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EXHIBIT 10.2
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: Michael A. Russak
Social Security Number:
Address:
Total Option Shares: 100,000
Exercise Price Per Share: $0.41
Date of Grant: August 28, 2007
First Vesting Date: November 29, 2007
Expiration Date for Exercise of Options: August 28, 2012
Stock Option Number: 07-021
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) The Option shall become exercisable in the amount of
12,500 shares upon the First Vesting Date. Thereafter, the
Option shall vest become exercisable at the rate of 12,500
Shares per calendar quarter, or any apportioned amount
thereof, during the term of engagement by XsunX, Inc. of
the Optionee.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the
Option is governed by Sections 7, 8 and 9 below, subject
to the limitations contained in subsection 3(i) (d) below.
(d) In no event may the Option be exercised after the date
of
expiration of the term of the Option as set forth in
Section 11 below.
(ii)(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
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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 written notice shall be signed by Optionee and shall
be delivered in person or by certified mail to the Presi-
dent, Secretary or Chief Financial Officer of the Company.
The written notice shall be accompanied by payment of the
exercise price if applicable.
(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
subject to appropriate adjustment in the event of changes
in the capital stock of the Company by reason of stock
dividends, 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 o f 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 exercis e 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
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(the "Act") in reliance upon one or more specific exemp-
tions 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 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 other-
wise it will be necessary that the Shares be sold pursuant
to another exemption from registration which may be diffi-
cult 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. Termination of Status as an Employee or Consultant. In the
event of
termination of Optionee's continuous status as an Employee or
Consultant, as
such status may be determined and construed by the Company in
its sole
discretion ("Continuous Status"), for any reason other than
death, disability or
the satisfactory completion of the term of any employment or
consulting
agreement between the parties, Optionee may, but only within
thirty (30) days
after the date of such termination (but in no event later than
the date of
expiration of the term of the Option as set forth in Section 11
below), exercise
the Option to the extent that Optionee was entitled to exercise
it at the date
of such termination. To the extent that Optionee was not
entitled to exercise
the Option at the date of such termination, or if Optionee does
not exercise the
Option within the time specified herein, the Option shall
terminate.
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8. Disability of Optionee. In the event of termination of
Optionee's Continuous
Status as an Employee or Consultant as a result of Optionee's
disability,
Optionee may, but only within six (6) months from the date of
termination of
employment or consulting relationship (but in no event later
than the date of
expiration of the term of the Option as set forth in Section 11
below), exercise
the Option to the extent Optionee was entitled to exercise it at
the date of
such termination; provided, however that if the disability is
not total and
permanent (as defined in Section 22(e)(3) of the Code) and the
Optionee
exercises the option within the period provided above but more
than three months
after the date of termination, the Option shall automatically be
deemed to be a
Nonstatutory Stock Option and not an Incentive Stock Option; and
provided,
further, that if the disability is total and permanent (as
defined in Section
22(e)(3) of the Code), then the Optionee may, but only within
one (1) year from
the date of termination of employment or consulting relationship
(but in no
event later than the date of expiration of the term of the
Option as set forth
in Section 11 below), exercise the Option to the extent Optionee
was entitled to
exercise it at the date of such termination. To the extent that
Optionee was not
entitled to exercise the Option at the date of termination, or
if Optionee does
not exercise such Option (which Optionee was entitled to
exercise) within the
time periods specified herein, the Option shall terminate.
9. Death of Optionee. In the event of the death of Optionee:
(i) During the term of the Option while an Employee or
Consultant of the Company and having been in Continuous
Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time
within one (1) year following the date of death (but, in the
case of an Incentive Stock Option, in no event later than
the date of expiration of the term of the Option as set
forth in Section 11 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the time of death of the
Optionee. To the extent that such Employee or Consultant was
not entitled to exercise the Option at the date of death, or
if such Employee, Consultant, estate or other person does
not exercise such Option (which such Employee, Consultant,
estate or person was entitled to exercise) within the one
(1) year time period specified herein, the Option shall
terminate; or,
(ii) During the thirty (30) day period specified in Section 7
or
the one (1) year period specified in Section 8, after the
termination of Optionee's Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time
within one (1) year following the date of death (but, in the
case of an Incentive Stock Option, in no event later than
the date of expiration of the term of the Option as set
forth in Section 11 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the date of termination. To
the extent that such Employee or Consultant was not entitled
to exercise the Option at the date of death, or if such
Employee, Consultant, estate or other person does not
exercise such Option (which such Employee, Consultant,
estate or person was entitled to exercise) within the one
(1) year time period specified herein, the Option shall
terminate.
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10. 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.
11. 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; provided,
however, that the
term of this option, if it is a Nonstatutory Stock Option, may
be extended for
the period set forth in Section 9(i) or Section 9(ii) in the
circumstances set
forth in such Sections.
12. 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
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.
13. 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
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