Separation Agreement and Mutual Release
Separation
Agreement and Mutual Release
This
Separation Agreement and Mutual Release ("Agreement") is made this 30 day
of
May, 2008 (“Effective Date”), by and between XsunX, Inc., a Colorado corporation
(“XsX”), on the one hand, and MVSystems, Inc., a Colorado corporation (“MVS”)
and Xx. Xxxx Xxxxx (“Madan”), on the other hand. XsX, MVS and Madan are
collectively referred to herein as the “Parties.” Each of XsX, MVS and Madan is
individually referred to herein as a “Party.”
Recitals
WHEREAS,
prior to the date hereof the Parties entered into certain written agreements
and
understandings relating to the licensing and development of certain technology,
including without limitation a “Phase 2” development proposal dated June 1,
2004, a Technology Sharing and License Agreement dated September 17, 2004,
a
Consulting and Advisory Agreement dated September 17, 2004, a “Phase 3”
development proposal dated February 22, 2005, a “Phase 4 Four Terminal
Development” agreement dated December 22, 2005, as amended by an Addendum dated
December 22, 2005, a “Phase 4 Base Line Production” agreement dated December 2,
2005, and an Expanded Use License Agreement dated October 12, 2005, and any
attachments, amendments or revisions thereto (together, the “Contracts”);
and
WHEREAS,
in connection with certain of the Contracts XsX granted to MVS and Madan
certain
warrants to purchase common stock of XsX, pursuant to the terms of a Technology
Sharing Warrant, and License Agreement Warrant, a Consultancy and Advisory
Warrant and an Expanded Use License Stock Warrant (together, the “Warrant
Agreements”) in exchange for MVS’s and Madan’s performance under the Contracts;
and
WHEREAS,
the Parties have determined that it is mutually beneficial to terminate their
business relationship, together with the joint development projects undertaken
pursuant to the Contracts and Warrant Agreements, and to mutually release
each
other, and the Parties further wish to have no obligations whatsoever between
or
among them arising from or relating in any manner to the Contracts or Warrant
Agreements upon execution of this Agreement;
NOW
THEREFORE, the parties enter into this Agreement on the terms set forth
below.
Agreement
In
consideration of the foregoing recitals, the covenants and provisions contained
herein, and other good and valuable consideration, the receipt and adequacy
of
which are acknowledged by the Parties, the Parties agree as
follows:
1. Terms.
1.1 Non-exclusive
License and Cross-License Agreement.
Contemporaneously herewith, and in consideration of the mutual obligations
set
forth herein, XsX, MVS and Madan agree to execute, and have executed, the
Non-Exclusive License and Cross-License Agreement attached hereto as Ex.
A
(“License”).
1.2 Sublease.
Contemporaneously
herewith, and in consideration of the mutual obligations set forth herein,
XsX
and MVS agree to execute, and have executed, the Sublease Agreement attached
hereto as Ex. B (“Sublease”).
1.3 Sale
of x4-bpl machine to third party or Reimbursement Option by mvs or
madan.
1.3.1 Machine
Sale Deadline. For
purposes of this Section 1.3, “Machine Sale Deadline” means May 1,
2009.
1.3.2 Sale
of Machine to third party/Sale Agreement.
Subject
to the terms set forth in this Agreement and the Sublease, including this
Section 1.3, from the date hereof through the Machine Sale Deadline, MVS
or
Madan shall have the right to sell to any third party the X4-BPL machine
(“Machine”) currently located in the Suite J facility at 000 Xxxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx, 00000 (“Facility”) upon such terms as MVS or Madan shall
determine so long as MVS and Madan use commercially reasonable efforts to
sell
the Machine. Such sale shall be subject to a written sales agreement (“Sale
Agreement”) approved in advance by XsX, which approval will not be unreasonably
withheld; provided, however, that the foregoing approval requirement is limited
to the terms of the Sale Agreement concerning: (a) net sale proceeds payable
to
XsX, including amount and disbursement schedule, if and only to the extent
the
net sale proceeds distributable to XsX pursuant to Section 1.3.3 are less
than
$1,412,000.00; and (b) any obligation or liability of XsunX, including without
limitation any representation or warranty relating to the Machine. To the
extent
that XsX wishes to withhold its approval, XsX must provide its written
objection, if any, to the Sale Agreement to MVS within five (5) business
days of
receipt of the Sale Agreement or XsX shall be deemed to have no objection
to the
Sale Agreement and approved of same.
In
the
event of a sale of the Machine by MVS or Madan to a third party, MVS shall
be
responsible to collect and remit to the appropriate government authority(ies)
any sales tax or import duty. Such sales tax or import duty shall be in addition
to the purchase price and payable by the third party purchaser upon closing
of
the Machine sale.
1.3.3 Distribution
of proceeds from sale of machine to third party.
In
the
event of a sale of the Machine by MVS or Madan to a third party as set forth
in
Section 1.3.2, the proceeds of such sale shall be distributed alternatively
as
follows: (a) if the sale proceeds are greater than or equal to $1,765,000.00,
exclusive of sales tax, import duties and packaging and shipping costs, such
proceeds will be allocated and disbursed 50% to XsX and 50% to MVS from such
amount as may be left after payment, in the following order and to the extent
sale proceeds remain available, of $1,412,000 to XsX, $353,000 to MVS, MVS’s
Costs of Sale (defined hereafter), and one-half (1/2) of XsX’s rental payments
made pursuant to the Master Lease during the term of the Sublease (“XsX Rental
Payments”); (b) if the sale proceeds are less than $1,765,000.00, exclusive of
sales tax, import duties and packaging and shipping costs, such proceeds
will be
allocated and disbursed 80% to XsX and 20% to MVS from such amount as may
be
left after payment of MVS’s Costs of Sale.
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“MVS’s
Costs of Sale” for purposes of this Section 1.3.3 shall mean expenses incurred
by MVS to effectuate a sale of the Machine to a third party hereunder and
consisting of: (i) payments for Utilities and Insurance made by or due from
MVS
as defined in the Sublease; (ii) marketing, maintenance and closing costs
for
such sale not to exceed the sum of $20,000.00.
1.3.4 Machine
Reimbursement Option of MVS and Madan. From
the
date hereof through the Machine Sale Deadline, MVS or Madan shall have the
option, but not the obligation, to reimburse XsX for the payments XsX has
previously made to MVS for the Machine ($1,412,000.00) plus one-half (1/2)
of
XsX’s Rental Payments (“Reimbursement Option”); provided, however, that if
within six (6) months following written notice to XsX of the exercise of
the
Reimbursement Option, MVS or Madan enters into an agreement for sale of the
Machine to a third party, then the proceeds of such sale shall be distributed
in
accordance with Section 1.3.3 less the sum of $1,412,000 already paid by
MVS or
Madan to XsX upon exercise of the Reimbursement Option. In the event that
MVS or
Madan exercises such Reimbursement Option, XsX shall have no warranty or
other
obligation whatsoever with respect to sale or delivery of the Machine and
except
as set forth in this Section 1.3.4 MVS shall own the Machine free and clear
of
any claim or right of any person including XsX and including any right of
such
person to sell or purchase the Machine.
1.3.5 Notice
of Machine Sale or Exercise of Reimbursement Option. On
or
before the Machine Sale Deadline, MVS and Madan shall either: (a) notify
XsX of
the sale, if any, of the Machine to a third party pursuant to Section 1.3.2,
by
providing to XsX a copy of the Sale Agreement; or (b) notify XsX in writing
of
any exercise, if any, by MVS or Madan of the Reimbursement Option set forth
in
Section 1.3.4.
1.3.6 Sale/Option
exercise closing date and Machine delivery. In
the
event that the Machine is sold by MVS or Madan to a third party pursuant
to
Sections 1.3.2, the closing of such sale, including payment in full by the
purchaser, shall be completed on or before May 31, 2009 (“Closing Date”). The
Machine shall be delivered to the purchaser, at purchaser’s expense, at a
location other than the Facility, on or before the Closing Date.
In
the
event that MVS or Madan exercise the Machine Reimbursement Option pursuant
to
Sections 1.3.4, the closing of such option exercise, including payment in
full
by MVS or Madan, shall be completed on or before May 31, 2009 (“Closing Date”).
The Machine shall be delivered to MVS or Madan, at MVS or Madan’s expense, at a
location other than the Facility on or before the Closing Date.
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1.3.7 Property
Taxes and Delivery of Operational Documents.
XsX
shall be responsible to pay any applicable property, sales or other tax that
may
apply or may become due with respect to the Machine. In the event that the
Machine is not sold to a third party by MVS or Madan by the Machine Sale
Deadline pursuant to Section 1.3.2, and MVS or Madan chose not to exercise
the
Reimbursement Option set forth in Section 1.3.4 by the Machine Sale Deadline,
then as of the Machine Sale Deadline: (a) XsX shall own the Machine free
and
clear of any claim or right of any person including MVS or Madan and including
any right of such person to sell or purchase the Machine; (b) MVS and Madan
shall deliver to XsX all such documents reasonably necessary to operate the
Machine, including hardware and software documentation, manuals and passwords;
(c) the Machine will be delivered to XsX at the Subleased Premises (as that
term
is defined in the Sublease) in the substantially same condition as it is
as of
the Effective Date, with no further warranties or obligations owed by MVS
or
Madan as to the Machine; and (d) XsX shall pay all applicable property, sales
tax or other tax or duty that may apply or may become due.
1.4 Warrant
agreement termination
1.4.1 Warrants
Ownership. MVS
and
Madan together represent that as of the date hereof, MVS and Madan together
own
and control, pursuant to the Warrant Agreements, unexercised warrants to
purchase 12,650,000 shares of XsX common stock (the “Retained Warrants”). MVS
and Madan together represent that warrants to purchase an additional 1,350,000
shares of common stock, pursuant to the Warrant Agreements, have been assigned
by MVS or Madan as of the date hereof to certain third parties (“Assigned
Warrants”), with the prior written consent of XsX, subject to the terms of the
Contracts, the Warrant Agreements and the assignment agreements. MVS and
Madan
represent and warrant that the Retained Warrants have not been assigned,
transferred, pledged, hypothecated or otherwise conveyed to any third party.
1.4.2 Warrant
Agreements Termination. The
Warrant Agreements shall be, and hereby are, terminated, together with the
warrants issued thereunder, notwithstanding any term therein relating to
vesting, notice, termination with or without cause or any other provision,
with
no surviving duties or obligations thereunder. MVS and Madan agree that the
Retained Warrants are hereby cancelled. MVS and Madan take no position as
to the
effect of the foregoing Warrant Agreements termination on the Assigned Warrants,
and covenant and agree not to assert any such position hereafter.
1.5 Termination
of the contracts and Discharge of Duties
1.5.1 Termination
of the Contracts. Each
of
the Contracts shall be, and hereby is, terminated, notwithstanding any term
therein relating to notice, termination with or without cause or any other
provision, with no surviving duties or obligations thereunder surviving this
termination. Such termination shall have no effect upon the duties and
obligations of the Parties arising under this Agreement, the Cross-License
or
the Sublease.
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1.5.2 Discharge
of XsX.
The
Parties agree that from the date hereof, XsX shall have no duty to perform
or
other obligation of any kind to MVS or Madan, express or implied, arising
under
the Contracts or Warrant Agreements and all such duties and obligations shall
be
deemed fully discharged. Such discharge is exclusive of duties and obligations
expressly set forth in this Agreement, the License and Sublease.
1.5.3 Discharge
of MVS and Madan.
The
Parties agree that from the date hereof, MVS and Madan shall have no duty
to
perform or other obligation of any kind to XsX, express or implied, arising
under the Contracts or Warrant Agreements and all such duties and obligations
shall be deemed fully discharged. Such discharge is exclusive of duties and
obligations expressly set forth in this Agreement, the License and
Sublease.
1.6 X4-LCT
Chamber.
Upon
execution of this Agreement, MVS and Madan shall deliver, within three (3)
weeks
to XsX, at the Retained Premises (as that term is defined in the Sublease),
the
X4-LCT chamber currently located at the Facility together with any operating
and
component manuals available for and specifically relating to the X4-LCT chamber.
Upon delivery MVS and Madan shall have no further warranties or obligations
as
to, nor ownership or other interest in, the X4-LCT chamber.
2. XsX’s
Release.
2.1 XsX’s
Representations and Warranties.
XsX
represents and warrants that it has full authority to enter into this Agreement,
and it has not assigned or transferred in any way any claims against MVS
or
Madan or any XsX Releasee (as defined in Section 2.2).
2.2 General
Release.
With the
exception of any claims arising under this Agreement, the License and the
Sublease, XsX hereby fully releases, discharges, and acquits MVS, Madan and
their subsidiaries, parent corporations, affiliates, and their respective
past
and present officers, directors, shareholders, employees, contractors, agents,
predecessors, successors, assigns, guarantors, indemnitors, sureties, insurers,
subrogors, accountants, auditors and attorneys (each, a “XsX Releasee”), from
any claims, causes of action, or liabilities which XsX now has, may have,
may
have had, or claims to have had, whether directly or indirectly, whether
accrued
in the past, present, or future, whether known or unknown, whether for damages
or equitable relief of any sort including, without limitation, economic damages,
lost profits, exemplary damages, treble damages, consequential damages, and
attorneys' fees, in any way arising prior to the date hereof and related
or
unrelated to the course of dealing among the Parties and the relationships,
facts, circumstances, events, and agreements which gave rise to or which
are
related to the Contracts or the Warrant Agreements. The Parties intend for
this
to be a general release by XsX, which said release shall survive any termination
of this Agreement, the License and/or Sublease.
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3. Mvs
and Madan Release.
3.1 Mvs
and madan Representations and Warranties.
MVS
and
Madan represent and warrant that each has full authority to enter into this
Agreement, and that neither has assigned or transferred in any way any claims
against XsX or any MVS Releasee (as defined in Section 3.2).
3.2 General
Release.
With the
exception of any claims arising under this Agreement, the License and the
Sublease, each of MVS and Madan hereby fully releases, discharges, and acquits
XsX and its subsidiaries, parent corporations, affiliates, and their respective
past and present officers, directors, shareholders, employees, contractors,
agents, predecessors, successors, assigns, guarantors, indemnitors, sureties,
insurers, subrogors, accountants, auditors and attorneys (each, an “MVS
Releasee”), from any claims, causes of action, or liabilities which MVS or Madan
now has, may have, may have had, or claims to have had, whether directly
or
indirectly, whether accrued in the past, present, or future, whether known
or
unknown, whether for damages or equitable relief of any sort including, without
limitation, economic damages, lost profits, exemplary damages, treble damages,
consequential damages, and attorneys' fees, in any way arising prior to the
date
hereof and related or unrelated to the course of dealing among the Parties
and
the relationships, facts, circumstances, events, and agreements which gave
rise
to or which are related to the Contracts or the Warrant Agreements. The Parties
intend for this to be a general release by MVS and Madan, which said release
shall survive any termination of this Agreement, the License and/or Sublease.
4. Integration.
This
Agreement and all exhibits thereto contain the entire understanding between
the
Parties with respect to the matters set forth herein. Any modification, change,
or termination of this Agreement (or any part thereof) must be agreed to
in
writing by the Parties. The terms of this Agreement are intended to be
contractual.
5. Default
and Termination. A
default
shall occur under this Agreement in the event of a material default by any
of
the Parties under the terms of this Agreement, the License or the Sublease.
In
the event of such default, the non-defaulting party shall given written notice
to the Party in default that a default has occurred. If such default is not
cured by the Party in default within thirty (30) days of such notice, a Material
Default will result. In the event of a Material Default, the non-defaulting
Party shall be entitled to terminate the Agreement, the License or Sublease
and
exercise any remedy otherwise available by law to the non-defaulting Party.
6. Notice.
All
notices and other communications required under this Agreement shall be in
writing and shall be given by United States first class mail, postage prepaid,
registered or certified, return receipt requested, facsimile or by hand delivery
(including by means of a professional messenger service) addressed as
follows:
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If
to
XsX:
XsunX,
Inc.
00
Xxxxxxxxxx
Xxxxx
Xxxxx, XX 00000
Attn:
Xxx
Xxxxxxxxx
(Tel)
(000) 000-0000
(Fax)
(000) 000-0000
With
copy
to:
Xxxxx
X.
Xxxx, Esq.
Xxxxxxx
& Xxxxxx, LLC
000
00xx
Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxxxxx 00000
(Tel)
(000) 000-0000
(Fax)
(000) 000-0000
If
to MVS
or Madan:
MVSystems,
Inc.
000
Xxxxxxxxx Xxxxxx, Xxxx X
Xxxxxx,
Xxxxxxxx 00000
Attn:
Xx.
Xxxx Xxxxx
(Tel)
(000) 000-0000
(Fax)
(000) 000-0000
With
copy
to:
Xxx
X.
Xxxxxxxx, Esq.
Holland
& Xxxx LLP
000
00xx
Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxxxxx 00000
(Tel)
(000) 000-0000
(Fax)
(000) 000-0000
7. Enforcement.
The
Parties agree that all obligations, representations, and covenants in this
Agreement are uniquely beneficial to the Party to which they run and shall
be
specifically enforceable, including through an action for injunctive
relief.
8. Governing
Law. Colorado
substantive law, excluding Colorado’s choice of law rules, governs the validity,
effect, and interpretation of this Agreement.
9. Execution
in Counterparts. This
Agreement may be executed in counterparts by facsimile to be followed by
originally executed counterparts, each one of which shall be deemed an original
and all of which together shall constitute one and the same
agreement.
10. Counsel.
Each
Party hereby expressly acknowledges that the effect and import of this
Agreement, including all rights and obligations arising under the Agreement,
have been fully explained to it by its respective counsel, and that it fully
understands this Agreement.
11. Joint
Authorship. This
Agreement is the product of the negotiation of all of the Parties. For
convenience, this Agreement has been drafted initially in substantial part
by
legal counsel for certain of the Parties, but by agreement of the Parties,
this
Agreement shall be deemed to have been drafted by all Parties jointly, and
any
ambiguity herein shall not be construed for or against any Party by virtue
of
the identity of the any drafter, initial or otherwise.
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12. Headings.
The
headings used in this Agreement are not intended by the Parties to have
independent meaning or to modify in any way the terms of this
Agreement.
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This
Agreement has been executed effective as of the date written on page
1.
XsunX,
Inc.
By:________________________________
Name:______________________________
Title:_______________________________
MVSystems,
Inc.
By:________________________________
Name:______________________________
Title:_______________________________
Xxxx
Xxxxx
________________________________
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