COMPOSITE TECHNOLOGY
CORPORATION
2008 STOCK OPTION
PLAN
STOCK OPTION
AGREEMENT,
(Immediately
Exercisable)
Composite
Technology Corporation. has granted to the individual (the "
Optionee " ) named in the Notice of Grant of Stock
Option (the " Notice " ) to which this Stock
Option Agreement (the " Option Agreement " ) is
attached an option (the " Option " ) to purchase
certain shares of Stock upon the terms and conditions set forth in
the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and
conditions of the Composite Technology Corporation. 2008 Stock
Option Plan (the " Plan " ), as amended to the Date
of Option Grant, the provisions of which are incorporated herein by
reference. By signing the Notice, the Optionee: (a) represents
that the Optionee has read and is familiar with the terms and
conditions of the Notice, the Plan and this Option Agreement,
including the Effect of Termination of Service set forth in
Section 7, the Unvested Share Repurchase Option set forth in
Section 11 and the Right of First Refusal set forth in
Section 12, (b) accepts the Option subject to all of the
terms and conditions of the Notice, the Plan and this Option
Agreement, (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any
questions arising under the Notice, the Plan or this Option
Agreement, and (d) acknowledges receipt of a copy of the
Notice, the Plan and this Option Agreement.
1.
Definitions and Construction.
1.1
Definitions.
Unless otherwise defined herein,
capitalized terms shall have the meanings assigned to such terms in
the Notice or the Plan.
1.2
Construction.
Captions and titles contained herein are
for convenience only and shall not affect the meaning or
interpretation of any provision of this Option Agreement. Except
when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the
term "or" is not intended to be exclusive, unless the context
clearly requires otherwise.
2.
Tax Consequences.
2.1
Tax Status of Option.
This Option is intended to have the tax
status designated in the Notice.
(a)
Incentive Stock Option.
If the Notice so designates, this Option is
intended to be an Incentive Stock Option within the meaning of
Section 422(b) of the Code, but the Company does not represent
or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain
favorable income tax treatment under Section 422 of the Code,
including, but not limited to, holding period requirements. (NOTE
TO OPTIONEE: If the Option is exercised more than three
(3) months after the date on which you cease to be an Employee
in accordance with Section 7.1(c) of this Option Agreement
(other than by reason of your death or permanent and total
disability as defined in Section 22(e)(3) of the Code), the
Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422
of the Code.)
(b)
Nonstatutory Stock Option.
If the Notice so designates, this Option is
intended to be a Nonstatutory Stock Option and shall not be treated
as an Incentive Stock Option within the meaning of
Section 422(b) of the Code.
2.2
ISO Fair Market Value Limitation.
If the Notice designates this Option as an
Incentive Stock Option, then to the extent that the Option
(together with all Incentive Stock Options granted to the Optionee
under all stock option plans of the Participating Company Group,
including the Plan) becomes exercisable for the first time during
any calendar year for shares having a Fair Market Value greater
than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be
treated as Nonstatutory Stock Options. For purposes of this
Section 2.2, options designated as Incentive Stock Options are
taken into account in the order in which they were granted, and the
Fair Market Value of stock is determined as of the time the option
with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this
Section 2.2, such different limitation shall be deemed
incorporated herein effective as of the date required or permitted
by such amendment to the Code. If the Option is treated as an
Incentive Stock Option in part and as a Nonstatutory Stock Option
in part by reason of the limitation set forth in this
Section 2.2, the Optionee may designate which portion of such
Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the
Incentive Stock Option portion of the Option first. Separate
certificates representing each such portion shall be issued upon
the exercise of the Option. (NOTE TO OPTIONEE: If the aggregate
Exercise Price of the Option (that is, the Exercise Price
multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other Incentive Stock Options you hold
(whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than $100,000,
you should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock
Option.)
2.3
Election Under Section 83(b) of the
Code. If the Optionee exercises this
Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee
understands that the Optionee should consult with the Optionee's
tax advisor regarding the advisability of filing with the Internal
Revenue Service an election under Section 83(b) of the Code,
which must be filed no later than thirty (30) days after the
date on which the Optionee exercises the Option. Shares acquired
upon exercise of the Option are nontransferable and subject to a
substantial risk of forfeiture if, for example, they are unvested
and are subject to a right of the Company to repurchase such shares
at the Optionee's original purchase price if the Optionee's Service
terminates. Failure to file an election under Section 83(b),
if appropriate, may result in adverse tax consequences to the
Optionee. The Optionee acknowledges that the Optionee has been
advised to consult with a tax advisor prior to the exercise of the
Option regarding the tax consequences to the Optionee of the
exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE
FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES
SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE
ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE
COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER
BEHALF.
3.
Administration.
All questions of interpretation concerning
this Option Agreement shall be determined by the Board. All
determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or
election.
4.
Exercise of the Option.
4.1
Right to Exercise.
Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date
and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the number of Option
Shares less the number of shares previously acquired upon exercise
of the Option, subject to the Company's repurchase rights set forth
in Section 11 and Section 12. In no event shall the
Option be exercisable for more shares than the Number of Option
Shares.
4.2
Method of Exercise.
Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is
being exercised and such other representations and agreements as to
the Optionee's investment intent with respect to such shares as may
be required pursuant to the provisions of this Option Agreement.
The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return
receipt requested, by confirmed facsimile transmission, or by such
other means as the Company may permit, to the Chief Financial
Officer of the Company, or other authorized representative of the
Participating Company Group, prior to the termination of the Option
as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein of the
then current form of escrow agreement reference below. The Option
shall be deemed to be exercised upon receipt by the Company of such
written notice, the aggregate Exercise Price, and, if required by
the Company, such executed agreement.
4.3 Payment of Exercise
Price.
(a)
Forms of Consideration Authorized.
Except as otherwise provided below, payment
of the aggregate Exercise Price for the number of shares of Stock
for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the
Company, or attestation to the ownership, of whole shares of Stock
owned by the Optionee having a Fair Market Value (as determined by
the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities
laws or agreements with an underwriter for the Company) not less
than the aggregate Exercise Price, (iii) by means of a
Cashless Exercise, as defined in Section 4.3(b), or
(iv) by any combination of the foregoing.
(b)
Limitations on Forms of
Consideration.
(i)
Tender of Stock.
Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company, or attestation to
the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any
law, regulation or agreement restricting the redemption of the
Company's stock. The Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless
such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly,
from the Company.
(ii)
Cashless Exercise.
A " Cashless Exercise " means
the delivery of a properly executed notice together with
irrevocable instructions to a broker in a form acceptable to the
Company providing for the assignment to the Company of the proceeds
of a sale or loan with respect to some or all of the shares of
Stock acquired upon the exercise of the Option pursuant to a
program or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at
any and all times, the right, in the Company's sole and absolute
discretion, to decline to approve or terminate any such program or
procedure.
4.4
Tax Withholding.
At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the
Company, the Optionee hereby authorizes withholding from payroll
and any other amounts payable to the Optionee, and otherwise agrees
to make adequate provision for (including by means of a Cashless
Exercise to the extent permitted by the Company), any sums required
to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part,
of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired upon exercise of the Option. The Company shall have no
obligation to deliver shares of Stock or to release shares of Stock
from an escrow established pursuant to this Option Agreement until
the tax withholding obligations of the Participating Company Group
have been satisfied by the Optionee.
4.5
Certificate Registration.
Except in the event the Exercise Price is
paid by means of a Cashless Exercise, the certificate for the
shares as to which the Option is exercised shall be registered in
the name of the Optionee, or, if applicable, in the names of the
heirs of the Optionee.
4.6
Restrictions on Grant of the Option and
Issuance of Shares. The grant of the
Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such
securities. The Option may not be exercised if the issuance of
shares of Stock upon exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law
or regulations or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the
Option may not be exercised unless (i) a registration
statement under the Securities Act shall at the time of exercise of
the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel
to the Company, the shares issuable upon exercise of the Option may
be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS
THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE
MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed
by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option shall relieve
the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not
have been obtained. As a condition to the exercise of the Option,
the Company may require the Optionee to satisfy any qualifications
that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the
Company.
4.7
Fractional Shares.
The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5.
Nontransferability of the Option.
The Option may be exercised during the
lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent
and distribution. Following the death of the Optionee, the Option,
to the extent provided in Section 7, may be exercised by the
Optionee's legal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable
laws of descent and distribution.
6.
Termination of the Option.
The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option
Expiration Date, (b) the last date for exercising the Option
following termination of the Optionee's Service as described in
Section 7, or (c) a Change in Control to the extent
provided in Section 8.
7.
Effect of Termination of Service.
7.1
Option Exercisability.
(a)
Disability.
If the Optionee's Service with the
Participating Company Group terminates because of the Disability of
the Optionee, the Option, to the extent unexercised and exercisable
on the date on which the Optionee's Service terminated, may be
exercised by
the Optionee (or the Optionee's guardian
or legal representative) at any time prior to the expiration of
twelve (12) months after the date on which the Optionee's
Service terminated, but in any event no later than the Option
Expiration Date.
(b)
Death. If
the Optionee's Service with the Participating Company Group
terminates because of the death of the Optionee, the Option, to the
extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's
legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee's death at any time
prior to the expiration of twelve (12) months after the date
on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date. The Optionee's Service shall
be deemed to have terminated on account of death if the Optionee
dies within three (3) months after the Optionee's termination
of Service.
(c)
Other Termination of Service.
If the Optionee's Service with the
Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's
Service terminated, may be exercised by the Optionee at any time
prior to the expiration of three (3) months (or such other
longer period of time as determined by the Board, in its
discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration
Date.
7.2
Additional Limitation on Option
Exercise. Notwithstanding the
provisions of Section 7.1, the Option may not be exercised
after the Optionee's termination of Service to the extent that the
shares to be acquired upon exercise of the Option would be subject
to the Unvested Share Repurchase Option as provided in
Section 11.
7.3
Extension if Exercise Prevented by
Law. Notwithstanding the foregoing, if
the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of
Section 4.6, the Option shall remain exercisable until three
(3) months after the date the Optionee is notified by the
Company that the Option is exercisable, but in any event no later
than the Option Expiration Date.
7.4
Extension if Optionee Subject to
Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth
in Section 7.1 of shares acquired upon the exercise of the
Option would subject the Optionee to suit under Section 16(b)
of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the
date on which a sale of such shares by the Optionee would no longer
be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Optionee's termination of Service, or
(iii) the Option Expiration Date.
(a) "
Termination After Change in Control " shall mean either of
the following events occurring within twelve (12) months after
a Change in Control:
(i) termination
by the Participating Company Group of the Optionee's Service with
the Participating Company Group for any reason other than for Cause
(as defined below); or
(ii) the
Optionee's resignation for Good Reason (as defined below) from all
capacities in which the Optionee is then rendering Service to the
Participating Company Group within a reasonable period of time
following the event constituting Good Reason. Notwithstanding any provision herein to the
contrary, Termination After Change in Control shall not include any
termination of the Optionee's Service with the Participating
Company Group which (1) is for Cause (as defined below);
(2) is a result of the Optionee's death or disability;
(3) is a result of the Optionee's voluntary termination of
Service other than for Good Reason; or (4) occurs prior to the
effectiveness of a Change in Control.
(b) "
Cause " shall mean any of the following: (i) the
Optionee's theft, dishonesty, or falsification of any Participating
Company documents or records; (ii) the Optionee' s improper
use or disclosure of a Participating Company's confidential or
proprietary information; (iii) any action by the Optionee
which has a detrimental effect on a Participating Company's
reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written
notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any
material breach by the Optionee of any employment agreement between
the Optionee and a Participating Company, which breach is not cured
pursuant to the terms of such agreement; or (vi) the
Optionee's conviction (including any plea of guilty or nolo
contendere) of any criminal act which impairs the Optionee's
ability to perform his or her duties with a Participating
Company.
(c) "
Good Reason " shall mean any one or more of the
following:
(i) without
the Optionee's express written consent, the assignment to the
Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's
positions, duties, responsibilities and status with the
Participating Company Group immediately prior to the date of the
Change in Control;
(ii) without
the Optionee's express written consent, the relocation of the
principal place of the Optionee's Service to a location that is
more than fifty (50) miles from the Optionee's principal place
of Service immediately prior to the date of the Change in Control,
or the imposition of travel requirements substantially more
demanding of the Optionee than such travel requirements existing
immediately prior to the date of the Change in Control;
(iii) any
failure by the Participating Company Group to pay, or any material
reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of
the Change in Control (unless reductions comparable in amount and
duration are concurrently made for all other employees of the
Participating Company Group with responsibilities, organizational
level and title comparable to the Optionee's), or (2) the
Optionee's bonus compensation, if any, in effect immediately prior
to the date of the Change in Control (subject to applicable
performance requirements with respect to the actual amount of bonus
compensation earned by the Optionee); or
(iv) any
failure by the Participating Company Group to (1) continue to
provide the Optionee with the opportunity to participate, on terms
no less favorable than those in effect for the benefit of any
employee or service provider group which customarily includes a
person holding the employment or service provider position or a
comparable position with the Participating Company Group then held
by the Optionee, in any benefit or compensation plans and programs,
including, but not limited to, the Participating Company Group's
life, disability, health, dental, medical, savings, profit sharing,
stock purchase and retirement plans, if any, in which the Optionee
was participating immediately prior to the date of the Change in
Control, or their equivalent, or (2) provide the Optionee with
all other fringe benefits (or their equivalent) from time to time
in effect for the benefit of any employee or service provider group
which customarily includes a person holding the employment or
service provider position or a comparable position with the
Participating Company Group then held by the Optionee.
8.
Change in Control.
(a) An
" Ownership Change Event " shall be deemed to have
occurred if any of the following occurs with respect to the
Company: (i) the direct or indirect sale or exchange in a
single or series of related transactions by the stockholders of the
Company of more than thirty percent (30%) of the voting stock of
the Company; (ii) a merger or co
