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:
Dr. Richard K Ahrenkiel, DBA Ahrenkiel Consulting
Social Security Number: XXX-XX-XXXX
Address:
XXXXX XXXX XXXXX
Total Option Shares:
100,000
Exercise Price Per Share: $0.45
Date of Grant: April 23, 2007
First Vesting Date:
July 23, 2007
Expiration Date for Exercise of Options: April 22, 2012
Stock Option Number: 07-020
Type of Stock Option:
(Check one)
[ ] Incentive Stock
Option [ X ] 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 Option is
being exercised, and such other representations and agreements
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<PAGE>
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
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 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, reorganizations
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
consolidation, the
Option (to the extent
that it is still
outstanding) 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 adjustments 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
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<PAGE>
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 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. 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
or disability,
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.
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,
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<PAGE>
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.
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
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<PAGE>
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 Optionee's own tax
advisors the
federal, state,
local and foreign tax consequences of the transactions
contemplated by this Agreement.
