SEPARATION
      AGREEMENT


    


    THIS
      SEPARATION AGREEMENT
      ("Agreement") is made effective this 13 day of June, 2008, by and between XsunX,
      Inc., a Colorado Corporation (“XsunX”) and Sencera, LLC, a North Carolina
      Limited Liability Company (“Sencera”). XsunX and Sencera are herein referred to
      individually as a “Party” and collectively as the “Parties.”

    


    R E C I T A L S

    


    WHEREAS,
      effective on or about January 1, 2007, the Parties entered into a Technology
      Development and License Agreement (“Technology Agreement”) and a Loan Agreement
      (“Loan Agreement”) and Sencera executed a Promissory Note in favor of XsunX in
      the principal sum of $1,500,000.00 bearing interest at the rate of 10% per
      annum
      (“Note”) all pertaining to that certain project identified in the Technology
      Agreement (“Project);

    


    WHEREAS,
      certain
      disputes have arisen between the Parties in regard to the Project and the above
      agreements and instruments;

    


    WHEREAS,
      it is
      the intent of the Parties hereto, subject to the terms and conditions set forth
      in this Agreement, and upon payment of all principal and interest under the
      Note
      by Sencera to XsunX, to settle and release all claims between the Parties in
      regard to the Project and the above agreements and instruments.

    


    NOW,
      THEREFORE,
      in
      consideration of the mutual promises contained herein, and other good and
      valuable consideration, the sufficiency of which are hereby acknowledged, the
      Parties hereto agree as follows:

     

    ARTICLE
      1.

    


    TERMS
      OF SETTLEMENT

    


    1.1. Payment
      of Note.
      Sencera
      shall, in exchange for the mutual releases set forth herein below, and subject
      to the terms and conditions of this Agreement, pay to XsunX the sum of
$1,673,251.05
      representing
      the entire principal balance due under the Note plus interest
      accrued through June 6, 2008. The
      above
      amount shall be payable
      in full in cash or cash equivalent pursuant to immediately available funds
      ("Settlement Amount").

    


    1.2. Termination
      of Instruments.
      Upon
      receipt of the Settlement Amount in full in cash or cash equivalent pursuant
      to
      immediately available funds, the Technology Agreement, Loan Agreement, and
      Note
      shall be terminated and all obligations of the Parties thereunder shall be
      deemed fully performed and discharged and all sums shall be deemed paid under
      the Note and XsunX shall deliver to Sencera the original executed Note marked
      “Paid and Satisfied in Full” and signed by a duly authorized officer of XsunX;
      provided, however that the confidentiality provisions of sections 1.2 and 8
      of
      the Technology Agreement shall survive as contemplated in the Technology
      Agreement.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.3. Termination
      of Intellectual Property Rights.
      Upon
      receipt of the Settlement Amount in full in cash or cash equivalent pursuant
      to
      immediately available funds, all rights, if any, of XsunX in or to the
      intellectual property of Sencera under the Technology Agreement shall be
      terminated. Concurrently, and subject to the representations, terms and
      conditions of this Agreement, all rights, if any, of Sencera in or to the
      intellectual property of XsunX under the Technology Agreement shall be
      terminated. 

    


    1.4. Project.
      The
      Parties acknowledge that Sencera has provided to XsunX the written documents
      and
      reports in regard to the Project or otherwise under the Technology Agreement
      as
      listed in Exhibit “A” attached hereto and XsunX has provided to Sencera the
      written documents and reports in regard to the Project or otherwise under the
      Technology Agreement as listed in Exhibit “B” attached hereto. Each Party
      represents to the other Party that the representing Party has not intentionally
      misrepresented any material facts relating to the Project contained in the
      written documents and reports provided by the representing Party. Neither Party
      accepts or admits the truthfulness or accuracy of the assertions made in the
      documents listed in the other Party’s Exhibit. XsunX acknowledges that Sencera
      has disclosed to XsunX that pages 9 and 10 of Report 1 dated February 6, 2007
      sent by Sencera to XsunX contain conflicting information of chamber cost
      estimates and Sencera has disclosed to XsunX that this was not intentional
      and
      that Sencera thinks the estimates on page 10 are more accurate. XsunX further
      acknowledges that Sencera has stated to XsunX that Sencera has produced a
      licensed process to satisfy Phase II of the Technology Agreement notwithstanding
      a prior letter by Sencera that was inconsistent with this representation. XsunX
      agrees that neither of these discrepancies shall be a basis for a breach of
      this
      Agreement or for a claim that the other provisions of this Agreement are not
      effective. Sencera acknowledges that XsunX is not agreeing hereby that Sencera
      has produced a licensed process to satisfy Phase II. Each Party further
      represents to the other Party that the representing Party has had the
      opportunity to conduct, and has conducted, such investigations and due diligence
      relating to the other Party and the Project as the representing Party deems
      appropriate prior to entering into this Agreement. The Parties agree that the
      documents listed in Exhibits “A” and “B” are confidential information under
      Sections 1.2 and 8 of the Technology Agreement and are subject to the terms
      thereof which survive the execution of this Agreement and the termination of
      the
      remainder of the Technology Agreement. The
      Parties expressly acknowledge that disclosure is required by XsunX under the
      Securities Exchange Act of 1934 (the “Act”), Generally Accepted Accounting
      Principals ("GAAP"), the U.S. Securities and Exchange Commission ("SEC")
      accounting rules requiring certain accounting or footnote disclosures, and
      SEC
      rules and regulations governing Form 8-K and Form 10-K under the Act, and that
      subject to the above rules and regulations the material contents of this
      Agreement as it relates to the disclosure requirements may be announced and
      filed with the SEC by XsunX without opportunity for
      Sencera
      to
      oppose such filing or reporting.  XsunX does not anticipate the disclosure
      by it of the contents of the documents listed in Exhibit “A” and will only
      disclose the contents of the documents listed in Exhibit “A” if required to do
      so under applicable law, rule, or regulation or by
      a
      valid and enforceable order issued by a court or agency, including the SEC,
      of
      competent jurisdiction. XsunX will use reasonable commercial efforts to
      provide advanced written notice to Sencera if XsunX is required by the SEC
      to
      disclose the contents of any of the documents listed in
      Exhibit “A.” While XsunX shall file said documents if so required by the SEC, it
      will include a request for confidential treatment of said documents with any
      such filing. 

     

    
      
        
        

      

      
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    1.5. Mutual
      General Release.
      Upon
      the full payment of the Settlement Amount by Sencera to XsunX as aforementioned,
      XsunX on the one hand and Sencera on the other hand, on behalf of such Party
      and
      the agents, servants, employees, representatives, successors, assigns, officers,
      directors, members, managers, parents, subsidiaries, and affiliates of such
      Party, shall, and hereby do, fully release and discharge the other Party, and
      the agents, servants, employees, representatives, successors, assigns, officers,
      directors, members, managers, parents, subsidiaries, and affiliates of such
      other Party, from all rights, claims, liabilities, actions, causes of action,
      and damages, which the one Party has or may have against the other Party with
      respect to the matters set forth in or related to the Technology Agreement,
      Loan
      Agreement, and Note, whether known or unknown.

    


    1.6. Waiver
      of Civil Code Section 1542.
      Each of
      the Parties hereto knowingly and expressly waive the provisions of California
      Civil Code Section 1542 pertaining to General Releases. California Civil Code
      Section 1542 provides:

    


    "A
      general release does not extend to claims which the creditor does not know
      or
      suspect to exist in his favor at the time of executing the release, which if
      known by him must have materially affected his settlement with the
      debtor."

    


    1.7. No
      Admission of Liability.
      This
      Agreement is not an admission of liability by any of the Parties hereto for
      any
      purpose. The settlement set forth herein is of a contested matter and by
      settling, no Party admits any liability in regard to any matter whatsoever.
      

    


    1.8. Advice
      of Counsel.
      This
      Agreement is freely and voluntarily entered into and executed by the Parties,
      each of the Parties hereto being duly represented by counsel. Each of the
      Parties have been advised of and understands the terms and conditions of this
      Agreement.

    


    1.9. Authority
      to Execute Agreement.
      Each
      Party hereto represents and warrants that any individual executing this
      Agreement on behalf of a corporate or limited liability company entity has
      the
      requisite power and authority to so execute this Agreement on behalf of the
      corporation or limited liability company and bind any corporate or limited
      liability company entity purported to be a Party hereto to the obligations
      and
      duties set forth herein.

    


    1.10. Warranties
      of All Parties.
      Each
      Party hereto represents and warrants that such Party has not assigned, sold
      or
      transferred, nor purported to have assigned, sold or transferred, any rights,
      claims or actions herein released, including any rights, claims or actions
      pertaining to the subject matter of this Agreement.

    


    1.11. Non-Solicitation.
      Each
      Party acknowledges that all information pertaining to the officers and employees
      of the other Party (“Employing/Engaging Party”) shall be deemed to constitute
      confidential information hereunder and under the confidentiality provisions
      of
      section 8 of the Technology Agreement. Neither Party (nor their directors,
      officers, employees, members, managers, parents, subsidiaries, or affiliates)
      shall, directly or indirectly, solicit, employ, engage or otherwise obtain
      the
      services of any of the officers or employees of the other Employing/Engaging
      Party for a period of two (2) years from the date of this Agreement without
      the
      prior written consent of the other Employing/Engaging Party.

    


    
      
        
        

      

      
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    ARTICLE
      2.

    


    MISCELLANEOUS

    2.1 Recitals.
      The
      recitals set forth above are incorporated herein by this reference and made
      a
      part of this Agreement.

    


    2.2 Expenses.
      Each of
      the Parties shall pay all costs and expenses incurred or to be incurred by
      it in
      negotiation and preparing this Agreement, and in closing and carrying out the
      transactions contemplated herein.

    


    2.3. 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.

    


    2.4. Entire
      Agreement; Modification; Waiver.
      This
      Agreement constitutes the entire agreement between the Parties hereto pertaining
      to the subject matter contained in it and supersedes all prior and
      contemporaneous agreements, representations and understandings of the Parties.
      No waiver of any of the provisions of this Agreement shall be deemed, or shall
      constitute a waiver of any other provision, whether or not similar, nor shall
      any waiver constitute a continuing waiver. No waiver shall be binding unless
      executed in writing by the Party making the waiver.

    


    2.5. Severability.
      Should
      any provision or portion of this Agreement be held or otherwise become
      unenforceable or invalid for any reason, the remaining provisions and portions
      of this Agreement shall be unaffected by such unenforceability or
      invalidity.

    


    2.6. 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 person 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 persons to any 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.

    


    2.7. Assignment.
      This
      Agreement shall be binding on, and shall inure to the benefit of the Parties
      to
      it and their respective heirs, legal representatives, successors and
      assigns.

    


    2.8. Specific
      Performance.
      Each
      Party's obligations under this Agreement are unique. If any Party should default
      in its obligations under the terms of 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 sue in equity for specific performance, and
      the Parties hereto each expressly waive the defense that a remedy in damages
      will be adequate.

    


    
      
        
        

      

      
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    2.9. Recovery
      of Litigation Costs.
      If any
      legal action, 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 attorney's fees and other costs incurred
      in
      that action or proceeding, in addition to any other relief to which said
      prevailing Party may be entitled.

    


    IN
      WITNESS WHEREOF,
      the
      Parties to this Settlement Agreement have duly executed it to be effective
      as of
      the day first written above.

     

    


    
      	 	
              XsunX:

            
	 	 
	 	
              XsunX,
                Inc., a Colorado Corporation

            
	 	 
	 	 
	
              Dated:

            	
              By:
                _____________________________________

            
	
              June
                13, 2008

            	
                    
                Tom Djokovich, CEO 

            
	 	 
	 	 
	 	
              Sencera:

            
	 	 
	 	
              Sencera,
                LLC, a North Carolina Limited Liability

            
	 	
              Company

            
	 	 
	 	 
	
              Dated:

            	
              By:
                ____________________________________

            
	
              June
                13, 2008

            	
                    
                Dr. Rusty Jewett, Manager

            


    

    


    
      
        
        

      

      
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