EXHIBIT 10.6
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
December ___, 2005
Mountain Share Transfer
0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-1147
RE: XSUNX, INC.
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith by and between XsunX,
Inc., a Colorado corporation (the "Company"), and the Buyers set forth on
Schedule I attached thereto (collectively the "Buyers"), and that certain Pledge
and Escrow Agreement (the "Pledge Agreement") dated July 14, 2005, as amended,
among the Company, the Buyers and the Xxxxx Xxxxxxxx, Esq. (the "Escrow Agent").
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, an the Buyers shall purchase from the Company, convertible debentures
(collectively, the "Debentures") in the aggregate principal amount of Five
Million Dollars ($5,000,000), plus accrued interest, which are convertible into
shares of the Company's common stock, no par value per share (the "Common
Stock"), at the Buyers discretion. The Company has also issued to the Buyer
warrants to purchase up to 4,375,000 shares of Common Stock, at the Buyer's
discretion (the "Warrant"). These instructions relate to the following stock or
proposed stock issuances or transfers:
1. Shares of Common Stock to be issued to the Buyers upon conversion of
the Debentures ("Conversion Shares") plus the shares of Common Stock
to be issued to the Buyers upon conversion of accrued interest and
liquidated damages into Common Stock (the "Interest Shares").
2. Up to 4,375,000 shares of Common Stock to be issued to the Buyer
upon exercise of the Warrant (the "Warrant Shares").
3. The transfer of up to 26,798,418 shares of Common Stock (the
"Escrowed Shares") that have been delivered to the Escrow Agent
pursuant to the Pledge Agreement and the Insider Pledge Agreement.
This letter shall serve as our irrevocable authorization and direction to
Mountain Share Transfer (the "Transfer Agent") to do the following:
1. Conversion Shares and Warrant Shares.
a. Instructions Applicable to Transfer Agent. With respect to the
Conversion Shares, Warrant Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time
upon delivery to the Transfer Agent of a properly completed
and duly executed Conversion Notice (the "Conversion Notice")
in the form attached as Exhibit A to the Debentures, or a
properly completed and duly executed Exercise Notice (the
"Exercise Notice") in the form attached as Exhibit A to the
Warrant, delivered to the Transfer Agent by the Escrow Agent
on behalf of the Company. Upon receipt of a Conversion Notice
or an Exercise Notice, the Transfer Agent shall within three
(3) Trading Days thereafter (i) issue and surrender to a
common carrier for overnight delivery to the address as
specified in the Conversion Notice or the Exercise Notice, a
certificate, registered in the name of the Buyer or its
designees, for the number of shares of Common Stock to which
the Buyer shall be entitled as set forth in the Conversion
Notice or Exercise Notice or (ii) provided the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast
Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock
to which the Buyers shall be entitled to the Buyer's or their
designees' balance account with DTC through its Deposit
Withdrawal At Custodian ("DWAC") system provided the Buyer
causes its bank or broker to initiate the DWAC transaction.
For purposes hereof "Trading Day" shall mean any day on which
the Nasdaq Market is open for customary trading.
b. The Company hereby confirms to the Transfer Agent and the
Buyer that certificates representing the Conversion Shares and
the Warrant Shares shall not bear any legend restricting
transfer and should not be subject to any stop-transfer
restrictions and shall otherwise be freely transferable on the
books and records of the Company; provided that counsel to the
Company delivers (i) the Notice of Effectiveness set forth in
Exhibit I attached hereto and (ii) an opinion of counsel in
the form set forth in Exhibit II attached hereto, and that if
the Conversion Shares, Warrant Shares and the Interest Shares
are not registered for sale under the Securities Act of 1933,
as amended, then the certificates for the Conversion Shares,
Warrant Shares and Interest Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
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REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT."
c. In the event that counsel to the Company fails or refuses to
render an opinion as required to issue the Conversion Shares
or the Warrant Shares in accordance with the preceding
paragraph (either with or without restrictive legends, as
applicable), then the Company irrevocably and expressly
authorizes counsel to the Buyer to render such opinion. The
Transfer Agent shall accept and be entitled to rely on such
opinion for the purposes of issuing the Conversion Shares.
d. Instructions Applicable to Escrow Agent. Upon the Escrow
Agent's receipt of a properly completed Conversion Notice or
Exercise Notice and the Aggregate Exercise Price (as defined
in the Warrant), the Escrow Agent shall, within one (1)
Trading Day thereafter, send to the Transfer Agent the
Conversion Notice or Exercise Notice, which shall constitute
an irrevocable instruction to the Transfer Agent to process
such Conversion Notice or Exercise Notice in accordance with
the terms of these instructions.
2. Escrowed Shares.
a. With respect to the Escrowed Shares, upon an event of default
as set forth in the Pledge Agreement or the Insider Pledge
Agreement, the Escrow Agent shall send written notice to the
Transfer Agent ("Escrow Notice") to transfer such number of
Escrow Shares as set forth in the Escrow Notice to the Buyers.
Upon receipt of an Escrow Notice, the Transfer Agent shall
promptly transfer such number of Escrow Shares to the Buyers
as shall be set forth in the Escrow Notice delivered to the
Transfer Agent by the Escrow Agent. Further, the Transfer
Agent shall promptly transfer such shares from the Buyers to
any subsequent transferee promptly upon receipt of written
notice from the Buyers or their counsel. If the Escrow Shares
are not registered for sale under the Securities Act of 1933,
as amended, then the certificates for the Escrow Shares shall
bear the legend set forth in Section 1b.
b. In the event that counsel to the Company fails or refuses to
render an opinion as may be required by the Transfer Agent to
affect a transfer of the Escrow Shares (either with or without
restrictive legends, as applicable), then the Company
irrevocably and expressly authorizes counsel to the Buyers to
render such opinion. The Transfer Agent shall accept and be
entitles to rely on such opinion for the purpose of
transferring the Escrow Shares.
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3. All Shares.
a. The Transfer Agent shall reserve for issuance to the Buyers a
minimum of 50,000,000 Conversion Shares and 4,375,000 Warrant
Shares. All such shares shall remain in reserve with the
Transfer Agent until the Buyers provides the Transfer Agent
instructions that the shares or any part of them shall be
taken out of reserve and shall no longer be subject to the
terms of these instructions.
b. The Transfer Agent shall rely exclusively on the Conversion
Notice, the Escrow Notice, or the Exercise Notice and shall
have no liability for relying on such instructions. Any
Conversion Notice, Escrow Notice, or Exercise Notice delivered
hereunder shall constitute an irrevocable instruction to the
Transfer Agent to process such notice or notices in accordance
with the terms thereof. Such notice or notices may be
transmitted to the Transfer Agent by facsimile or any
commercially reasonable method.
c. The Company hereby confirms to the Transfer Agent and the
Buyers that no instructions other than as contemplated herein
will be given to Transfer Agent by the Company with respect to
the matters referenced herein. The Company hereby authorizes
the Transfer Agent, and the Transfer Agent shall be obligated,
to disregard any contrary instructions received by or on
behalf of the Company.
Certain Notice Regarding the Escrow Agent. The Company and the Transfer
Agent hereby acknowledge that the Escrow Agent is general counsel to the Buyers,
a partner of the general partner of the Buyers and counsel to the Buyers in
connection with the transactions contemplated and referred herein. The Company
and the Transfer Agent agree that in the event of any dispute arising in
connection with this Agreement or otherwise in connection with any transaction
or agreement contemplated and referred herein, the Escrow Agent shall be
permitted to continue to represent the Buyers and neither the Company nor the
Transfer Agent will seek to disqualify such counsel.
The Company hereby agrees that it shall not replace the Transfer Agent as
the Company's transfer agent unless the subsequent transfer agent agrees to be
bound by these instructions.
Any attempt by Transfer Agent to resign as the Company's transfer agent
hereunder shall not be effective until such time as the Company provides to the
Transfer Agent written notice that a suitable replacement has agreed to serve as
transfer agent and to be bound by the terms and conditions of these Irrevocable
Transfer Agent Instructions.
The Company and the Transfer Agent hereby acknowledge and confirm that
complying with the terms of this Agreement does not and shall not prohibit the
Transfer Agent from satisfying any and all fiduciary responsibilities and duties
it may owe to the Company.
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The Company and the Transfer Agent acknowledge that the Buyers is relying
on the representations and covenants made by the Company and the Transfer Agent
hereunder and are a material inducement to the Buyers purchasing convertible
debentures under the Securities Purchase Agreement. The Company and the Transfer
Agent further acknowledge that without such representations and covenants of the
Company and the Transfer Agent made hereunder, the Buyers would not purchase the
Debentures.
Each party hereto specifically acknowledges and agrees that in the event
of a breach or threatened breach by a party hereto of any provision hereof, the
Buyers will be irreparably damaged and that damages at law would be an
inadequate remedy if these Irrevocable Transfer Agent Instructions were not
specifically enforced. Therefore, in the event of a breach or threatened breach
by a party hereto, including, without limitation, the attempted termination of
the agency relationship created by this instrument, the Buyers shall be
entitled, in addition to all other rights or remedies, to an injunction
restraining such breach, without being required to show any actual damage or to
post any bond or other security, and/or to a decree for specific performance of
the provisions of these Irrevocable Transfer Agent Instructions.
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IN WITNESS WHEREOF, the parties have caused this letter agreement
regarding Irrevocable Transfer Agent Instructions to be duly executed and
delivered as of the date first written above.
COMPANY:
XSUNX, INC.
By:______________________________
Name: Xxx Xxxxxxxxx
Title: Chief Executive Officer
_________________________________
Xxxxx Xxxxxxxx, Esq.
MOUNTAIN SHARE TRANSFER
By:_____________________________
Name:___________________________
Title:__________________________
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SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile
Name Signature Number of Buyers
---------------------------- ----------------------------- ------------------------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxx: Xxxxxxx Xxxxxxx Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By:__________________________
Name: Xxxx Xxxxxx
Its: Portfolio Manager
SCHEDULE I-1
EXHIBIT I
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
_________, 2005
--------
Attention:
RE: XSUNX, INC.
Ladies and Gentlemen:
We are counsel to XsunX, Inc., (the "Company"), and have represented the
Company in connection with that certain Securities Purchase Agreement, dated as
of December __, 2005 (the "Securities Purchase Agreement"), entered into by and
among the Company and the Buyers set forth on Schedule I attached thereto
(collectively the "Buyers") pursuant to which the Company has agreed to sell to
the Buyers up to $5,000,000 of secured convertible debentures, which shall be
convertible into shares (the "Conversion Shares") of the Company's common stock,
no par value per share (the "Common Stock"), in accordance with the terms of the
Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement,
the Company also has entered into a Registration Rights Agreement, dated as of
December ___, 2005, with the Buyers (the "Investor Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Conversion Shares under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, on _______, 2005, the
Company filed a Registration Statement (File No. ___-_________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the sale of the Conversion Shares.
In connection with the foregoing, we advise the Transfer Agent that a
member of the SEC's staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the 1933 Act at
____ P.M. on __________, 2005 and we have no knowledge, after telephonic inquiry
of a member of the SEC's staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT I-1
The Buyers has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Conversion Shares.
Very truly yours,
By:______________________________
EXHIBIT I-2
EXHIBIT II
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF OPINION
________________ 2005
VIA FACSIMILE AND REGULAR MAIL
--------
Attention:
RE: XSUNX, INC.
Ladies and Gentlemen:
We have acted as special counsel to XsunX, Inc. (the "Company"), in
connection with the registration of ___________shares (the "Shares") of its
common stock with the Securities and Exchange Commission (the "SEC"). We have
not acted as your counsel. This opinion is given at the request and with the
consent of the Company.
In rendering this opinion we have relied on the accuracy of the Company's
Registration Statement on Form SB-2, as amended (the "Registration Statement"),
filed by the Company with the SEC on _________ ___, 2005. The Company filed the
Registration Statement on behalf of certain selling stockholders (the "Selling
Stockholders"). This opinion relates solely to the Selling Shareholders listed
on Exhibit "A" hereto and number of Shares set forth opposite such Selling
Stockholders' names. The SEC declared the Registration Statement effective on
__________ ___, 2005.
We understand that the Selling Stockholders acquired the Shares in a
private offering exempt from registration under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Shareholders
is contained under the heading "Selling Stockholders" in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders. The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws of
the United States of America. We do not express any opinion concerning any law
of any state or other jurisdiction.
EXHIBIT II
In rendering this opinion we have relied upon the accuracy of the
foregoing statements.
Based on the foregoing, it is our opinion that the Shares have been
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and that ________ may remove the restrictive legends
contained on the Shares. This opinion relates solely to the number of Shares set
forth opposite the Selling Stockholders listed on Exhibit "A" hereto.
This opinion is furnished to Transfer Agent specifically in connection
with the sale or transfer of the Shares, and solely for your information and
benefit. This letter may not be relied upon by Transfer Agent in any other
connection, and it may not be relied upon by any other person or entity for any
purpose without our prior written consent. This opinion may not be assigned,
quoted or used without our prior written consent. The opinions set forth herein
are rendered as of the date hereof and we will not supplement this opinion with
respect to changes in the law or factual matters subsequent to the date hereof.
Very truly yours,
By:______________________________
EXHIBIT II-2
EXHIBIT A
(LIST OF SELLING STOCKHOLDERS)
NAME: NO. OF SHARES:
-------------------------------- ---------------------------------
EXHIBIT A
