EXHIBIT 10.4
STOCK OPTION AGREEMENT
(XX. XXXX X. XXXXX)
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is made effective as of the
date of grant set forth below ("Date of Grant") by and between XSUNX, INC., a
Colorado corporation ("Company"), and the optionee named below ("Optionee") as
contemplated in the Company's 2007 Option Plan ("Plan"). Capitalized terms not
defined herein shall have the meaning ascribed to them in the Plan.
Optionee: Xx. Xxxx X. Xxxxx
Social Security Number:
Address:
Total Option Shares: 150,000
Exercise Price Per Share: $0.46
Date of Grant: January 26, 2007
First Vesting Date: April 26, 2007
Expiration Date for Exercise of Options: January 26, 2012
Stock Option Number: 07-014
Type of Stock Option:
(Check one) [ X ] Incentive Stock Option [ ] Statutory Stock Option
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1. Conditional Grant of Option. The Company hereby conditionally grants to
Optionee an option ("Option") to purchase the total number of shares of Common
Stock of the Company set forth above ("Shares") at the Exercise Price Per Share
set forth above ("Exercise Price"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"). Subject to the Plan, only Employees of the Company shall
receive ISOs. This Agreement shall be deemed a Stock Option Agreement as defined
in the Plan. The terms and conditions of the Plan are incorporated herein by
this reference. All specific terms and references, including capitalized terms
and references, which are undefined in this Agreement shall have the definition
and meaning ascribed to them in the Plan, including, without limitation, the
definition of the terms Employee and Consultant.
2. Exercise Price. The Exercise Price, is not less than the fair market value
per share of Common Stock on the date of grant, as determined by the Board;
provided, however, in the event Optionee is an Employee and owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of its Parent or Subsidiary corporations
immediately before the Option is granted, said exercise price is not less than
one hundred ten percent (110%) of the fair market value per share of Common
Stock on the date of grant as determined by the Board.
3. Exercise of Option. Subject to the vesting schedule contained herein and the
other conditions set forth in this Agreement, all or part of the Option may be
exercised prior to its expiration from the first vesting date set forth above
("First Vesting Date") up to and including 5:00 p.m. Pacific Standard Time on
the expiration date set forth above ("Expiration Date") at the time or times set
forth herein in accordance with the provisions of the Plan as follows:
(i) Vesting:
(a) The Option shall become exercisable in the amount of
18,750 shares upon the First Vesting Date. Thereafter, the
Option shall vest become exercisable at the rate of 18,750
Shares per calendar quarter, or any apportioned amount
thereof, during the term of engagement by XsunX, Inc. of
the Optionee.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the
Option is governed by Sections 7, 8 and 9 below, subject
to the limitations contained in subsection 3(i)(d) below.
(d) In no event may the Option be exercised after the date of
expiration of the term of the Option as set forth in
Section 11 below.
(ii) Method of Exercise. The Option shall be exercisable by written
notice which shall state the election to exercise the Option,
the number of Shares in respect of which the Option is being
exercised, and such other representations and agreements as to
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the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by
Optionee and shall be delivered in person or by certified mail
to the President, Secretary or Chief Financial Officer of the
Company. The written notice shall be accompanied by payment of
the exercise price.
(iii) Compliance with Law. No Shares will be issued pursuant to the
exercise of an Option unless such issuance and such exercise
shall comply with all relevant provisions of law and the
requirements of any stock exchange or quotation medium upon
which the Shares may then be listed or quoted. Assuming such
compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
(iv) Adjustments, Merger, etc. The number and class of the Shares
and/or the exercise price specified above are subject to
appropriate adjustment in the event of changes in the
capital stock of the Company by reason of stock dividends,
stock splits, combination or recombination of shares,
reclassifications, mergers, consolidations, reorganizations
or liquidations. Subject to any required action of the
stockholders of the Company, if the Company shall be the
surviving corporation in any merger or consolidation, the
Option (to the extent that it is still outstanding) shall
pertain to and apply to the securities to which a holder of
the same number of shares of Common Stock that are then
subject to the Option would have been entitled. A
dissolution or liquidation of the Company, or a merger or
consolidation in which the Company is not the surviving
corporation, will cause the Option to terminate, unless the
agreement or merger or consolidation shall otherwise
provide, provided that the Optionee shall, if the Board
expressly authorizes, in such event have the right
immediately prior to such dissolution or liquidation, or
merger or consolidation, to exercise the Option in whole or
part. To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall
be made by the Board, whose determination in that respect
shall be final, binding and conclusive.
4. Optionee's Representations. By receipt of the Option, by its execution, and
by its exercise in whole or in part, Optionee represents to the Company that
Optionee understands that:
(i) Both the Option and any Shares purchased upon its exercise are
securities, the issuance by the Company of which requires
compliance with federal and state securities laws;
(ii) These securities are made available to Optionee only on the
condition that Optionee makes the representations contained in
this Section 4 to the Company;
(iii) Optionee has made a reasonable investigation of the affairs of
the Company sufficient to be well informed as to the rights
and the value of these securities;
(iv) Optionee understands that the securities have not been
registered under the Securities Act of 1933, as \amended (the
"Act") in reliance upon one or more specific exemptions con-
tained in the Act, which may include reliance on Rule 701
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promulgated under the Act, if available, or which may depend
upon: (a) Optionee's bona fide investment intention in acquir-
ing these securities; (b) Optionee's intention to hold these
securities in compliance with federal and state securities
laws; (c) Optionee having no present intention of selling or
transferring any part thereof (recognizing that the Option is
not transferable) in violation of applicable federal and state
securities laws; and (d) there being certain restrictions on
transfer of the Shares subject to the Option;
(v) Optionee understands that the Shares subject to the Option, in
addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Act, or
unless an exemption from registration is available; that Rule
144, the usual exemption from registration, is only available
after the satisfaction of certain holding periods and in the
presence of a public market for the Shares; that there is no
certainty that a public market for the Shares will exist, and
that otherwise it will be necessary that the Shares be sold
pursuant to another exemption from registration which may be
difficult to satisfy; and,
(vi) Optionee understands that the certificate representing the
Shares will bear a legend prohibiting their transfer in the
absence of their registration or the opinion of counsel for
the Company that registration is not required, and a legend
prohibiting their transfer in compliance with applicable state
securities laws unless otherwise exempted.
5. Method of Payment. Payment of the purchase price may be made subject to the
terms of Section 14 herein, or by cash, check or, in the sole discretion of the
Board at the time of exercise, promissory notes or other Shares of Common Stock
having a fair market value on the date of surrender equal to the aggregate
purchase price of the Shares being purchased.
6. Restrictions on Exercise. The Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such Shares would constitute a violation of any applicable federal or state
securities or other law or regulation. As a condition to the exercise of the
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Termination of Status as an Employee or Consultant. In the event of
termination of Optionee's continuous status as an Employee or Consultant, as
such status may be determined and construed by the Company in its sole
discretion ("Continuous Status"), for any reason other than death or disability,
Optionee may, but only within thirty (30) days after the date of such
termination (but in no event later than the date of expiration of the term of
the Option as set forth in Section 11 below), exercise the Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise the Option within the time
specified herein, the Option shall terminate.
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8. Disability of Optionee. In the event of termination of Optionee's Continuous
Status as an Employee or Consultant as a result of Optionee's disability,
Optionee may, but only within six (6) months from the date of termination of
employment or consulting relationship (but in no event later than the date of
expiration of the term of the Option as set forth in Section 11 below), exercise
the Option to the extent Optionee was entitled to exercise it at the date of
such termination; provided, however that if the disability is not total and
permanent (as defined in Section 22(e)(3) of the Code) and the Optionee
exercises the option within the period provided above but more than three months
after the date of termination, the Option shall automatically be deemed to be a
Nonstatutory Stock Option and not an Incentive Stock Option; and provided,
further, that if the disability is total and permanent (as defined in Section
22(e)(3) of the Code), then the Optionee may, but only within one (1) year from
the date of termination of employment or consulting relationship (but in no
event later than the date of expiration of the term of the Option as set forth
in Section 11 below), exercise the Option to the extent Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (which Optionee was entitled to exercise) within the
time periods specified herein, the Option shall terminate.
9. Death of Optionee. In the event of the death of Optionee:
(i) During the term of the Option while an Employee or Consultant
of the Company and having been in Continuous Status as an
Employee or Consultant since the date of grant of the Option,
the Option may be exercised, at any time within one (1) year
following the date of death (but, in the case of an Incentive
Stock Option, in no event later than the date of expiration
of the term of the Option as set forth in Section 11 below),
by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the time
of death of the Optionee. To the extent that such Employee or
Consultant was not entitled to exercise the Option at the date
of death, or if such Employee, Consultant, estate or other
person does not exercise such Option (which such Employee,
Consultant, estate or person was entitled to exercise) within
the one (1) year time period specified herein, the Option
shall terminate; or,
(ii) During the thirty (30) day period specified in Section 7 or
the one (1) year period specified in Section 8, after the
termination of Optionee's Continuous Status as an Employee or
Consultant, the Option may be exercised, at any time within
one (1) year following the date of death (but, in the case of
an Incentive Stock Option, in no event later than the date of
expiration of the term of the Option as set forth in Section
11 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had
accrued at the date of termination. To the extent that such
Employee or Consultant was not entitled to exercise the Option
at the date of death, or if such Employee, Consultant, estate
or other person does not exercise such Option (which such
Employee, Consultant, estate or person was entitled to
exercise) within the one (1) year time period specified
herein, the Option shall terminate.
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10. Non-Transferability of Option. The Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee, only by Optionee. The terms of the
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of Optionee.
11. Term of Option. The Option may not be exercised more than five (5) years
from the date of grant of the Option, and may be exercised during such term only
in accordance with the Plan and terms of the Option; provided, however, that the
term of this option, if it is a Nonstatutory Stock Option, may be extended for
the period set forth in Section 9(i) or Section 9(ii) in the circumstances set
forth in such Sections.
12. Early Disposition of Stock; Taxation Upon Exercise of Option. If Optionee is
an Employee and the Option qualifies as an ISO, Optionee understands that, if
Optionee disposes of any Shares received under the Option within two (2) years
after the date of this Agreement or within one (1) year after such Shares were
transferred to Optionee, Optionee may be treated for federal income tax purposes
as having received ordinary income at the time of such disposition in any amount
generally measured as the difference between the price paid for the Shares and
the lower of the fair market value of the Shares at the date of exercise or the
fair market value of the Shares at the of disposition. Any gain recognized on
such premature sale of the Shares in excess of the amount treated as ordinary
income may be characterized as capital gain. Optionee hereby agrees to notify
the Company in writing within thirty (30) days after the date of any such
disposition. Optionee understands that if Optionee disposes of such Shares at
any time after the expiration of such two-year and one-year holding periods, any
gain on such sale may be treated as long-term capital gain laws subject to
meeting various qualifications. If Optionee is a Consultant or this is a
Nonstatutory Stock Option, Optionee understands that, upon exercise of the
Option, Optionee may recognize income for tax purposes in an amount equal to the
excess of the then fair market value of the Shares over the exercise price. Upon
a resale of such shares by the Optionee, any difference between the sale price
and the fair market value of the Shares on the date of exercise of the Option
may be treated as capital gain or loss. Optionee understands that the Company
may be required to withhold tax from Optionee's current compensation in some of
the circumstances described above (and Optionee hereby so authorizes the
Company); to the extent that Optionee's current compensation is insufficient to
satisfy the withholding tax liability, the Company may require the Optionee to
make a cash payment to cover such liability as a condition to exercise of the
Option.
13. Tax Consequences. The Optionee understands that any of the foregoing
references to taxation are based on federal income tax laws and regulations now
in effect, and may not be applicable to the Optionee under certain
circumstances. The Optionee may also have adverse tax consequences under state
or local law. The Optionee has reviewed with the Optionee's own tax advisors the
federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement. The Optionee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents. The Optionee understands that the Optionee (and not the Company) shall
be responsible for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement.
14. Net Issue Exercise. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Company's Common Stock is greater
than the Per Share Exercise Price (at the date of calculation as set forth
below), in lieu of exercising the Option for cash, the Optionee may elect to
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receive shares equal to the value (as determined below) of the Option (or the
portion thereof being canceled) by surrender of the Option at the principal
office of the Company together with the properly endorsed Notice of Exercise and
Subscription Form and notice of such election, in which event the Company will
issue to the Optionee a number of shares of Common Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Optionee
Y = the number of shares of Common Stock purchasable
under the Option or, if only a portion of the Option is being
exercised, the portion of the Option being canceled (at the date of
such calculation)
A = the fair market value of one share of the
Company's Common Stock (at the date of such calculation)
B = Per Share Exercise Price (as adjusted to the
date of such calculation)
For purposes of the above calculation, fair market value of one share
of the Company's Stock will be the average of the closing prices of the
Company's shares of Common Stock as quoted on the OTC Bulletin Board (the
"OTCBB") (or on such other United States stock exchange or public trading market
or quotation medium on or by which the shares of the Company trade or are quoted
if, at the time of the election, they are not trading or being quoted on the
OTCBB), for the five (5) consecutive trading days immediately preceding the date
of the date the completed, executed Notice of Exercise and Subscription Form is
received.
15. Damages. The parties agree that any violation of the Option (other than a
default in the payment of money) cannot be compensated for by damages, and any
aggrieved party shall have the right, and is hereby granted the privilege, of
obtaining specific performance of the Option in any court of competent
jurisdiction in the event of any breach hereunder.
16. Delay. No delay or failure on the part of the Company or the Optionee in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy.
17. Restrictions. Notwithstanding anything herein to the contrary, Optionee
understands and agrees that Optionee shall not dispose of any of the Shares,
whether by sale, exchange, assignment, transfer, gift, devise, bequest,
mortgage, pledge, encumbrance or otherwise, except in accordance with the terms
and conditions of this Agreement, and Optionee shall not take or omit any action
which will impair the absolute and unrestricted right, power, authority and
capacity of Optionee to sell Shares in accordance with the terms and conditions
hereof.
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Any purported transfer of Shares by Optionee that violates any provision of this
Section 17 shall be wholly void and ineffectual and shall give to the Company or
its designee the right to purchase from Optionee all but not less than all of
the Shares then owned by Optionee for a period of ninety (90) days from the date
the Company first learns of the purported transfer at the Agreement Price and on
the Agreement Terms (as those terms are defined in subsections (vi) and (vii),
respectively, of this Section 17). If the Shares are not purchased by the
Company or its designee, the purported transfer thereof shall remain void and
ineffectual and they shall continue to be subject to this Agreement.
The Company shall not cause or permit the transfer of any Shares to be made on
its books except in accordance with the terms hereof.
(i) Permitted Transfers.
(a) Optionee may sell, assign or transfer any Shares held
by the Optionee but only by complying with the
provisions of subsection (iv) of this Section 17.
(b) Optionee may sell, assign or transfer any Shares held
by the Optionee without complying with the provisions
of subsection (iv) by obtaining the prior written
consent of the Company's shareholders owning 50% of
the then issued and outstanding shares of the
Company's Common Stock (determined on a fully diluted
basis) or a majority of the members of the Board of
Directors of the Company, provided that the
transferee agrees in writing to be bound by the
provisions of the Option and the transfer is made in
accordance with any other restrictions or conditions
contained in the written consent and in accordance
with applicable federal and state securities laws.
(c) Upon the death of Optionee, Shares held by the
Optionee may be transferred to the personal
representative of the Optionee's estate without
complying with the provisions of subsection (iv).
Shares so transferred shall be subject to the other
provisions of the Option, including in particular,
and without limitation, subsection (v).
(ii) No Pledge. Unless a majority of the members of the Board of
Directors consent, Shares may not be pledged, mortgaged or
otherwise encumbered to secure indebtedness for money borrowed
or any other obligation for which the Optionee is primarily or
secondarily liable.
(iii) Stock Certificate Legend. Each stock certificate for Shares
issued to the Optionee shall have conspicuously written,
printed, typed or stamped upon the face thereof, or upon the
reverse thereof with a conspicuous reference on the face
thereof, one or both of the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
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REGISTRATION THEREUNDER OR AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT. SUCH SHARES MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN ANY
MANNER EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE TERMS OF
THE STOCK OPTION AGREEMENT, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. UNLESS A MAJORITY OF THE
MEMBERS OF THE BOARD OF DIRECTORS CONSENT, SUCH STOCK OPTION
AGREEMENT PROHIBITS ANY PLEDGE, MORTGAGE OR OTHER ENCUMBRANCE
OF SUCH SHARES TO SECURE ANY OBLIGATION OF THE HOLDER HEREOF.
EVERY CREDITOR OF THE HOLDER HEREOF AND ANY PERSON ACQUIRING
OR PURPORTING TO ACQUIRE THIS CERTIFICATE OR THE SHARES HEREBY
EVIDENCED OR ANY INTEREST THEREIN IS HEREBY NOTIFIED OF THE
EXISTENCE OF SUCH STOCK OPTION AGREEMENT, AND ANY ACQUISITION
OR PURPORTED ACQUISITION OF THIS CERTIFICATE OR THE SHARES
HEREBY EVIDENCED OR ANY INTEREST THEREIN SHALL BE SUBJECT TO
ALL RIGHTS AND OBLIGATIONS OF THE PARTIES TO SUCH STOCK OPTION
AGREEMENT AS THEREIN SET FORTH.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
(iv) Sales of Shares.
(a) Company's Right of First Refusal. In the event that
the Optionee shall desire to sell, assign or transfer
any Shares held by the Optionee to any other person
(the "Offered Shares") and shall be in receipt of a
bona fide offer to purchase the Offered Shares
("Offer"), the following procedure shall apply. The
Optionee shall give to the Company written notice
containing the terms and conditions of the Offer,
including, but not limited to (a) the number of
Offered Shares; (b) the price per Share; (c) the
method of payment; and (d) the name(s) of the
proposed purchaser(s).
(b) An offer shall not be deemed bona fide unless the
Optionee has informed the prospective purchaser of
the Optionee's obligation under the Option and the
prospective purchaser has agreed to become a party
hereunder and to be bound hereby. The Company is
entitled to take such steps as it reasonably may deem
necessary to determine the validity and bona fide
nature of the Offer.
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(c) Until thirty (30) days after such notice is given,
the Company or its designee shall have the right to
purchase all of the Offered Shares at the price
offered by the prospective purchaser and specified in
such notice. Such purchase shall be on the Agreement
Terms, as defined in subsection (vi).
(d) Failure of Company or its Designee to Purchase
Offered Shares. If all of the Offered Shares are not
purchased by the Company and/or its designee within
the thirty (30) day period granted for such
purchases, then any remaining Offered Shares may be
sold, assigned or transferred pursuant to the Offer;
provided, that the Offered Shares are so transferred
within 30 days of the expiration of the thirty (30)
day period to the person or persons named in, and
under the terms and conditions of, the bona fide
Offer described in the notice to the Company; and
provided further, that such persons agree to execute
and deliver to the Company a written agreement, in
form and content satisfactory to the Company, agree-
ing to be bound by the terms and conditions of the
Option.
(v) Manner of Exercise. Any right to purchase hereunder shall be
exercised by giving written notice of election to the
Optionee, the Optionee's personal representative or any other
selling person, as the case may be, prior to the expiration of
such right to purchase.
(vi) Agreement Price. The "Agreement Price" shall be the higher of
(a) the fair market value of the Shares to be purchased
determined in good faith by the Board of Directors of the
Company and (b) the original exercise price of the Shares to
be purchased.
(vii) Agreement Terms. "Agreement Terms" shall mean and include the
following:
(a) Delivery of Shares and Closing Date. At the closing,
the Optionee, the Optionee's personal representative
or such other selling person, as the case may be,
shall deliver certificates representing the Shares,
properly endorsed for transfer, and with the
necessary documentary and transfer tax stamps, if
any, affixed, to the purchaser of such Shares.
Payment of the purchase price therefore shall
concurrently be made to the Optionee, the Optionee's
personal representative or such other selling person,
as provided in subsection (b) of this subsection
(vii). Such delivery and payment shall be made at the
principal office of the Company or at such other
place as the parties mutually agree.
(b) Payment of Purchase Price. The Company shall pay the
purchase price to the Optionee at the closing.
(viii) Right to Purchase Upon Certain Other Events. The Company or
its designee shall have the right to purchase all, but not
less than all, of the Shares held by the Optionee at the
Agreement Price and on the Agreement Terms for a period of
ninety (90) days after any of the following events:
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(a) An attempt by a creditor to levy upon or sell any of
the Optionee's Shares;
(b) The filing of a petition by the Optionee under the
U.S. Bankruptcy Code or any insolvency laws;
(c) The filing of a petition against Optionee under any
insolvency or bankruptcy laws by any creditor of the
Optionee if such petition is not dismissed within
thirty (30) days of filing;
(d) The entry of a decree of divorce between the Optionee
and the Optionee's spouse; or,
(e) The termination of Optionee's services as an employee
or consultant with the Company.
The Optionee shall provide the Company written notice of the
occurrence of any such event within 30 days of such event.
(ix) Termination. The provisions of this Section 17 shall terminate
and all rights of each such party hereunder shall cease except
for those which shall have theretofore accrued upon the
occurrence of any of the following events:
(a) Cessation of the Company's business;
(b) Bankruptcy, receivership or dissolution of the
Company;
(c) Ownership of all of the issued and outstanding shares
of the Company by a single shareholder of the
Company;
(d) Written consent or agreement of the shareholders of
the Company holding Fifty Percent (50%) of the then
issued and outstanding shares of the Company
(determined on a fully diluted basis);
(e) Consent or agreement of a majority of the members of
the Board of Directors of the Company; or,
(f) Registration of any class of equity securities of the
Company pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
(x) Amendment. This Section 17 may be modified or amended in whole
or in part by a written instrument signed by shareholders of
the Company holding 50% of the outstanding shares of Common
Stock (determined on a fully diluted basis) or a majority of
the members of the Board of Directors of the Company.
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18. Market Standoff. Unless the Board of Directors otherwise consents, Optionee
agrees hereby not to sell or otherwise transfer any Shares or other securities
of the Company during the 180-day period following the effective date of a
registration statement of the Company filed under the Act; provided, however,
that such restriction shall apply only to the first two registration statements
of the Company to become effective under the Act which includes securities to be
sold on behalf of the Company to the public in an underwritten public offering
under the Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such 180-day
period.
19. Rule 144. Optionee acknowledges and understands that the Shares may be
subject to transfer and sale restrictions imposed pursuant to SEC Rule 144 of
the Rules promulgated under the Securities Act of 1933 ("Act") and the
regulations promulgated thereunder. Optionee shall comply with Rule 144 and with
all policies and procedures established by the Company with regard to Rule 144
matters. Optionee acknowledged that the Company or its attorneys or transfer
agent may require a restrictive legend on the certificate or certificates
representing the Shares pursuant to the restrictions on transfer of the Shares
imposed by Rule 144.
20. No Distribution. Notwithstanding anything in this Agreement to the contrary,
Optionee acknowledges that: (i) the Option, and the Shares upon exercise, is and
are being acquired in a private transaction which is not part of a distribution
of the Option or Shares; (ii) the Optionee intends to hold the Option and Shares
for the account of the Optionee and does not intend to sell the Option or Shares
as a part of a distribution or otherwise; and (iii) neither the Optionee nor the
Company is an underwriter with regard to the Option or the Shares for purposes
of Rule 144.
21. Securities Compliance. Optionee understands that the Option and the Shares
may be offered and sold in reliance on one or more exemptions from the
registration requirements of federal and state securities laws, which exemptions
may include, without limitation, Regulation D promulgated under the Securities
Act, and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Optionee set forth herein in order to determine the applicability of such
exemptions and the suitability of Optionee to acquire the Option and the Shares.
The representations, warranties and agreements contained herein are true and
correct as of the date hereof and may be relied upon by the Company and Optionee
will notify the Company immediately of any adverse change in any such
representations and warranties which may occur prior to the issuance of Shares.
The representations, warranties and agreements of Optionee contained herein
shall survive the execution and delivery of this Agreement and the exercise of
the Option and the issuance of the Shares.
22. Complete Agreement. This Agreement constitutes the entire agreement between
the parties with respect to its subject matter, and supersedes all other prior
or contemporaneous agreements and understandings both oral or written; subject,
however, that in the event of any conflict between this Agreement and the Plan,
the Plan shall govern. This Agreement may only be amended in a writing signed by
the Company and the Optionee.
23. Privileges of Stock Ownership. Optionee shall not have any of the rights of
a shareholder with respect to any Shares until Optionee exercises the Option and
pays the Exercise Price, Shares are issued and delivered to Optionee, and
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Optionee is shown as a shareholder of record on the books and records of the
Company.
24. Further Acts. The parties hereto shall cooperate with each other and execute
such additional documents or instruments and perform such further acts as may be
reasonably necessary to affect the purpose and intent of the Agreement.
25. Effect of Headings. The subject headings of the paragraphs and subparagraphs
of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
26. Notices. Any notice required to be given or delivered to the Company under
the terms of this Agreement shall be in writing and addressed to the Corporate
Secretary of the Company 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 herein or to such other address as such party
may designate in writing from time to time to the Company. All notices shall be
deemed to have been given or delivered upon actual personal delivery; three (3)
days after deposit in the United States mail by certified or registered mail
(return receipt requested); one (1) business day after deposit with any return
receipt express courier (prepaid); or one (1) business day after transmission by
facsimile with a corresponding facsimile transmission confirmation sheet.
27. Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The exhibits attached
hereto and initialed by the parties are made a part hereof and incorporated
herein by this reference.
28. Parties in Interest. Nothing in this Agreement, whether express or implied,
is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third party to this Agreement, nor
shall any provision give any third person any right of subrogation or action
over against any party to this Agreement.
29. Recovery of Litigation Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover as an element of their damages, reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which they may be entitled.
30. Severability; Construction. In the event that any provision in this
Agreement shall be invalid or unenforceable, such provision shall be severable
from, and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Agreement. This Agreement shall be
construed as to its fair meaning and not for or against either party.
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31. Survival of Representations and Obligations. All representations, warranties
and agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion or other writing provided for in it, shall survive the
exercise of the Option and the issuance of the Shares.
32. Specific Performance. Each party's obligations under this Agreement are
unique. If any party should default in its obligations under this Agreement, the
parties each acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting party, in addition to any
other available rights or remedies, may xxx in equity for specific performance
without the necessity of posting a bond or other security, and the parties each
expressly waive the defense that a remedy in damages will be adequate.
33. Gender; Number. Whenever the context of this Agreement requires, the
masculine gender includes the feminine or neuter gender, and the singular number
includes the plural.
34. Governing Law and Venue. This Agreement will be construed and enforced in
accordance with, and the rights of the parties will be governed by, the laws of
the State of California without regard to conflict of laws principles. Venue in
any action arising by reason of this Agreement shall lie exclusively in Orange
County, California.
35. Consultancy, Advisory and Technology Sharing and License Agreements. This
Option is issued pursuant to that certain Consultancy and Advisory Agreement
effective January 23rd, 2007. The terms of the Consultancy and Advisory
Agreement shall control over any conflicting terms in this Option. Any breach
under the Consultancy and Advisory Agreement shall constitute a breach under
this Option and allows the Company to terminate this Option in whole or in part.
IN WITNESS WHEREOF, this Agreement is made effective on the date first set forth
above at Orange County, California.
Company:
XSUNX, INC, a Colorado Corporation
By: ________________________________
Name: Xxx X. Xxxxxxxxx
Title: CEO
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OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE,
THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL,
AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan, represents that Optionee is
familiar with the terms and provisions thereof, and hereby accepts the Option
subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Agreement in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Agreement and fully understands all
provisions of the Plan and this Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board or
of the Committee upon any questions arising under the Plan.
OPTIONEE
------------------------------
Name:
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CONSENT OF SPOUSE
The undersigned spouse of the Optionee to the foregoing Stock Option Agreement
acknowledges on his or her own behalf that: I have read the foregoing Stock
Option Agreement and I know its contents. I hereby consent to and approve of the
provisions of the Stock Option Agreement, and agree that the Shares issued upon
exercise of the Option covered thereby and my interest in them shall be subject
to the provisions of the Stock Option Agreement and that I will take no action
at any time to hinder operation of the Stock Option Agreement as to the Shares
or my interest in the Shares.
---------------------------------
Name:
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EXHIBIT TO OPTION
SUBSCRIPTION FORM AND NOTICE OF EXERCISE
Xsunx, Inc. Date:
Attn: President
00 Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
The undersigned, the holder of the enclosed Option, hereby
irrevocably elects to exercise the purchase rights represented by the Option and
to purchase there under __________ shares of Common Stock of XSUNX, INC. (the
"Company"), and herewith encloses payment of $___________ and/or ___________
shares of the Company's common stock, (the "Purchase Price") in full payment of
the Purchase Price of such shares being purchased.
Exercise of the Option shall not be deemed effective unless and until good and
immediately available funds in the full amount of the Purchase Price have been
confirmed in the account of the Company. The original Option shall be presented
with this Subscription Form and Notice of Exercise.
The Company may, in its discretion, withhold a portion of some or all
of the exercised shares or other amounts for the payment of taxes or other
items. Holder represents that Holder is not subject to any backup withholding
requirements. Holder acknowledges that the shares of stock of the Company issued
upon exercise will not be entitled to any dividend declared upon such stock
prior to the effective date of exercise of the Option.
Holder hereby constitutes this Subscription Form and Notice of Exercise
as an assignment, deposit tender, and transfer in blank of the Option as set
forth therein. Holder hereby irrevocably constitutes and appoints the secretary
of the Company as Holder's attorney in fact to issue shares upon the exercise of
the Option and reflect the same on the books and records of the Company, cancel
the Option, issue a new Option, if applicable, and perform any necessary act on
behalf of Holder, with full power substitution.
Very truly yours,
-------------------------------------
By: __________________________________
Title: _________________________________
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