Document:

Unassociated Document

    NOTE

     

    May
      __,
      2008

     

    Composite
      Technology Corporation, a Nevada corporation (the “Borrower”), promises to pay
      to the order of ACF CTC, L.L.C., a Delaware limited liability company (the
      “Lender”) the aggregate unpaid principal amount of the Loan made by the Lender
      to the Borrower pursuant to Article II of the Agreement (as hereinafter
      defined), in immediately available funds at the Payment Office (as defined
      below) of ACF CTC, L.L.C., a Delaware limited liability company, as Agent,
      together with interest on the unpaid principal amount hereof at the rates and
      on
      the dates set forth in the Agreement. The Borrower shall pay the principal
      of
      and accrued and unpaid interest on the Loan in full on the Final Maturity Date.
      “Payment Office” means the office of the Agent specified pursuant to Section
      1.01 of the Agreement.

     

    The
      Lender shall, and is hereby authorized to, record on the schedule attached
      hereto, or to otherwise record in accordance with its usual practice, the date
      and amount of the Loan and the date and amount of each principal payment
      hereunder.

     

    This
      Note
      is one of the Notes issued pursuant to, and is entitled to the benefits of,
      the
      Financing Agreement dated as of May __, 2008 (which, as it may be amended or
      modified and in effect from time to time, is herein called the “Agreement”),
      among the Borrower, the Guarantors, the lenders party thereto, including the
      Lender, and ACF CTC, L.L.C., as Agent, to which Agreement reference is hereby
      made for a statement of the terms and conditions governing this Note, including
      the terms and conditions under which this Note may be prepaid or its maturity
      date accelerated. This Note is secured pursuant to the Loan Documents and
      guaranteed pursuant to the Guaranty, all as more specifically described in
      the
      Agreement, and reference is made thereto for a statement of the terms and
      provisions thereof. Capitalized terms used herein and not otherwise defined
      herein are used with the meanings attributed to them in the
      Agreement.

     

    This
      Note
      shall be governed by and construed in accordance with the internal laws of
      the
      State of New York.

     

    
      	 	COMPOSITE
              TECHNOLOGY CORPORATION	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	
              By:  

            	   
	 
	 	
              Print
                Name:

            	  
	 
	 	
              Title:

            	   
	 
	 	 	 	 	 	 
	 	
              By:

            	    
	 
	 	
              Print
                Name:

            	   
	 
	 	
              Title:Unassociated Document

    

    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: __________, 2008 (“Issuance
      Date”)

    

    Warrant
      Shares: This Warrant shall be exercisable for 1,125,000 shares of Common Stock
      (as defined below)

    

    

    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, ACF
      CTC, L.L.C., 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 and 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 12. This Warrant is granted in connection
      with
      a Financing Agreement, dated as of May 5, 2008 (the “Loan
      Date”),
      by
      and between the Company and the Holder (the “Financing
      Agreement”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    1. EXERCISE
      OF WARRANT. 

    

    (a) Warrant
      Shares.
      This
      Warrant shall be exercisable for 1,125,000 shares of Common Stock (as defined
      below) (the “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) either (A) payment
      to the Company of an amount equal to the 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 six
      months of the Warrant. 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. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Exercise
      Price.
      For
      purposes of this Warrant, “Exercise
      Price”
means
      $0.99 per share, subject to adjustment as provided herein.

    

    (d) Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, if at any time after 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.

      

    

    

    (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 10.

    

    (f) 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 Exercise 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 Exercise 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (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 Exercise 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.

    

    (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 any equity compensation plan which
      has
      been approved by the Board of Directors of the Company, pursuant to which the
      Company’s securities may be issued to any employee, officer, consultant or
      director for services provided to the Company (“Approved Stock
      Plan”);

    

    (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 without
      limitation, the Warrant) 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 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;
      or

    

    (F) 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.

    

    (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) If
      the
      Company, at any time while this Warrant is outstanding: (A) pays a stock
      dividend or otherwise makes a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company upon exercise of this Warrant),
      (B)
      subdivides outstanding shares of Common Stock into a larger number of shares,
      (C) combines (including by way of reverse stock split) outstanding shares of
      Common Stock into a smaller number of shares, or (D) issues by reclassification
      of shares of the Common Stock any shares of capital stock of the Company, then
      in each case the Exercise Price shall be adjusted by multiplying the Exercise
      Price by a fraction, of which the numerator shall be the number of shares of
      Common Stock (excluding treasury shares, if any) outstanding immediately before
      such event and of which the denominator shall be the number of shares of Common
      Stock outstanding immediately after such event, and the number of shares
      issuable upon exercise of this Warrant shall be proportionately adjusted to
      result in the same Aggregate Exercise Price as existed immediately prior to
      such
      event. Any adjustment made pursuant to this Section 2(c) shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution or shall become effective immediately
      after the effective date of such subdivision, combination or re classification,
      as applicable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) Organic
      Change. If, at any time while this Warrant is outstanding, (A) the Company
      effects any merger or consolidation of the Company with or into another Person,
      (B) the Company effects any sale of all or substantially all of its assets
      in
      one or a series of related transactions, (C) any tender offer or exchange offer
      (whether by the Company or another Person) is completed pursuant to which
      holders of Common Stock are permitted to tender or exchange their shares for
      other securities, cash or property, or (D) the Company effects any
      reclassification of the Common Stock or any compulsory share exchange pursuant
      to which the Common Stock is effectively converted into or exchanged for other
      securities, cash or property (each “Organic Change”), then, upon any subsequent
      exercise of this Warrant, the Holder shall have the right to receive, for each
      Warrant Share that would have been issuable upon such exercise immediately
      prior
      to the occurrence of such Organic Change, the number of shares of Common Stock
      of the successor or acquiring corporation or of the Company, if it is the
      surviving corporation, and/or any additional consideration (the “Alternate
      Consideration”) receivable as a result of such merger, consolidation or
      disposition of assets by a Holder of the number of shares of Common Stock for
      which this Warrant is exercisable immediately prior to such event. For purposes
      of any such exercise, the determination of the Exercise Price shall be
      appropriately adjusted to apply to such Alternate Consideration based on the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Organic Change (if applicable), and the Company shall apportion
      the Exercise Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Organic Change, then the Holder
      shall be given the same choice (no later than the time of the Organic Change)
      as
      to the Alternate Consideration it receives upon any exercise of this Warrant
      following such Organic Change. To the extent necessary to effectuate the
      foregoing provisions, any successor to the Company or surviving entity in such
      Organic Change shall issue to the Holder a new warrant consistent with the
      foregoing provisions and evidencing the Holder’s right to exercise such warrant
      into Alternate Consideration. The terms of any agreement pursuant to which
      an
      Organic Change is effected shall include terms requiring any such successor
      or
      surviving entity to comply with the provisions of this Section 3(e) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to an Organic Change. 

    

    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.

    

    (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 12.01
      of
      the Financing 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 or decrease the number of shares
      or
      change the class of stock obtainable upon exercise of any Warrants, (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.

    

    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
      (2)
      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 (3) Business Days of such disputed determination
      or
      arithmetic calculation being submitted to the Holder, then the Company shall,
      within two (2) Business Days submit via facsimile the disputed determination
      of
      the Exercise Price to a mutually agreeable independent, reputable investment
      bank, or such other Person as the Holder and the Company may mutually agree.
      The
      Company shall cause at its expense the investment bank or other Person, 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 (10) Business Days
      from
      the time it receives the disputed determinations or calculations. Such
      investment bank’s or other Person’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 that the Warrant may not be offered for sale,
      sold, assigned or transferred unless (A) the Warrant is subsequently registered,
      (B) such transferor shall have delivered to the Company an opinion of counsel,
      in a generally acceptable form, to the effect that the Warrant to be sold,
      assigned or transferred may be sold, assigned or transferred pursuant to an
      exemption from such registration, (C) such transferor provides the Company
      with
      reasonable assurance that the Warrant can be sold, assigned or transferred
      pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended
      (or
      a successor rule thereto) (collectively, “Rule 144”), or (D) the sale,
      assignment, or transfer meets the requirement of Regulation S under the 1933
      Act, as amended.

    

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

    

    (a) “Bloomberg”
means
      Bloomberg Financial Markets.

    

    (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).

    

    (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 fifty percent (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 fifty percent (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 fifty percent (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) “Organic
      Change”
means
      a
      transaction as described in section 2(d).

    

    (k) “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.

    

    (l) “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.

    

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

    

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

    

    (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]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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:

            	 
	 	 	
              Benton
                H. Wilcoxon

            
	 	 	
              Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 _________________
      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:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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:

              	 
	 	 	
                Benton
                  H. Wilcoxon

              
	 	 	
                Chief
                  Executive Officer

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