Document:

Unassociated Document

     

    
      

       

       

      October
        31, 2007

      

      John
        Mitola

      Chicago,
        IL 60631

      

      Dear
        John:

      

      Concerning: Letter
        Agreement

      

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

      

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

      

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

      

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

      

      We
        further are asking you to accept the position of Chairman of the Compensation
        Committee, which will be compensated by an additional $1,000 per month. We
        are
        also asking you to serve on the Audit Committee, which will be compensated
        by an
        additional $500 per month.

      

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

      

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

       

       

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

              	
                

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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

      

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

      

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

      ·  Attend
        the Annual General Meeting of the Shareholders; and

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

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

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

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

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

      

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

      

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

      

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

      

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

      

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

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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

       

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

      

      

      

      
        	
                FOR:

              	
                Composite
                  Technology Corporation

              	 	
                FOR:

              	
                John
                  P. Mitola

              
	
                 

              	
                (the
                  Corporation)

              	 	 	
                (the
                  Director)

              
	
                 

              	 	 	 	 
	
                 

              	 	 	 	 
	
                By:

              	 	 	
                By:

              	 
	
                 

              	
                Benton
                  H Wilcoxon

              	 	 	
                John
                  P. Mitola

              
	
                 

              	
                Chairman
                  and CEO

              	 	 	
                Representing
                  himself personally

              

      

      

       

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

    

      
        	
                Notice
                  of Grant of Stock Options

                and
                  Option Agreement

              	
                Composite
                  Technology Corporation

                2026
                  McGaw Avenue, Irvine, CA 92614

              
	
                Name:
                  John P Mitola

                Address:
                  

                 

              	
                Option
                  Number: 500,000

                Optionee
                  ID: ____ ____ ______

              

      

       

      Effective,
        October 31, 2007 (the "Grant Date"), you have been granted a
        Non-Qualified Stock
        Option to purchase 500,000 shares
        of
        Composite Technology Corporation, a Nevada corporation (the "Corporation"),
        Common Stock at an exercise price of $2.09
        per
        share
        (“Exercise Price”), exercisable upon vesting as set forth below (the
        "Option"):

      
        	
                Portion
                  Vesting

              	
                Number
                  of Months since vesting start date

              	
                %
                  of Option Grant Vesting

              	
                Accumulated
                  % of Option Grant vesting

              	
                Number
                  of shares

              
	
                1st
                  Portion

              	
                3

              	
                8.3%

              	
                8.3%

              	
                41,667

              
	
                2nd
                  Portion

              	
                6

              	
                8.3%

              	
                16.6%

              	
                41,667

              
	
                3rd
                  Portion

              	
                9

              	
                8.3%

              	
                24.9%

              	
                41,667

              
	
                4th
                  Portion

              	
                12

              	
                8.3%

              	
                33.2%

              	
                41,667

              
	
                5th
                  Portion

              	
                15

              	
                8.3%

              	
                41.5%

              	
                41,667

              
	
                6th
                  Portion

              	
                18

              	
                8.3%

              	
                49.8%

              	
                41,667

              
	
                7th
                  Portion

              	
                21

              	
                8.3%

              	
                58.1%

              	
                41,667

              
	
                8th
                  Portion

              	
                24

              	
                8.3%

              	
                66.4%

              	
                41,667

              
	
                9th
                  Portion

              	
                27

              	
                8.3%

              	
                74.7%

              	
                41,667

              
	
                10th
                  Portion

              	
                30

              	
                8.3%

              	
                83%

              	
                41,667

              
	
                11th
                  Portion

              	
                33

              	
                8.3%

              	
                91.3%

              	
                41,667

              
	
                12th
                  Portion

              	
                36

              	
                8.7%

              	
                100%

              	
                41,663

              
	
                XXXXXXX

              	
                XX

              	
                XXX

              	
                XXX

              	
                XXXXXXXX

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

                By
                  your signature and the Corporation's signature below, you and the
                  Corporation agree that this option is granted under and governed
                  by the
                  terms and conditions of the 2002 Non-Qualified Stock Compensation
                  Plan
                  (the “2002 Plan”) and Stock Option Agreement, all of which are attached
                  hereto and made a part of this document.

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

              
	
                For:   
                  Composite
                  Technology Corporation,

                a
                  Nevada corporation

                 

                 

                By:    

                Benton
                  H Wilcoxon,

                Chief
                  Executive Officer

                 

                 

              	 	
                By:  
                  John
                  P Mitola

                 

                 

                 

                 

                 

                 

                 

                 

              
	
                Date:  
                  October
                  31, 2007

              	 	
                Date:  
                  October
                  ___, 2006

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

              
	
                ____________________________

                Spouse:__________________________

              	
                ______________________________

                Date

              

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      COMPOSITE
        TECHNOLOGY CORPORATION 

       

      STOCK
        OPTION AGREEMENT

       

       

      RECITALS
        :

       

       

      WHEREAS
        the Optionee has or is to render valuable services to the Corporation (or
        a
        Parent or Subsidiary), and the Corporation wishes to grant the Optionee a
        stock
        option pursuant to this Agreement; and

       

      WHEREAS
        all capitalized terms in this Agreement shall have the meaning assigned to
        them
        in the attached Appendix.

       

      NOW,
        THEREFORE, it is hereby agreed as follows:

       

      1. Grant
        of Option.
        The
        Corporation hereby grants to Optionee, as of the Grant Date, an option to
        purchase up to the number of Option Shares specified in the Grant Notice.
        The
        Option Shares shall be purchasable from time to time during the option term
        specified in Section 2 hereof at the Exercise Price.

       

      2. Option
        Term.
        This
        Option shall terminate on December 31, 2011 (the "Expiration Date") and shall
        accordingly expire at the close of business on the Expiration Date, unless
        sooner terminated in accordance with Sections 6 or 7 hereof. 

       

      3. Dates
        of Exercise.
        This
        Option shall become exercisable for the Option Shares in one or more
        installments as specified in the Grant Notice. As the Option becomes exercisable
        for such installments, those installments shall accumulate and the Option
        shall
        remain exercisable for the accumulated installments until the Expiration
        Date
        subject to the provisions of termination and accelerated vesting or sooner
        termination of the option term under Sections 6 or 7 hereof.

       

      4. Manner
        of Exercising Option.

       

      (a) In
        order
        to exercise this Option with respect to all or any part of the Option Shares
        for
        which this Option is at the time exercisable, Optionee (or any other person
        or
        persons exercising the Option) must take the following actions:

       

      (i) Execute
        and deliver to the Chief Executive Officer of the Corporation the Option
        Exercise Form. 

       

      (ii) Pay
        the
        aggregate of the number of options exercised multiplied by the Exercise Price
        for the purchased shares in one or more of the following forms: (A)
        cash
        or
        (B) cashiers’ check, (C) certified check, (D) bank draft, (E) money order or (F)
        wire transfer.

       

      (iii) Furnish
        to the Corporation appropriate documentation (A) confirming the identity
        of the
        person or persons exercising the Option and (B) confirming that the person
        or
        persons exercising the Option (if other than Optionee) have the right to
        exercise this Option and (C) establishing such person or persons residency
        and/or tax status under US applicable laws. 

       

      (iv) Make
        appropriate arrangements with the Corporation (or Parent or Subsidiary employing
        or retaining Optionee) for the satisfaction of all Federal, state and local
        income and employment tax withholding requirements applicable to the option
        exercise. In this respect, however, the Corporation shall have the right
        at its
        sole discretion before the delivery of any Option Shares pursuant to an
        exercise, the Company shall be entitled to deduct or withhold, or require
        an
        Optionee to remit to the Company, an amount sufficient to satisfy any federal,
        state and local taxes required to be paid or withheld with respect to such
        exercise

       

      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

      (b) As
        soon
        as practical after the Exercise Date, the Corporation shall issue to or on
        behalf of Optionee (or any other person or persons exercising this Option)
        a
        certificate for the purchased Option Shares, with the appropriate legends
        (if
        any) affixed thereto. To the extent any such Option Shares are unvested,
        the
        certificates for those Option Shares shall be endorsed with an appropriate
        legend evidencing the Corporation's repurchase rights and may be held in
        escrow
        with the Corporation until such shares vest.

       

      (c) In
        no
        event may this Option be exercised for any fractional shares.

       

      5. Limited
        Transferability.
        This
        Option shall be neither transferable nor assignable by Optionee other than
        by
        will or by the laws of descent and distribution following Optionee's death
        and
        may be exercised, during Optionee's lifetime, only by Optionee.

       

      6. Cessation
        of Service.

       

      (a) In
        the
        event that the Optionee shall (i) voluntarily resign from his position or,
        (ii)
        in the case of an Optionee who is a Director, such Optionee shall either
        refuse
        to stand for reelection when requested by the Chairman or the Board of Directors
        at any time within a 3 year period from the date of the Grant Notice or shall
        not be reelected at the Shareholders’ Meeting at which such elections are
        annually scheduled to occur, then any portion of the Option that has not
        yet
        vested in accordance with the Grant Notice shall cease to be outstanding
        and
        shall immediately be cancelled as of the date of the termination Service,
        provided however, that any portion of the Option that has vested shall remain
        exercisable until the Expiration Date. For greater certainty, it is understood,
        that in the event of the occurrence of an event of cessation of Service provided
        by this Section 6(a), this Option may not be exercised in the aggregate for
        more
        than the number of vested Option Shares for which the Option is exercisable
        at
        the time of Optionee's cessation of Service.

       

      (b) In
        the
        event that the Optionee shall (i) be removed from his position as a Director
        of
        the Company for any reason other than Misconduct, or (ii)_not be asked to
        stand
        for reelection at any time within a 3 year period from the date of the Grant
        Notice, then any portion of the Option that has not yet vested in accordance
        with the Grant Notice shall immediately and fully vest such that the entire
        Option to acquire all of the Option shares shall be immediately exercisable
        and
        remain exercisable until the Expiration Date, provided however, that the
        Optionee shall have completed a term of Service with the Company of more
        than 6
        full calendar months.

       

      (c) Should
        Optionee's Service be terminated for Misconduct, then this Option shall
        terminate immediately and cease to remain outstanding. 

       

      7. Special
        Acceleration of Option.
        

       

      (a) In
        the
        event of a Change in Control, any portion of the Option to acquire the Option
        Shares that has not yet vested at the time of the Change in Control shall
        automatically accelerate so that such Option shall, immediately prior to
        the
        effective date of the Change in Control, become exercisable for all the shares
        of Common Stock at the time subject to such Option and may be exercised for
        any
        or all of those shares as fully vested shares of Common Stock and remain
        exercisable until the Expiration Date, unless and to the extent: (i) this
        Option
        is, in connection with the Change in Control, assumed by the successor
        corporation (or parent thereof) or otherwise continued in full force and
        effect
        pursuant to the terms of the Change in Control transaction; or (ii) this
        Option
        is replaced with a cash incentive program of the successor corporation which
        preserves the spread existing at the time of the Change in Control on the
        shares
        of Common Stock for which the Option is granted and provides for subsequent
        payout of such cash amount within 3 month from the date of the Change in
        Control. 

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

      (b) If
        this
        Option is assumed in connection with a Change in Control (or otherwise continued
        in full force and effect), then this Option shall be appropriately adjusted,
        immediately after such Change in Control, to apply to the number and class
        of
        securities or other property which would have been issuable to Optionee in
        consummation of such Change in Control had the Option been exercised immediately
        prior to such Change in Control, and appropriate adjustments shall also be
        made
        to the Exercise Price, provided the aggregate Exercise Price shall remain
        the
        same. To the extent the actual holders of the Corporation's outstanding Common
        Stock receive cash consideration for their Common Stock in consummation of
        the
        Change in Control transaction, the successor corporation may, in connection
        with
        the assumption of this Option, substitute one or more shares of its own common
        stock with a fair market value equivalent to the cash consideration paid
        per
        share of Common Stock in such Change in Control transaction.

       

      (c) This
        Option may also be subject to acceleration in accordance with the terms of
        any
        special Addendum attached to this Agreement. 

       

      (d) This
        Agreement shall not in any way affect the right of the Corporation to adjust,
        reclassify, reorganize or otherwise change its capital or business structure
        or
        to merge, consolidate, dissolve, liquidate or sell or transfer all or any
        part
        of its business or assets. 

       

      8. Adjustment
        in Option Shares.
        Should
        any change be made to the Common Stock by reason of any stock split, stock
        dividend, recapitalization, combination of shares, exchange of shares or
        other
        change affecting the outstanding Common Stock as a class without the
        Corporation's receipt of consideration, appropriate adjustments shall be
        made
        to: (i) the total number and/or class of securities subject to this Option;
        and
        (ii) the Exercise Price in order to reflect such change and thereby preclude
        a
        dilution or enlargement of benefits hereunder.

       

      9. Stockholder
        Rights.
        The
        holder of this Option shall not have any stockholder rights with respect
        to the
        Option Shares until such person shall have exercised the Option, paid the
        Exercise Price and become a holder of record of the purchased
        shares.

       

      10. Compliance
        with Laws and Regulations.

       

      (a) The
        exercise of this Option and the issuance of the Option Shares upon such exercise
        shall be subject to compliance by the Corporation and Optionee with all
        applicable requirements of law relating thereto and with all applicable
        regulations of any Stock Exchange (or a NASDAQ market or the Over-the-Counter
        Bulletin Board, as applicable) on which the Common Stock may be listed for
        trading at the time of such exercise and issuance. 

       

      (b) The
        inability of the Corporation to obtain approval from any regulatory body
        having
        authority deemed by the Corporation to be necessary to the lawful issuance
        and
        sale of any Common Stock pursuant to this Option shall relieve the Corporation
        of any liability with respect to the non-issuance or sale of the Common Stock
        as
        to which such approval shall not have been obtained. The Corporation, however,
        shall use its best efforts to obtain all such approvals. 

       

      11. Successors
        and Assigns.
        Except
        to the extent otherwise provided in Sections 5 and 6 hereof, the provisions
        of
        this Agreement shall inure to the benefit of, and be binding upon, the
        Corporation and its successors and assigns and Optionee, Optionee's assigns
        and
        the legal representatives, heirs and legatees of Optionee's estate.

       

      12. Notices.
        Any
        notice required to be given or delivered to the Corporation under the terms
        of
        this Agreement shall be in writing and addressed to the Corporation at its
        principal corporate offices. Any notice required to be given or delivered
        to
        Optionee shall be in writing and addressed to Optionee at the address indicated
        below Optionee's name on the Grant Notice. All notices shall be deemed effective
        upon personal delivery or upon deposit in the U.S. mail, postage prepaid
        and
        properly addressed to the party to be notified.

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

      13. Construction.
        All
        decisions of the Board with respect to any question or issue arising under
        this
        Agreement shall be conclusive and binding on all persons having an interest
        in
        this Option. Nothing in this Agreement shall confer upon Optionee any right
        to
        continue in Service for any period of specific duration or interfere with
        or
        otherwise restrict in any way the rights of the Corporation (or any Parent
        or
        Subsidiary employing or retaining Optionee) or of Optionee, which rights
        are
        hereby expressly reserved by each, to terminate Optionee's service at any
        time
        for any reason, with or without cause.

       

      14. Governing
        Law.
        The
        interpretation, performance and enforcement of this Agreement shall be governed
        by the laws of the State of California without resort to that State's
        conflict-of-laws rules. 

       

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

      APPENDIX

       

       

      The
        following definitions shall be in effect under the Agreement:

       

      A. Agreement
        shall
        mean this Stock Option Agreement.

       

      B. Board
        shall
        mean the Corporation's Board of Directors.

       

      C. Change
        in Control
        shall
        mean a change in ownership or control of the Corporation effected through
        any of
        the following transactions:

       

      (i) a
        merger,
        consolidation or reorganization approved by the Corporation's stockholders,
        unless securities representing more than fifty percent (50%) of the total
        combined voting power of the successor corporation are immediately thereafter
        beneficially owned, directly or indirectly and in substantially the same
        proportion, by the persons who beneficially owned the Corporation's outstanding
        voting securities immediately prior to such transaction,

       

      (ii) the
        acquisition, directly or indirectly, by any person or related group of persons
        (other than the Corporation or a person that directly or indirectly controls,
        is
        controlled by, or is under common control with, the Corporation) of beneficial
        ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
        possessing more than forty-five percent (45%) of the total combined voting
        power
        of the Corporation's outstanding securities, 

       

      (iii) in
        the
        event that either (a) Benton H Wilcoxon shall cease to be a member of the
        Board
        of Directors of the Corporation for any reason except if he shall 1) freely
        resign, 2) be incapable of fulfilling his role as a director for any reason
        and
        such reason is anticipated to extend for a period of more than 90 days or
        3) be
        legitimately removed for grossly negligent or willful misconduct, or (b)
        a
        majority of the Directors shall be replaced for any reason or a new majority
        of
        directors shall be created by new appointments that create a majority of
        newly
        appointed Directors and such new majority is not appointed with the consent
        of
        the majority of the existing Directors

       

      (iv) any
        transfer or other disposition of all or substantially all of the Corporation's
        assets, or

       

      (v) a
        change
        in the control of the Corporation occurs as such term is defined in Rule
        405
        under the 1933 Act.

       

      D. Code
        shall
        mean the Internal Revenue Code of 1986, as amended.

       

      E. Common
        Stock
        shall
        mean shares of the shares of the Corporation's common stock.

       

      F. Corporation
        shall
        mean Composite Technology Corporation, a Nevada corporation.

       

      G. Director
        shall
        mean an individual who is a member of the Board of Directors of the Corporation
        (or any Parent or Subsidiary).

       

      H. Employee
        shall
        mean an individual who is in the employ of the Corporation (or any Parent
        or
        Subsidiary), subject to the control and direction of the employer entity
        as to
        both the work to be performed and the manner and method of
        performance.

       

      I. Exercise
        Date
        shall
        mean the date on which the Option shall have been exercised in accordance
        with
        Section 4 of the Agreement.

       

      
        
           

        

        
          
            APPENDIX

            1

          

          
            

          

        

        
           

        

      

      J. Exercise
        Price
        shall
        mean the exercise price per Option Share as specified in to Notice of Grant
        of
        Stock Option.

       

      K. Expiration
        Date
        shall
        mean the date on which the Option expires as specified in Section 2 of the
        Agreement.

       

      L. Fair
        Market Value
        per
        share of Common Stock on any relevant date shall be determined in accordance
        with the following provisions:

       

      (i) If
        the
        Common Stock is at the time traded on any Nasdaq market, national quotation
        system, or Over-the-Counter Bulletin Board, then the Fair Market Value shall
        be
        deemed equal to the closing selling price per share of Common Stock on the
        date
        in question, as such price is reported on thereon. If there is no closing
        selling price for the Common Stock on the date in question, then the Fair
        Market
        Value shall be the closing selling price on the last preceding date for which
        such quotation exists.

       

      (ii) If
        the
        Common Stock is at the time listed on any Stock Exchange, then the Fair Market
        Value shall be deemed equal to the closing selling price per share of Common
        Stock on the date in question on the Stock Exchange determined by the Board
        to
        be the primary market for the Common Stock, as such price is officially quoted
        in the composite tape of transactions on such exchange. If there is no closing
        selling price for the Common Stock on the date in question, then the Fair
        Market
        Value shall be the closing selling price on the last preceding date for which
        such quotation exists.

       

      (iii) If
        the
        Common Stock can not be determined pursuant to the foregoing sections, then
        the
        Fair Market Value shall be determined by the Board after taking into account
        such factors as the Board shall deem appropriate.

       

      M. Grant
        Date
        shall
        mean the date of grant of the Option as specified in the Grant
        Notice.

       

      N. Grant
        Notice
        shall
        mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant
        to
        which Optionee has been informed of the basic terms of the Option evidenced
        hereby.

       

      O. Immediate
        Family
        shall
        mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
        sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
        brother-in-law, or sister-in-law, and shall include adoptive
        relationships.

       

      P. Incentive
        Option
        shall
        mean an option which satisfies the requirements of Code Section
        422.

       

      Q. Involuntary
        Termination
        shall
        mean the termination of Optionee's Service by reason of:

       

      (i) Optionee's
        involuntary dismissal or discharge by the Corporation for reasons other than
        Misconduct, or

       

      (ii) Optionee's
        voluntary resignation following (A) a change in Optionee's position with
        the
        Corporation (or Parent or Subsidiary employing Optionee) which materially
        reduces Optionee's duties and responsibilities or the level of management
        to
        which Optionee reports, (B) a reduction in Optionee's level of compensation
        (including base salary, fringe benefits and target bonus under any corporate
        performance based bonus or incentive programs) by more than fifteen percent
        (15%) or (C) a relocation of Optionee's place of employment by more than
        fifty
        (50) miles, provided and only if such change, reduction or relocation is
        effected by the Corporation without Optionee's consent.

       

      R. Misconduct
        shall
        mean the commission of any act of fraud, embezzlement or dishonesty by Optionee,
        any unauthorized use or disclosure by Optionee of confidential information
        or
        trade secrets of the Corporation (or any Parent or Subsidiary), or any
        intentional wrongdoing by Optionee or the causing of damage by gross negligence,
        whether by omission or commission, which adversely affects the business or
        affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
        This shall not limit the grounds for the dismissal or discharge of Optionee
        or
        any other individual in the Service of the Corporation (or any Parent or
        Subsidiary).

       

      
        
           

        

        
          
            APPENDIX

            2

          

          
            

          

        

        
           

        

      

      S. 1933
        Act
        shall
        mean the Securities Exchange Act of 1933, as amended.

       

      T.
         1934
        Act
        shall
        mean the Securities Exchange Act of 1934, as amended.

       

      U. Non-Statutory
        Option
        shall
        mean an option not intended to satisfy the requirements of Code Section
        422.

       

      V. Option
        shall
        mean the Option granted pursuant to the decision of the Committee or, in
        the
        absence of a Committee, the Board of Directors of the Corporation and the
        terms
        of this Agreement.

       

      W. Option
        Exercise Form
        shall
        mean the notice of exercise in the form attached as Exhibit 1.

       

      X. Option
        Shares
        shall
        mean the number of shares of Common Stock subject to the Option as specified
        in
        the Grant Notice. 

       

      Y. Optionee
        shall
        mean the person to whom the Option is granted as specified in the Grant
        Notice.

       

      Z. Parent
        shall
        mean any corporation (other than the Corporation) in an unbroken chain of
        corporations ending with the Corporation, provided each corporation in the
        unbroken chain (other than the Corporation) owns, at the time of the
        determination, stock possessing fifty percent (50%) or more of the total
        combined voting power of all classes of stock in one of the other corporations
        in such chain.

       

      AA. Permanent
        Disability
        shall
        mean the inability of Optionee to engage in any substantial gainful activity
        by
        reason of any medically determinable physical or mental impairment which
        can be
        expected to result in death or has lasted or can be expected to last for
        a
        continuous period of twelve (12) months or more. 

       

      BB. 2002
        Plan
        shall
        mean the 2002 Non-Qualified Stock Compensation Plan attached hereto as Exhibit
        2
        and as may be modified from time to time provided that such modifications
        shall
        have been approved and registered with the Securities Exchange
        Commission.

       

      CC. Service
        shall
        mean the Optionee's performance of services for the Corporation (or any Parent
        or Subsidiary) in the capacity of an Employee, a non- employee member of
        the
        board of directors or a consultant or independent advisor.

       

      DD. Subsidiary
        shall
        mean any corporation (other than the Corporation) in an unbroken chain of
        corporations beginning with the Corporation, provided each corporation (other
        than the last corporation) in the unbroken chain owns, at the time of the
        determination, stock possessing fifty percent (50%) or more of the total
        combined voting power of all classes of stock in one of the other corporations
        in such chain. 

       

      
        
           

        

        
          
            APPENDIX

            3

          

          
            

          

        

        
           

        

      

      EXHIBIT
        1

       

       

      OPTION
        EXERCISE FORM

       

      Subject
        to the foregoing, Optionee hereby purchases __________________ shares of
        Common
        Stock (the "Shares") of the Corporation pursuant to that certain option (the
        "Option") granted to Optionee under the Stock Option Agreement (the "Option
        Agreement") between the Corporation and Optionee on ___________. Such shares
        are
        purchased at the exercise price of $______ per share for an aggregate exercise
        price of $__________________ (the "Exercise Price").

       

      Concurrently
        upon the delivery of this Agreement to the Corporation, Optionee is delivering
        the Exercise Price to the Corporation in accordance with and in the manner
        set
        forth in the Option Agreement and Optionee shall deliver whatever additional
        documents may be required by the Option Agreement as a condition for
        exercise.

       

      Dated:
        __________________

       

      
        	 
	
                Name
                  of Optionee:

              	 
	 	 
	 	 
	
                address
                  of residence:

              	 
	 	 
	 	 
	 	 
	
                Optionee’s
                  social security number (“SS/N”) or if no SS/N, his TIN or if no TIN his
                  passport information including Nationality, Number of passport,
                  date of
                  issue and expiry, and issuing authority (a copy of the passport
                  must also
                  be attached)

              
	 	 

      

      

      
        	
              	 	 	 
	SIGNATURE OF OPTIONEE	 	 	SIGNATURE OF SPOUSE
	
              	 	 	
              
	 	 	 	 
	 	 	 	NAME: 
	ACKNOWLEDGED BY:	 	 	 
	 	 	 	 

      

      Composite
        Technology Corporation,

      a
        Nevada
        corporation

       

      By: _____________________________

      Benton
        H
        Wilcoxon,

      Chief
        Executive Officer

       

      

      
        
           

        

        
          
            EXHIBIT
              1

            1

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