EXHIBIT 10.1
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: Xxxxxxx X. Xxxxxx
Social Security Number:
Address:
Total Option Shares: 500,000
Exercise Price Per Share: $0.36
Date of Grant: November 26, 2007
First Vesting Date: see Section 3
Expiration Date for Exercise of Options: November 25, 2012
Stock Option Number: 07-027
Type of Stock Option:
(Check one) [ ] 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) Beginning November 26, 2007 the Option shall vest and
become exercisable at the rate of 62,500 Shares upon the
anniversary of each calendar quarter of continuous service
as a Director, or prorated portion thereof, for services
rendered as a member of the Company Board of Directors up
to a total of 500,000 shares.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In no event may the Option be exercised after the date of
expiration of the term of the Option as set forth in
Section 8 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 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
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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 sub- ject to
appropriate adjustment in the event of changes in the
capital stock of the Company by reason of stock divi- dends,
stock splits, combination or recombination of shares,
reclassifications, mergers, consolidations, reorg-
anizations 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 consolida- tion,
the Option (to the extent that it is still outstand- ing)
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 adjust- ments 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
contained in the Act, which may include reliance on Rule 701
promulgated under the Act, if available, or which may depend
upon: (a) Optionee's bona fide investment intention in
acquiring 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
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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. 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.
8. 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.
9. 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
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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.
10. 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.
11. 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
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)
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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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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
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Company is an underwriter with regard to the Option or the Shares for purposes
of Rule 144.
17. 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.
18. 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.
19. 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
Optionee is shown as a shareholder of record on the books and records of the
Company.
20. 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.
21. 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.
22. 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.
23. Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
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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.
24. 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.
25. 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.
26. 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.
27. 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.
28. 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.
29. 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.
30. 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.
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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.
IN WITNESS WHEREOF, this Agreement is made effective on the date first
set forth above at Orange County, California.
OPTIONEE
------------------------------
Name: Xxxxxxx X. Xxxxxx
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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.
IN WITNESS WHEREOF, this Agreement is made effective on the date first set
forth above at Orange County, California.
---------------------------------
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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