Se
paration 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 Dr. Arun Madan
(“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 500 Corporate Circle,
Golden, Colorado, 80401 (“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.
“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
