(f) or 3(g), such
      Investor will immediately discontinue disposition of Registrable Securities
      pursuant to any Registration Statement(s) covering such Registrable Securities
      until such Investor's receipt of the copies of the supplemented or amended
      prospectus or receipt of notice that no supplement or amendment is required.
      

     

    d.  Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it or an exemption therefrom
      in
      connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5.  Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, (i) all registration, listing and
      qualifications fees, printers and accounting fees, and fees and disbursements
      of
      legal counsel for the Company, and (ii) the fees and disbursements up to but
      not
      in excess of $5,000, of one legal counsel for the Investors, shall be paid
      by
      the Company. 

     

    6.  Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    a.  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
      an "Indemnified
      Person"),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys' fees, amounts paid in settlement or
      expenses, joint or several, (collectively, "Claims")
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified
      Damages"),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other "blue sky" laws of any jurisdiction
      in
      which Registrable Securities are offered ("Blue
      Sky Filing"),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in the light of the circumstances under which
      the statements therein were made, not misleading, (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement or (iv) any violation of this
      Agreement (the matters in the foregoing clauses (i) through (iv) being,
      collectively, "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      for such Indemnified Person expressly for use in connection with the preparation
      of the Registration Statement or any such amendment thereof or supplement
      thereto, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(e) and (ii) shall not apply to amounts paid in settlement of any
      Claim
      if such settlement is effected without the prior written consent of the Company,
      which consent shall not be unreasonably withheld or delayed. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of the Indemnified Person and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9.

     

    b.  In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section 6(a), the Company, each of its directors, each of its officers
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation occurs in reliance
      upon and in conformity with written information furnished to the Company by
      such
      Investor expressly for use in connection with such Registration Statement;
      and,
      subject to Section 6(c), such Investor will reimburse any legal or other
      expenses reasonably incurred by an Indemnified Party in connection with
      investigating or defending any such Claim; provided, however, that the indemnity
      agreement contained in this Section 6(b) and the agreement with respect to
      contribution contained in Section 7 shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of such Investor, which consent shall not be unreasonably withheld
      or
      delayed; provided, further, however, that the Investor shall be liable under
      this Section 6(b) for only that amount of a Claim or Indemnified Damages as
      does
      not exceed the gross proceeds to such Investor as a result of the sale of
      Registrable Securities pursuant to such Registration Statement. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(b) with respect to any preliminary prospectus shall
      not inure to the benefit of any Indemnified Party if the untrue statement or
      omission of material fact contained in the preliminary prospectus was corrected
      on a timely basis in the prospectus, as then amended or
      supplemented.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    c.  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own legal counsel at the expense of such
      Indemnified Person or Indemnified Party. The Indemnified Party or Indemnified
      Person shall cooperate fully with the indemnifying party in connection with
      any
      negotiation or defense of any such action or Claim by the indemnifying party
      and
      shall furnish to the indemnifying party all information reasonably available
      to
      the Indemnified Party or Indemnified Person which relates to such action or
      Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
      Person reasonably apprised at all times as to the status of the defense or
      any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent, provided, however, that the indemnifying party shall
      not unreasonably withhold, delay or condition its consent. No indemnifying
      party
      shall, without the prior written consent of the Indemnified Party or Indemnified
      Person, consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such Claim or litigation, and such
      settlement shall not include any admission as to fault on the part of the
      Indemnified Party. Following indemnification as provided for hereunder, the
      indemnifying party shall be subrogated to all rights of the Indemnified Party
      or
      Indemnified Person with respect to all third parties, firms or corporations
      relating to the matter for which indemnification has been made. The failure
      to
      deliver written notice to the indemnifying party within a reasonable time of
      the
      commencement of any such action shall not relieve such indemnifying party of
      any
      liability to the Indemnified Person or Indemnified Party under this Section
      6,
      except to the extent that the indemnifying party is prejudiced in its ability
      to
      defend such action.

     

    d.  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    e.  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

     

    7.  Contribution.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no Person involved
      in the sale of Registrable Securities which Person is guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
      connection with such sale shall be entitled to contribution from any Person
      involved in such sale of Registrable Securities who was not guilty of fraudulent
      misrepresentation; and (ii) contribution by any seller of Registrable Securities
      shall be limited in amount to the net amount of proceeds received by such seller
      from the sale of such Registrable Securities pursuant to such Registration
      Statement.

     

    8.  Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule
      144"),
      the
      Company agrees to:

     

    a.  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b.  file
      with
      the SEC all reports and other documents required of the Company under the 1933
      Act and the 1934 Act so long as the Company remains subject to such requirements
      and the filing of such reports and other documents is required for the
      applicable provisions of Rule 144; and

     

    c.  furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      Act, (ii) a copy of the most recent annual report of the Company and such other
      reports and documents so filed by the Company, and (iii) such other information
      as may be reasonably requested to permit the Investors to sell such securities
      pursuant to Rule 144 without registration.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    9.  Assignment
      of Registration Rights.
      

     

    Prior
      to
      the initial declaration by the SEC of the effectiveness of the applicable
      Registration Statement, the rights under this Agreement shall be automatically
      assignable by the Investors to any transferee of all or any portion of such
      Investor's Registrable Securities if: (i) the Investor agrees in writing with
      the transferee or assignee to assign such rights, and a copy of such agreement
      is furnished to the Company within a reasonable time after such assignment;
      (ii)
      the Company is, within a reasonable time after such transfer or assignment,
      furnished with written notice of (a) the name and address of such transferee
      or
      assignee, and (b) the securities with respect to which such registration rights
      are being transferred or assigned; (iii) immediately following such transfer
      or
      assignment the further disposition of such securities by the transferee or
      assignee is restricted under the 1933 Act or applicable state securities laws;
      (iv) at or before the time the Company receives the written notice contemplated
      by clause (ii) of this sentence the transferee or assignee agrees in writing
      with the Company to be bound by all of the provisions contained herein; and
      (v)
      such transfer shall have been made in accordance with the applicable
      requirements of the Securities Purchase Agreement. After the initial declaration
      by the SEC of the effectiveness of the Registration Statement that registers
      such Registrable Securities, this Agreement shall not be assignable by the
      Investors. 

     

    10.  Amendment
      of Registration Rights.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the Required
      Holders (as defined in the Debentures) provided that no Holder may be
      disproportionately adversely affected by such amendment or waiver without such
      Holder’s consent, except as a result of Holder holding a greater percentage of
      Registrable Securities. Any amendment or waiver effected in accordance with
      this
      Section 10 shall be binding upon each Investor and the Company. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the Registrable Securities. 

     

    11.  Miscellaneous.

     

    a.  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from the such record owner of
      such
      Registrable Securities.

     

    b.  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall as
      set
      forth in Section 9(f) of the Securities Purchase Agreement.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, or to such other address and/or facsimile number and/or
      to
      the attention of such other Person as the recipient party has specified by
      written notice given to each other party five (5) days prior to the
      effectiveness of such change. Written confirmation of receipt (A) given by
      the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender's facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    c.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d.  This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof. Each of the parties hereto irrevocably submits to the exclusive
      jurisdiction of the courts of the State of New York located in New York County
      and the United States District Court for the Southern District of New York
      for
      the purpose of any suit, action, proceeding or judgment relating to or arising
      out of this Agreement and the transactions contemplated hereby. Service of
      process in connection with any such suit, action or proceeding may be served
      on
      each party hereto anywhere in the world by the same methods as are specified
      for
      the giving of notices under this Agreement. Each of the parties hereto
      irrevocably consents to the jurisdiction of any such court in any such suit,
      action or proceeding and to the laying of venue in such court. Each party hereto
      irrevocably waives any objection to the laying of venue of any such suit, action
      or proceeding brought in such courts and irrevocably waives any claim that
      any
      such suit, action or proceeding brought in any such court has been brought
      in an
      inconvenient forum. EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     

    e.  This
      Agreement, the other Transaction Documents (as defined in the Securities
      Purchase Agreement) and the instruments referenced herein and therein constitute
      the entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein supersede all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof and thereof.

     

    f.  Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    g.  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    h.  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    i.  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    j.  All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

    k.  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party. 

     

    l.  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    m.  The
      obligations of each Buyer hereunder are several and not joint with the
      obligations of any other Buyer, and no provision of this Agreement is intended
      to confer any obligations on any Buyer vis-à-vis any other Buyer. Nothing
      contained herein, and no action taken by any Buyer pursuant hereto, shall be
      deemed to constitute the Buyers as a partnership, an association, a joint
      venture or any other kind of entity, or create a presumption that the Buyers
      are
      in any way acting in concert or as a group with respect to such obligations
      or
      the transactions contemplated herein.

     

    

     

     

    *
      * * * *
      *

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              COMPANY:

            
	 	 
	 	
              COMPOSITE
                TECHNOLOGY CORPORATION

            
	 
 	 
 	 
 
	 	By:  	/s/ Benton
              H
              Wilcoxon
	 	
              
Benton
              H Wilcoxon
	 	
              Chief
                Executive Officer

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    

    

    
      	
              BUYERS:

               

            
	
              ________________________________________

              Buyer

               

               

              ____/s/__________________________________

              Signature

               

               

              ________________________________________

              Authorized
                Representative

               

               

              ________________________________________

              Title

            
	 

    

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    EXHIBIT
      A

    

    PLAN
      OF DISTRIBUTION

     

    

     

    We
      are
      registering the shares of Common Stock issuable upon conversion of the
      Debentures, payment of interest on the Debentures and upon exercise of the
      Warrants to permit the resale of these shares of Common Stock by the holders
      of
      the Debentures and warrants from time to time after the date of this prospectus.
      We will not receive any of the proceeds from the sale by the selling
      stockholders of the shares of Common Stock. We will bear all fees and expenses
      incident to our obligation to register the shares of Common Stock.

     

    The
      selling stockholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      stockholders will be responsible for underwriting discounts or commissions
      or
      agent’s commissions. The shares of Common Stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

     

    	·  	
            on
              any national securities exchange or quotation service on which the
              securities may be listed or quoted at the time of
              sale;

          

     

    	·  	
            in
              the over-the-counter market;

          

     

    	·  	
            in
              transactions otherwise than on these exchanges or systems or in the
              over-the-counter market;

          

     

    	·  	
            through
              the writing of options, whether such options are listed on an options
              exchange or otherwise;

          

     

    	·  	
            ordinary
              brokerage transactions and transactions in which the broker-dealer
              solicits purchasers;

          

     

    	·  	
            block
              trades in which the broker-dealer will attempt to sell the shares as
              agent
              but may position and resell a portion of the block as principal to
              facilitate the transaction;

          

     

    	·  	
            purchases
              by a broker-dealer as principal and resale by the broker-dealer for
              its
              account;

          

     

    	·  	
            an
              exchange distribution in accordance with the rules of the applicable
              exchange;

          

     

    	·  	
            privately
              negotiated transactions;

          

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    	·  	
            short
              sales;

          

     

    	·  	
            sales
              pursuant to Rule 144;

          

     

    	·  	
            broker-dealers
              may agree with the selling stockholders to sell a specified number
              of such
              shares at a stipulated price per share;

          

     

    	·  	
            a
              combination of any such methods of sale;
              and

          

     

    	·  	
            any
              other method permitted pursuant to applicable
              law.

          

     

    If
      the
      selling stockholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling stockholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling stockholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling stockholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling stockholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares. The selling stockholders
      may
      also enter into option or other transactions with broker-dealers or other
      financial institutions or the creation of one or more derivative securities
      which require the delivery to such broker-dealer or other financial institution
      of shares offered by this prospectus, which shares such broker-dealer or other
      financial institution may resell pursuant to this prospectus (as supplemented
      or
      amended to reflect such transaction). 

     

    The
      selling stockholders may pledge or grant a security interest in some or all
      of
      the Debentures or Warrants or shares of Common Stock owned by them and, if
      they
      default in the performance of their secured obligations, the pledgees or secured
      parties may offer and sell the shares of Common Stock from time to time pursuant
      to this prospectus or any amendment to this prospectus under Rule 424(b)(3)
      or
      other applicable provision of the Securities Act of 1933, as amended, amending,
      if necessary, the list of selling stockholders to include the pledgee,
      transferee or other successors in interest as selling stockholders under this
      prospectus. The selling stockholders also may transfer and donate the shares
      of
      Common Stock in other circumstances in which case the transferees, donees,
      pledgees or other successors in interest will be the selling beneficial owners
      for purposes of this prospectus.

     

    The
      selling stockholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be “underwriters” within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling stockholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    There
      can
      be no assurance that any selling stockholder will sell any or all of the shares
      of Common Stock registered pursuant to the shelf registration statement, of
      which this prospectus forms a part.

     

    The
      selling stockholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      stockholders and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be
      $[     ] in total, including, without limitation,
      Securities and Exchange Commission filing fees and expenses of compliance with
      state securities or “blue sky” laws; provided, however, that a selling
      stockholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling stockholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling stockholders will be entitled to contribution. We
      may
      be indemnified by the selling stockholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling stockholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreements,
      or we may be entitled to contribution.

     

    Once
      sold
      under the shelf registration statement, of which this prospectus forms a part,
      the shares of Common Stock will be freely tradable in the hands of persons
      other
      than our affiliates.

     

    
      
         

      

      
        19

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