EXHIBIT 10.5
LICENSE AGREEMENT WARRANT TO PURCHASE
COMMON STOCK OF XSUNX, INC.
EXHIBIT 10.5
Warrant Grant # 01-2004 Warrant Grant # 02-2004
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION THEREFROM
IS AVAILABLE.
LICENSE AGREEMENT WARRANT TO PURCHASE
COMMON STOCK OF XSUNX, INC.
This License Agreement Warrant ("Warrant") is issued as consideration
for the grant of License pursuant to that certain Technology Sharing and License
Agreement effective September 17, 2004 as set forth at Paragraph 16 hereof .
This certifies that MVSystems, Inc. (the "Holder") for value received,
is entitled to purchase from Xsunx, Inc. (the "Company") Five Million
(5,000,000) shares of the Company's Common Stock (the "Common Stock") for a per
share exercise price equal to $ .15 (the "Per Share Exercise Price"). This right
may be exercised at any time from the date hereof up to and including 5:00 p.m.
(Denver City time) on September 17, 2009 (the "Expiration Date"), upon surrender
to the Company at its principal office (or at such other location as the Company
may advise the Holder in writing) of this Warrant, properly endorsed, with the
Notice of Exercise and Subscription Form attached hereto duly filled in and
signed, if applicable, and upon payment in cash or other form of good and
immediately available funds reasonably satisfactory to the Company of the
aggregate Per Share Exercise Price for the full number of shares for which this
Warrant is being exercised determined in accordance with the provisions hereof.
1. ISSUANCE OF CERTIFICATES.
Certificates for the shares of Common Stock acquired upon exercise of
this Warrant, together with any other securities or property to which the Holder
is entitled upon such exercise, will be delivered to the Holder by the Company
at the Company's expense within a reasonable time after this Warrant has been so
exercised and payment of the full Per Share Exercise Price has been delivered to
the Company as set forth above and such funds have been confirmed to the account
of the Company. The Company will deliver authorization instructions to its share
transfer agent for the issuance of the above referenced Common Stock within
three (3) business days of satisfaction of the above requirements.
Each stock certificate so delivered will be in such denominations of
Common Stock as may be requested by the Holder and will be registered in the
name of the Holder. In case of a purchase of less than all the shares that may
be purchased under this Warrant, the Company will cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the balance of
the shares purchasable under this Warrant to the Holder within a reasonable time
after surrender of this Warrant.
2. SHARES FULLY-PAID, NONASSESSABLE, ETC.
All shares of Common Stock issued upon exercise of this Warrant will,
upon issuance, be duly authorized, validly issued, fully-paid and nonassessable
and free of all taxes, liens and charges with respect to the issue thereof. The
Company will use reasonable commercial efforts to reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of this Warrant, such number of its shares of Common
Stock as from time to time are sufficient to effect the full exercise of this
Warrant. If at any time the number of authorized but unissued shares of Common
Stock are not sufficient to effect the exercise of this Warrant, the Company
will use reasonable commercial efforts to take such corporate action as may, in
the opinion of its counsel, be reasonably necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as are sufficient
for such purpose.
3. 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 this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant 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 Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)
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A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under
this Warrant or, if only a portion of this Warrant is being exercised, the
portion of this Warrant 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 Common Stock will be the average of the closing bid prices of the Company's
shares of Common Stock as quoted on the New York Stock Exchange (the "NYSE") (or
on such other United States stock exchange or public trading market on which the
shares of the Company trade if, at the time of the election, they are not
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trading on the NYSE), 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, or (ii) in the absence of an established market
or public marketability for the Stock due to trading restrictions, the fair
market value shall be determined in good faith by the Administrator and such
determination shall be conclusive and binding on all persons.
4. ADJUSTMENTS.
4.1 Adjustment for Stock Splits and Combinations. If the Company
at any time or from time to time during the term of this Warrant effects a sub-
division of the outstanding Common Stock, the Per Share Exercise Price in effect
immediately before that subdivision will be proportionately decreased and the
number of remaining shares that can be purchased under this warrant shall be
proportionatly increased to effect the same subdivision of warrants as with the
outstanding Common Stock. Conversely, if the Company at any time or from time to
time during the term of this Warrant combines the outstanding shares of Common
Stock into a smaller number of shares, the Per Share Exercise Price in effect
immediately before the combination will be proportionately increased and the
number of remaining shares that can be purchased under this warrant shall be
proportionatly decreased to effect the same subdivision of warrants as with the
outstanding Common Stock. Any adjustment under this Section 4.1 will become
effective at the close of business on the date the subdivision or combination
becomes effective.
4.2 Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time during the term of this Warrant the Common Stock
issuable upon the exercise of this Warrant is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a recapitalization,
subdivision, combination, reclassification or exchange provided for elsewhere in
this Section 4), the Holder will have the right thereafter to exercise this
Warrant for the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change into
which the shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such recapitalization, reclassification or change could
have been converted, all subject to further adjustment as provided herein or
with respect to such other securities or property by the terms thereof.
4.3 Reorganizations. If at any time or from time to time during the
term of this Warrant there is a capital reorganization of the Common Stock
(other than a recapitalization, subdivision, combination, reclassification or
exchange provided for elsewhere in this Section 4), as a part of such capital
reorganization, provision will be made so that the Holder will thereafter be
entitled to receive upon exercise of this Warrant the number of shares of stock
or other securities or property of the Company to which a holder of the number
of shares of Common Stock deliverable upon exercise of this Warrant would have
been entitled on such capitalization reorganization, subject to adjustment in
respect of such stock or securities by the terms thereof.
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5. OBLIGATION TO SELL.
Notwithstanding anything herein to the contrary, if at any time
following Holder's acquisition of Shares hereunder, stockholders of the Company
owning 51% or more of the shares of the Company (on a fully diluted basis) (the
"Control Sellers") enter into an agreement (including any agreement in
principal) to transfer all of their shares to any person or group of persons who
are not affiliated with the Control Sellers, such Control Sellers may require
each stockholder who is not a Control Seller (a "Non-Control Seller") to sell
all of their shares to such person or group of persons at a price and on terms
and conditions the same as those on which such Control Sellers have agreed to
sell their shares, other than terms and conditions relating to the performance
or non-performance of services. For the purposes of the preceding sentence, an
affiliate of a Control Seller is a person who controls, which is controlled by,
or which is under common control with, the Control Seller.
6. STOCKHOLDERS AGREEMENT
As a condition to the transfer of Stock pursuant to this Warrant, the
Company, in its sole and absolute discretion, may require the Holder to execute
and become a party to any agreement by and among the Company and a material
number of its stockholders which exists on or after the effective date of this
Warrant (the "Stockholders Agreement"). If the Holder becomes a party to a
Stockholders Agreement, in addition to the terms of this Warrant, the terms and
conditions of Stockholders Agreement shall govern Holders's rights in and to the
Stock; and if there is any conflict between the provisions of the
Stockholders Agreement and this Warrant, the provisions of the Stockholders
Agreement shall be controlling. Notwithstanding anything to the contrary in this
Section 6, if the Stockholders Agreement contains any provisions which would
violate Colorado corporate law if applied to the participant, the terms of this
Warrant shall govern the participant's rights with respect to such provisions.
7. TAXES.
The Company shall not become obligated for or pay any taxes imposed
upon the Holders by reason of the issuance of this Warrant or the exercise
hereof or otherwise in connection with the shares of Common Stock to be issued
upon exercise of this Warrant. Notwithstanding the foregoing, the Company may
withhold from any shares of Common Stock to be issued upon exercise of this
Warrant such amounts as may be reasonably required to satisfy any backup
withholding or other withholding obligation of the Company with regard to the
issuance of this Warrant or the exercise hereof or otherwise in connection with
the shares of Common Stock to be issued upon exercise of this Warrant.
8. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Nothing contained in this Warrant will be construed as conferring upon
the Holder the right to vote or to consent or to receive notice as a shareholder
of the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest will be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant has been exercised.
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9. TRANSFER OR ASSIGNMENT OF Warrant
Except as provided herein, the Holder may not assign, sell or transfer
the Warrant, in whole or in part. The Company may however, in its sole
discretion permit the transfer or assignment of this Warrant and all rights
hereunder subject to any other written agreement between the Holder and the
Company and compliance with applicable Federal and state securities laws and the
restrictions.
10. MODIFICATION AND WAIVER.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
11. NOTICES.
Any notice required by the provisions of this Warrant will be in
writing and will be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All notices will be addressed to the Holder at
the address of the Holder appearing on the books of the Company.
Notice shall be addressed to the Company at:
XsunX, Inc
Att: President
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to (which copy shall not
constitute notice):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Attorney
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12. LOST WARRANTS.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant, and upon receipt of an
indemnity, surety, undertaking or security reasonably satisfactory to the
Company (and in the case of any such mutilation upon surrender and cancellation
of the original mutilated Warrant), the Company shall, in accordance with
applicable law, make and deliver a new Warrant, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant. The Company may, as a condition
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precedent to making or delivering a new Warrant, reasonably require that the
Holder make and deliver to the Company an affidavit or declaration made under
penalty of perjury, as to the loss, theft, destruction, or mutilation of this
Warrant.
13. FRACTIONAL SHARES.
No fractional shares of Common Stock will be issued upon exercise of
this Warrant. If the conversion would result in the issuance of any fractional
share, the Company may, in lieu of issuing any fractional share, pay cash equal
to the product of such fraction multiplied by the closing bid price of the
Company's Common Stock on the date of conversion.
14. NO REGISTRATION RIGHTS
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The Company
shall not be obligated to take any affirmative action in order to cause the sale
of Shares under this Warrant to comply with any law.
15. RESTRICTIONS ON TRANSFER
15.1 Securities Law Restrictions. Regardless of whether the offering
and sale of Shares under this Warrant have been registered under the Securities
Act or have been registered or qualified under the securities laws of any state,
the Company, at its discretion, may impose restrictions upon the sale, pledge or
other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the
judgment of the Company, such restrictions are necessary or desirable in order
to achieve compliance with the Securities Act, the securities laws of any state
or any other law.
15.2 Market Stand-Off. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Act, including the Company's initial public offering
(a "Public Offering"), the Holder shall not transfer for value any shares of
Stock without the prior written consent of the Company or its underwriters, for
such period of time from and after the effective date of such registration
statement as may be requested by the Company or such underwriters (the "Market
Stand-Off"). The Market Stand-off shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested
by the Company or such underwriters. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any Shares subject to the Market Stand-Off, or into which such Shares thereby
become convertible, shall immediately be subject to the Market Stand-Off. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the Shares acquired under this Warrant until the
end of the applicable stand-off period.
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15.3 Investment Intent at Grant. The Holder represents and agrees that
the Shares to be acquired upon exercising this Warrant will be acquired for
investment, and not with a view to the sale or distribution thereof.
15.4 Investment Intent at Exercise. In the event that the sale of
Shares under this Warrant is not registered under the Securities Act but an
exemption is available which requires an investment representation or other
representation, the Holder shall represent and agree at the time of exercise
that the Shares being acquired upon exercising this option are being acquired
for investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or appropriate by
the Company and its counsel.
15.5 Rule 144. Holder 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. Holder shall comply with Rule 144 and with
all policies and procedures established by the Company with regard to Rule 144
matters. Holder acknowledged that in the event that the sale of Shares under
this Warrant is not registered under the Securities Act the Company or its
attorneys or transfer agent will require a restrictive legend on the certificate
or certificates representing restrictions on transfer of the Shares imposed by
Rule 144.
15.6 Legends. All certificates evidencing Shares purchased under this
Warrant in an unregistered transaction shall bear the following legend (and such
other restrictive legends as are required or deemed advisable under the
provisions of any applicable law):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED."
15.7 Removal of Legends. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Warrant no longer is required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but without such legend.
15.8 Administration. Any determination by the Company and its counsel
in connection with any of the matters set forth in this Section 15 shall be
conclusive and binding on the Holder and all other persons.
16. Technology Sharing and License Agreement
This Warrant is issued pursuant to that certain Technology Sharing and
License Agreement effective September 17, 2004. The terms of the Technology
Sharing and License Agreement shall control over any conflicting terms in this
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Warrant. Any breach under the Technology Sharing and License Agreement shall
constitue a breach under this Warrant and allows the Company to terminate this
Warrant in whole or in part.
17. Governing Law; Venue.
This Warrant will be construed and enforced in accordance with, and the
rights of the parties will be governed by, the laws of the State of Colorado
without regard to conflict of laws principles. Venue in any action arising by
reason of this Warrant shall lie exclusively in Orange County, California.
[See Attached Signature Page]
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This Warrant is made effective as of this 17th day of September, 2004.
COMPANY: Xsunx, Inc., a Colorado corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
HOLDER: MVSystems, Inc., a Colorado Corpora
-tion
By: _______________________________
Name:
Title:
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[Address]
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[Address]
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[Address]
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[Tax Identification]
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EXHIBIT TO WARRANT
SUBSCRIPTION FORM AND NOTICE OF EXERCISE
Xsunx, Inc. Date:
Attn: President
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Ladies and Gentlemen:
The undersigned, the holder of the enclosed Warrant, hereby
irrevocably elects to exercise the purchase rights represented by the Warrant
and to purchase thereunder __________ 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 Warrant 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 Warrant 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 Warrant.
Holder hereby constitutes this Subscription Form and Notice of Exercise
as an assignment, deposit tender, and transfer in blank of the Warrant 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 Warrant and reflect the same on the books and records of the Company, cancel
the Warrant, issue a new Warrant, if applicable, and perform any necessary act
on behalf of Holder, with full power substitution.
Very truly yours,
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By: __________________________________
Title: _________________________________
