STOCK OPTION AGREEMENT
THIS
STOCK OPTION AGREEMENT
(this
“Agreement”) is entered into as of December 19, 2007 by and between Xxxx Xxxxx
(the “Optionee”) and Sionix Corporation, a Nevada corporation (the
“Corporation”). The foregoing parties are sometimes referred to hereinafter
individually as a “Party” or collectively as the “Parties.” All capitalized
terms not otherwise defined herein shall have the definition ascribed to them
in
the Grant Notice or the Employment Agreement (as hereinafter defined).
WHEREAS,
on
December 19, 2007, the Corporation entered into in an employment agreement
with
the Optionee (the “Employment Agreement”), pursuant to which the Corporation is
to grant an Option to the Optionee; and
WHEREAS,
this
Agreement is executed pursuant to, and is intended to carry out the purposes
of,
the Employment Agreement in connection with the Corporation’s grant of the
Option to the Optionee.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements hereinafter set forth,
and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties do hereby covenant and agree as
follows:
1. Grant
of Option.
The
Corporation hereby grants to the Optionee, as of the Grant Date, an Option
to
purchase up to the aggregate number of Option Shares specified in the Grant
Notice. The Option Shares shall be purchasable from time to time during the
Option term specified in Paragraph 2 below at the Exercise Price, subject to
the
vesting provisions set forth in the Grant Notice. Notwithstanding the foregoing,
initially the Option shall not be exercisable as to 340,000 of the Option Shares
(the “Excluded Shares”), which represents 5% of the shares of Common Stock
issuable upon conversion of those certain Convertible Promissory Notes, dated
June 6, 2007, issued to: (i) Calico Capital Management, LLC in the principal
amount of $52,000 (with respect to 260,000 shares), (ii) BRAX Capital, LLC
in
the principal amount of $8,000 (with respect to 40,000 shares), and (iii) Xxxx
Xxxxxxx MD in the principal amount of $8,000 (with respect to 40,000 shares)
(collectively, the “Calico Notes”), which are not convertible except upon the
satisfaction of certain conditions set forth therein. As and to the extent
the
Calico Notes become convertible, the Corporation shall provide the Optionee
with
prompt written notice that the Excluded Shares have become exercisable
hereunder, subject to the terms of this Agreement and the Grant Notice.
2. Option
Term.
The
Option shall have a term of five (5) years measured from the Grant Date and
shall accordingly expire at the close of business on the Expiration Date, unless
sooner terminated pursuant to Paragraph 6 or 7 of this Agreement.
3. Limited
Transferability.
(a) During
the Optionee’s lifetime, the Option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of
descent and distribution following the Optionee’s death. However, Optionee may
designate one or more persons as the beneficiary or beneficiaries of this
Option, so that, if Optionee is holding this Option at the time of his or her
death, this Option shall, in accordance with such designation, automatically
be
transferred to such beneficiary or beneficiaries upon Optionee’s death. Such
beneficiary or beneficiaries shall take the transferred Option subject to all
the terms and conditions of this Agreement, including (without limitation)
the
limited time period during which this option may, pursuant to Paragraph 6(c),
be
exercised following Optionee’s death.
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(b) If
this
option is designated a Non-Statutory Option in the Grant Notice, then this
Option may be assigned in whole or in part during Optionee’s lifetime to one or
more members of Optionee’s family (as defined in Rule 701 promulgated by the
Securities and Exchange Commission) or to a trust established for the benefit
of
one or more such family members or to Optionee’s former spouse, to the extent
such assignment is in connection with Optionee’s estate plan or pursuant to a
domestic relations order. The assigned portion shall be exercisable only by
the
person or persons who acquire a proprietary interest in the Option pursuant
to
such assignment. The terms applicable to the assigned portion shall be the
same
as those in effect for this Option immediately prior to such assignment.
(c) Anything
herein to the contrary notwithstanding, in no event shall the Optionee sell
during the nine months following the Grant Date (the “Lock-Up Period”) any
shares of Common Stock acquired upon exercise of the Option. The Optionee
consents to the placement of a legend to that effect on any Common Stock
certificates issued to the Optionee during the Lock-Up Period upon exercise
of
the Option.
4. Dates
of Exercise.
The
Option shall become exercisable for the Option Shares in one or more
installments as specified in the Vesting Schedule set forth in the Grant Notice.
As the Option becomes exercisable for such installments, those installments
shall accumulate and the Option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the Option
pursuant to Paragraph 6 or 7 of this Agreement.
5.
Representations of the Optionee.
The
Optionee hereby represents as follows:
(a)
The
Optionee either has a preexisting personal or business relationship with the
Corporation or any of its officers, directors or controlling persons, or by
reason of his business or financial experience or the business or financial
experience of his professional advisors who are unaffiliated with and who are
not compensated by the Corporation or any affiliate or selling agent of the
Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to protect his own interests in connection with the transaction.
(b)
The
Optionee is acquiring the Option and, upon exercise, the Option Shares, for
his
own account and not with a view to or for sale in connection with any
distribution thereof.
(c)
The
Optionee did not learn of the offer and sale of the Option through the
publication of any advertisement.
6. Termination
of Employment.
The
Option term specified in Paragraph 2 shall be subject to the
following:
(a) if
during
the Term the Optionee’s employment is terminated by the Corporation for Cause,
or by the Optionee without Good Reason, then any as yet unvested Option Shares
shall be immediately forfeited upon the Termination Date (as defined in the
Employment Agreement);
(b) if
during
the Term the Optionee’s employment is terminated by the Corporation without
Cause, or by the Optionee for Good Reason, then any as yet unvested Option
Shares shall immediately vest upon the Termination Date, and shall remain
exercisable through the Expiration Date;
(c) if
the
Optionee’s employment is terminated because of the Optionee’s death or
Disability, then the Option may be exercised only to the extent that it would
have been exercisable by the Optionee on the Termination Date and must be
exercised by the Optionee (or the Optionee’s legal representative or authorized
assignee) not later than twelve (12) months following the Termination Date;
and
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(d) in
the
event of a Change in Control, the provisions of Paragraph 7 of this Agreement
shall govern the period for which the Option is to remain exercisable and shall
supersede any provisions to the contrary herein.
7. Accelerated
Vesting.
(a) In
the
event of a Change in Control, the Option Shares at the time subject to the
Option but not otherwise vested shall automatically vest in full so that the
Option shall, immediately prior to the effective date of the Change in Control,
become fully exercisable for all of those Option Shares and may be exercised
for
any or all of those Option Shares as fully-vested shares of Common
Stock.
(b) Immediately
following the Change in Control, the Option shall terminate and cease to be
outstanding.
(c) This
Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
8. Adjustment
in Option Shares.
(a) If
in any
equity financing (other than the sale or issuance of securities upon the
exercise or conversion of outstanding options, warrants or convertible notes)
completed by the Corporation during the Term (a “Dilutive Financing”), the
Corporation issues shares of Common Stock, or securities convertible into or
exercisable or exchangeable for shares of Common Stock, at a price, or exercise
or conversion price, per share that is less than the then Exercise Price, then
the Option Shares will be immediately and concurrently adjusted, such that
following the closing of any Dilutive Financing (the “Closing”) the Option
Shares will represent five percent (5%) of the Corporation’s outstanding Common
Stock on a fully diluted basis calculated immediately following the Closing.
If
any Dilutive Financing occurs in multiple Closings, then such calculation shall
be made immediately after the final Closing.
(b)
Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made to
(i) the total number and/or class of securities subject to this option and
(ii)
the Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
9. Right
of First Refusal.
If
during the Term the Corporation offers or proposes to offer its securities
in
any transaction the primary purpose of which is to raise capital (a “Proposed
Financing”), the Optionee shall have a right of first refusal to purchase up to
fifty percent (50%) of the securities offered in such Proposed Financing (a
“Right of First Refusal”). The Corporation will provide the Optionee with at
least ten (10) business days prior written notice of a Proposed Financing in
accordance with the requirements for giving notice as hereinafter set forth
in
Paragraph 14. The notice shall specify therein the number and type of securities
proposed to be issued, the price and type of consideration to be received,
and
any other material terms upon which the Corporation proposes to issue the
securities. The Optionee will have ten (10) business days following deemed
delivery of such notice to give the Corporation written notice of his intention
to exercise the Right of First Refusal.
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10. Shareholder
Rights.
The
Optionee shall not have any shareholder rights with respect to the Option Shares
until the Optionee shall have exercised the Option in accordance with this
Agreement and become a holder of record of the purchased shares.
11. Manner
of Exercising Option.
(a) In
order
to exercise the Option with respect to all or any part of the Option Shares
for
which the Option is at the time exercisable, the Optionee (or any other person
or persons exercising the option) must take the following actions:
(i) Execute
and deliver to the Corporation a written notice setting forth the number of
Option Shares for which the Option is exercised.
(ii) Pay
the
aggregate Exercise Price for the purchased shares in cash or in one or more
of
the following forms:
(A) by
cancellation of indebtedness of the Corporation to the Optionee, including,
without limitation, expense reimbursements owed under the Employment
Agreement;
(B) by
surrender of shares of Common Stock that either: (1) have been owned by the
Optionee for more than six (6) months and have been paid for within the meaning
of Rule 144 promulgated under the Securities Act of 1933, as amended (and,
if
such shares were purchased from the Corporation by use of a promissory note,
such note has been fully paid with respect to such shares); or (2) were obtained
by the Optionee in the public market;
(C) with
respect only to purchases upon exercise of an Option, and provided that a public
market for the Corporation’s stock exists:
(1) through
a
“same day sale” commitment from the Optionee and a broker-dealer that is a
member of the Financial Industry Regulatory Authority (an “FINRA Dealer”)
whereby the Optionee irrevocably elects to exercise the Option and to sell
a
portion of the shares so purchased to pay for the Exercise Price, and whereby
the FINRA Dealer irrevocably commits upon receipt of such shares to forward
the
Exercise Price directly to the Corporation; or
(2) through
a
“margin” commitment from the Optionee and a FINRA Dealer whereby the Optionee
irrevocably elects to exercise the Option and to pledge the shares so purchased
to the FINRA Dealer in a margin account as security for a loan from the FINRA
Dealer in the amount of the Exercise Price, and whereby the FINRA Dealer
irrevocably commits upon receipt of such shares to forward the Exercise Price
directly to the Corporation; or
(D) by
any
combination of the foregoing.
Except
to
the extent the sale and remittance procedure is utilized in connection with
the
Option exercise, payment of the Exercise Price in one of the forms provided
above must accompany the written notice delivered to the Corporation in
connection with the Option exercise.
(iii) Furnish
to the Corporation appropriate documentation that the person or persons
exercising the Option (if other than Optionee) have the right to exercise the
Option.
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(iv) Execute
and deliver to the Corporation such written representations as may be requested
by the Corporation in order for it to comply with the applicable requirements
of
federal and state securities laws.
(v) Make
appropriate arrangements with the Corporation for the satisfaction of all
federal, state and local income and employment tax withholding requirements
applicable to the Option exercise.
(b) As
soon
as practical after the exercise date, the Corporation shall issue to or on
behalf of the Optionee (or any other person or persons exercising the Option)
a
certificate for the purchased Option Shares, with the appropriate legends
affixed thereto.
(c) Fractions
of Option Shares will not be issued but will either be replaced by a cash
payment equal to the fair market value of such fraction of an Option Share
(based on the closing price of the Common Stock reported by Bloomberg LP on
the
replacement date) or will be rounded up to the nearest whole share of Common
Stock, as determined by the Corporation.
12. Compliance
with Laws and Regulations.
The
exercise of the Option and the issuance of the Option Shares upon such exercise
shall be subject to compliance by the Corporation and the Optionee with all
applicable requirements of law relating thereto and with all applicable
regulations of any national securities exchange or interdealer quotation system
on which the Corporation’s Common Stock may be listed or quoted at the time of
such exercise and issuance.
13. Successors
and Assigns.
Except
to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Corporation
and its successors and assigns and the Optionee, the Optionee’s assigns and the
legal representatives, heirs and legatees of the Optionee’s estate.
14. Notices.
Any
notice required to be given or delivered to the Corporation under the terms
of
this Agreement shall be in writing and addressed to the Corporation at its
principal executive offices. Any notice required to be given or delivered to
the
Optionee shall be in writing and addressed to the Optionee at the last address
the Optionee filed in writing with the Corporation. All notices shall be deemed
effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the Party to be notified.
15. Governing
Law.
The
interpretation, performance and enforcement of this Agreement shall be governed
by the laws of the State of California without resort to that State’s
conflict-of-laws rules.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF,
the
Parties hereto have executed this Stock Option Agreement as of the date first
set forth above.
|
SIONIX
CORPORATION
|
|
|
By:
|
/s/ Xxxxxx Xx Xxxx |
| Name: Xxxxxx Xx Xxxx | |
| Title: Chief Financial Officer | |
|
OPTIONEE:
|
|
| /s/ Xxxx Xxxxx | |
|
XXXX
XXXXX
|
|
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