EXHIBIT 10.3
FORM OF WARRANT
EXHIBIT 10.3
EXHIBIT F
FORM OF WARRANT
This Warrant (this "warranT") HAS NOT been Registered UNDER The securities ACT
OF 1933, AS amended (The "AcT"), OR ANY STATE securities LAW. Neither this
warrant NOR any WARRANT Shares issuable upon exercise hereof NOR ANY interest OR
Participation herein or therein may BE SOLD, Assigned, MORTGAGED, Pledged,
hypothecated, ENCUMBERED OR Otherwise Transferred EXCEPT IN Compliance WITH THE
ACT AND Applicable STATE Securities LAWS.
XSUNX, INC.
COMMON STOCK PURCHASE
WARRANT FOR 1,666,666 SHARES
ORIGINAL ISSUE DATE: NOVEMBER 1, 2007 WARRANT CERTIFICATE # _________
This Warrant is issued in connection with and pursuant to that certain
Common Stock Purchase Agreement (the "Purchase Agreement") dated as of November
1, 2007, by and between XsunX, Inc., a Colorado corporation (the "Company") and
FUSION CAPITAL FUND II, LLC, an Illinois limited liability company the
registered holder hereof, or its assigns (the "Holder").
FOR VALUE RECEIVED, the Holder is entitled to purchase from the Company
during the period specified in this Warrant, 1,666,666 fully paid and
non-assessable shares (subject to adjustment as hereinafter provided) of Common
Stock (the "Warrant Shares"), of the Company at the purchase price per share
provided in Section 1.2 of this Warrant (the "Warrant Exercise Price"), all
subject to the terms and conditions set forth in this Warrant. All terms not
otherwise defined herein shall have the meaning set forth in the Purchase
Agreement.
Section 1. Period for Exercise and Exercise Price.
1.1 Period for Exercise. The right to purchase Warrant Shares
represented by this Warrant shall be immediately exercisable, and shall expire
at 12:00 midnight, Chicago time, October 31, 2012 (the "Expiration Date").
1.2 Warrant Exercise Price. The Warrant Exercise Price shall be
$[0.50 and 0.75] per Warrant Share (subject to adjustment as hereinafter
provided).
Section 2. Exercise of Warrant.
2.1 Manner of Exercise. The Holder may exercise this Warrant, in whole
or in part, by surrendering this Warrant to the Company at the principal office
of the Company, accompanied by a warrant exercise notice (the "Warrant Exercise
Notice") in substantially the form attached hereto duly executed by the Holder
and by payment of the Warrant Exercise Price for the number of Warrant Shares
for which this Warrant is then be exercised, either (i) by check or wire
transfer, (ii) by delivery of an instrument evidencing indebtedness owing by the
Company to the Holder in the appropriate amount, (iii) subject to the
limitations set forth in Section 2.4 hereof, by authorizing the Company to
retain shares of Common Stock which would otherwise be issuable upon exercise of
this Warrant or (iv) in a combination of (i), (ii) or (iii) above, provided,
however, that in no event shall the Holder be entitled to exercise this Warrant
for a number of Warrant Shares in excess of that number of Warrant Shares which,
upon giving effect to such exercise, would cause the aggregate number of shares
of Common Stock beneficially owned by the Holder to exceed 4.9% of the then
outstanding shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the Holder shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which determination
of such proviso is being made, but shall exclude the shares of Common Stock
which would be issuable upon (i) exercise of the remaining, unexercised warrants
beneficially owned by the Holder and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the Holder subject to a limitation on conversion or
exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The Holder may waive the foregoing 4.9% ownership
limitation by written notice to the Company upon not less than 61 days prior
written notice (with such waiver taking effect only upon the expiration of such
sixty-one (61) day notice period).
2.2 Holder of Record. At such time the person in whose name any
certificate for shares of Warrant Shares shall be issuable upon such exercise
shall be deemed for all corporate purposes to have become the Holder of record
of such shares, regardless of the actual delivery of certificates evidencing
such shares.
2.3 Delivery of Stock Certificates. As permitted under applicable
federal securities laws, as soon as practicable after delivery of a Warrant
Exercise Notice to the Company, and in any event not later than three (3)
Business Days after any Warrant Exercise Notice is deemed delivered to the
Company pursuant to Section 2.5 hereof, the Company at its expense shall issue
Warrant Shares via credit to the Holder's account with DTC for the number of
Warrant Shares to which the Holder is entitled upon such exercise or, if the
Transfer Agent is not participating in The DTC Fast Automated Securities
Transfer Program and DWAC system in respect of the Common Stock, issue and
surrender to the address as specified in the Warrant Exercise Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled to upon
such exercise.
2.4 Cashless Exercise if No Registration Statement Available. At any
time for any reason or for no reason, if a registration statement is not
available so that the Warrant Shares would be issued to the Holder without any
restrictive transfer legend and be freely tradable by the Holder upon a
non-cashless exercise hereof, in such case and only in such case, the Holder
may, by providing notice thereof to the Company in a Warrant Exercise Notice,
elect to exercise this Warrant, in whole or in part, for a number of Warrant
Shares determined in accordance with the following formula:
X = Y(A-B)
------
A
Where:
-----
X = The number of Warrant Shares to be issued to the Holder.
Y = The number of Warrant Shares purchasable under this Warrant as of the date
that the Warrant Exercise Notice is deemed delivered to the Company pursuant to
Section 2.5 hereof.
A = The Fair Market Value of one share of Common Stock (or other security for
which the Warrant is then exercisable).
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B = Exercise Price (as adjusted under Section 3 hereof).
For purposes of this Section 2.4, the "Fair Market Value" per share shall be the
highest Sale Price of the Common Stock during the five (5) Business Day period
immediately prior to the date that the Warrant Exercise Notice is deemed to have
been delivered to the Company pursuant to Section 2.5 hereof.
2.5 Deemed Delivery of the Warrant Exercise Notices. In connection with
any exercise of this Warrant, a Warrant Exercise Notice shall be deemed
delivered to the Company: (i) upon receipt, when delivered personally by the
Holder or its representative to an officer or employee of the Company; or (ii)
on one Business Day after the date that the Warrant Exercise Notice is deposited
with a nationally recognized overnight delivery or ▇▇▇▇▇▇▇ service addressed to
the Company at the address of the Company as set forth in Section 8.5 hereof.
Section 3. Adjustment of Purchase Price and Number of Shares. The
Warrant Exercise Price and the kind of securities issuable upon exercise of the
Warrant shall be adjusted from time to time as follows:
3.1 Subdivision or Combination of Shares (Stock Splits). If the Company
at any time effects a subdivision or combination of the outstanding Common Stock
(through a stock split or otherwise), the number of shares of Warrant Shares
shall be increased, in the case of a subdivision, or the number of shares of
Warrant Shares shall be decreased, in the case of a combination, in the same
proportions as the Common Stock is subdivided or combined, in each case
effective automatically upon, and simultaneously with, the effectiveness of the
subdivision or combination which gives rise to the adjustment.
3.2 Action Affecting Common Stock. If at any time the Company takes any
action affecting its Common Stock, other than an action described in Section 3.1
which, in the opinion of the Board of Directors of the Company (the "Board"),
would have an adverse effect upon the exercise rights of the Warrants, the
Warrant Exercise Price or the kind of securities issuable upon exercise of the
Warrants, or both, shall be adjusted in such manner and at such time as the
Board may in good faith determine to be equitable in the circumstances;
provided, however, that the purpose of this Section is to prevent the Company
from taking any action which has the effect of diluting the number of shares of
Warrant Shares issuable upon exercise of this Warrant.
Section 4. Reservation of Stock, etc. The Company covenants and agrees
that it will at all times have authorized, reserve and keep available, solely
for issuance and delivery upon the exercise of this Warrant, the number of
shares of Warrant Shares from time to time issuable upon the exercise of this
Warrant. The Company further covenants and agrees that this Warrant is, and any
Warrants issued in substitution for or replacement of this Warrant and all
Warrant Shares, will upon issuance be duly authorized and validly issued and, in
the case of Warrant Shares, upon issuance will be fully paid and non-assessable
and free from all preemptive rights of any stockholder, and from all taxes,
liens and charges with respect to the issue thereof (other than transfer taxes)
and, if the Common Stock of the Company is then listed on any national
securities exchanges (as defined in the Exchange Act of 1934, as amended (the
"Exchange Act")) or quoted on NASDAQ, shall be, subject to the restrictions set
forth in Section 5, duly listed or quoted thereon, as the case may be. In the
event that the number of authorized but unissued shares of such Common Stock
shall not be sufficient to effect the exercise of this entire Warrant into
Warrant Shares, then in addition to such other remedies as shall be available to
the Holder of this Warrant, the Company shall promptly take such corporate
action as may be necessary to increase its authorized but unissued shares of
such Common Stock to such number of shares as shall be sufficient for such
purpose.
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Section 5. Ownership, Transfer and Substitution of Warrants.
5.1 Transfer and Exchange of Warrants. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will execute and
deliver to the Holder thereof, upon the order of such Holder, a new Warrant or
Warrants of like tenor, in the name of such Holder or as such Holder may direct,
for such number of shares with respect to each such Warrant, the aggregate
number of shares in any event not to exceed the number of shares for which the
Warrant so surrendered had not been exercised.
5.2 Registration Rights. The holder of this Warrant is entitled to
certain registration rights with respect to the Warrant Shares issuable upon
exercise thereof. Said registration rights are set forth in a Registration
Rights Agreement by and between the Holder and the Company. if the registration
statement contemplated in the registration rights agreement is not effective at
the time of any issuance and the shares are not exempt from registration under
Rule 144, the Warrant Shares shall be issued in certificated form and shall bear
only the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
5.3 Exemption from Registration. If an opinion of Holder's counsel
provides that registration is not required for the proposed exercise or transfer
of this Warrant or the proposed transfer of the Warrant Shares and that the
proposed exercise or transfer in the absence of registration would require the
Company to take any action including executing and filing forms or other
documents with the Securities and Exchange Commission (the "SEC") or any state
securities agency, or delivering to the Holder any form or document in order to
establish the right of the Holder to effectuate the proposed exercise or
transfer, the Company agrees promptly, at its expense, to take any such action;
and provided, further, that the Company will reimburse the Holder in full for
any expenses (including but not limited to the fees and disbursements of such
counsel, but excluding brokers' commissions) incurred by the Holder or owner of
Warrant Shares on his, her or its behalf in connection with such exercise or
transfer of the Warrant or transfer of Warrant Shares.
Section 6. No Rights or Liabilities as Shareholder. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any liabilities on such holder to
purchase any securities or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Section 7. Rule 144 Sales. At the request of any Holder who proposes to sell
securities in compliance with Rule 144 of the SEC, the Company will (i)
forthwith furnish to such Holder a written statement of compliance with the
filing requirements of the SEC as set forth in Rule 144, as such rules may be
amended from time to time and (ii) make available to the public and such Holder
such information as will enable the Holder to make sales pursuant to Rule 144.
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Section 8. Miscellaneous.
8.1 Amendment and Waiver. This Warrant may be amended with, and only
with, the written consent of the Company and the Holder. Any waiver of any term,
covenant, agreement or condition contained in this Warrant shall not be deemed a
waiver of any other term, covenant, agreement or condition, and any waiver of
any default in any such term, covenant, agreement or condition shall not be
deemed a waiver of any later default thereof or of any default of any other
term, covenant, agreement or condition.
8.2 Representations and Warranties to Survive. All representations,
warranties and covenants contained herein shall survive the execution and
delivery of this Warrant and the issuance of any Warrant Shares upon the
exercise hereof.
8.3 Severability. In the event that any court or any governmental
authority or agency declares all or any part of any Section of this Warrant to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Warrant, and in the event that only a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
8.4 Binding Effect; No Third Party Beneficiaries. All provisions of
this Warrant shall be binding upon and inure to the benefit of the parties and
their respective heirs, legatees, executors, administrators, legal
representatives, successors, and permitted transferees and assigns. No person
other than the Holder of this Warrant and the Company shall have any legal or
equitable right, remedy or claim under or in respect of this Warrant.
8.5 Notices. Except for a Warrant Exercise Notice which shall be deemed
delivered pursuant to Section 2.5 hereof, any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
XsunX, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
With a copy to:
K & L Gates LLP
Miami Center, 20th Floor,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 305-358-7095
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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If to the Holder:
Fusion Capital Fund II, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Transfer Agent:
Mountain Share Transfer
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
or at such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by written
notice given to each other party three (3) Business Days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, and recipient facsimile number or (C) provided by a
nationally recognized overnight delivery service, shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
8.6 Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Colorado shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be governed by
the internal laws of the State of Illinois, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of Chicago, for the adjudication of any dispute hereunder or under the
other Transaction Documents or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
8.7 Loss of Warrant. Upon receipt by the Company of a written statement
of the Holder to it of the loss, theft or destruction of this Warrant, and upon
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surrender for cancellation of this Warrant if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date as replacement hereof.
8.8 Entire Agreement. This Warrant, the Purchase Agreement and the
Registration Rights Agreement of even date herewith represent the entire
agreement and understanding between the parties concerning the subject matter
hereof and supercede all prior and contemporaneous agreements, understandings,
representations and warranties with respect thereto.
8.9 Headings. The headings used herein are used for convenience only
and are not to be considered in construing or interpreting this Warrant.
COMPANY:
XsunX, INC.
By:______________________
Name: ___________________
Title: ____________________
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FORM OF
WARRANT EXERCISE NOTICE
Date:______________
XsunX, Inc.
Attn: President
▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:The undersigned, being the holder of your Warrant for the
purchase of _________ Warrant Shares issued November 1, 2007, accompanying this
letter, hereby irrevocably exercises such Warrant for ________ shares of Warrant
Shares (as defined in said Warrant), and herewith delivers ___________ as
payment therefor in accordance with the Warrant, and requests that such shares
of Warrant Shares be issued in the name of, and delivered to FUSION CAPITAL FUND
II, LLC, at the address shown below the signature line hereof.
If said number of shares shall not be all the shares issuable upon exercise of
the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
By:_________________________
Name:
Title:
Fusion Capital Fund II, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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