Document:

LOAN AGREEMENT

         THIS LOAN AGREEMENT  ("Agreement")  is made effective as of the 1st day
of  January,  2007,  by and  between  SENCERA,  LLC,  a North  Carolina  limited
liability  company  ("Sencera"  or  "Debtor"),   and  XSUNX,  INC.,  a  Colorado
corporation  ("XsunX" or "Lender").  Debtor  and/or Lender are sometimes  herein
referred to individually as a "party" and collectively as the "parties."

                                 R E C I T A L S

         WHEREAS,  Debtor and Lender are entering into a Technology  Development
and License  Agreement  ("License")  contemporaneously  herewith  whereby Debtor
shall, inter alia, license certain technology to Lender; and

         WHEREAS,  Debtor and Lender are  entering  into a  Promissory  Note for
Installment  Credit  ("Note")  contemporaneously   herewith,  which  Note  shall
evidence  the loans made by Lender to Debtor  hereunder  to be used by Debtor to
develop technology subject to the License; and

         WHEREAS, Debtor and Lender desire to enter into this Agreement in order
to set forth the terms and conditions pursuant to which Lender shall provide the
installment credit to Debtor under the Note;

         NOW,  THEREFORE,  in consideration of the mutual covenants contained in
this Agreement,  and for other good and valuable consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Credit Extension Advances.  Lender shall make credit extension advances under
that certain  Promissory Note for  Installment  Credit referred to herein as the
"Note"  (and  further  identified  herein  below) in lawful  money of the United
States of America as follows:

1.1. The sum of Four Hundred  Thousand  Dollars  ($400,000.00)  to Debtor on the
date  hereof by wire  transfer  of  immediately  available  funds to an  account
designated in writing by Debtor.

1.2.  The  sum  of  One  Hundred  Thirty-Seven  Thousand  Five  Hundred  Dollars
($137,500.00) per month for a period of eight (8) consecutive  months,  with the
first of such  payments to be made on February 1, 2007.  Lender  shall make each
such  advance on the first day of each  month by wire  transfer  of  immediately
available funds to an account designated in writing by Debtor.

1.3. The sum of the principal amount of all credit  extensions made hereunder by
Lender  shall bear  accrued  interest at the rate of 10 percent  (10%) per annum
compounded  annually on the basis of a 365 day year  payable in lawful  money of
the United States of America.

<PAGE>

1.4. The above sums loaned and extended as credit under this Agreement,  and all
other  amounts  expended,  paid,  or incurred  by Lender  under the Note or this
Agreement  with regard to Debtor,  and all other amounts made the  obligation of
Debtor as set forth herein, shall be deemed extensions of credit under the Note.

1.5. The maximum  principal amount of all credit extensions made by Lender under
this  Agreement  shall not exceed One  Million  Five  Hundred  Thousand  Dollars
($1,500,000.00) (the "Total Commitment") in lawful money of the United States of
America, which maximum amount shall be subject to increase pursuant to the Right
of First Offer set forth in Section 8 herein, if applicable, or otherwise as set
forth in this Agreement.

1.6.  Notwithstanding  anything to the contrary herein,  all agreements  between
Debtor and  Lender are  expressly  limited  so that in no  contingency  or event
whatsoever,  whether by acceleration of maturity of any unpaid principal balance
or otherwise,  shall the amount, if any, paid or agreed to be paid to Lender for
the use,  forbearance  or  detention of the money to be advanced  hereunder,  or
pursuant to the Note or otherwise,  exceed the highest  lawful rate  permissible
under applicable usury laws. If, for any circumstances  whatsoever,  fulfillment
of any provision of this Agreement,  or of the Note or any other  agreement,  at
the time performance of such provision shall be due, shall involve  transcending
the limit of validity prescribed by law which a court of competent  jurisdiction
may deem  applicable  thereto,  then ipso facto,  the obligation to be fulfilled
shall be reduced to the limit of such  validity,  and if from any  circumstances
Lender shall ever receive an amount which would be excessive interest,  the same
shall be applied to the reduction of the unpaid principal balance due thereunder
and not to the payment of interest.  This  provision  shall  control every other
provision of all agreements between Debtor and Lender.

2. Repayment of the Note;  Cancellation.  Subject to the  Conversion  Rights set
forth in Section 8, Debtor shall repay the outstanding principal balance of, and
all accrued interest on, the Note at the time and in the manner set forth in the
Note.  Upon  repayment of the Note,  Lender  shall  surrender to Debtor the Note
marked "cancelled."

3. Obligations  Secured.  This Agreement is intended to secure,  and does hereby
secure, the payment, in lawful money of the United States of America, to Lender,
of the following:

3.1. The obligations  (hereinafter  referred to as the  "Obligation" or "Secured
Obligations") of Debtor under the Note; and

3.2. Due, prompt and full payment of all other amounts (including  principal and
interest,  additional  advances,  and any and all renewals and extensions of any
obligations)  now or  hereafter  owing by Debtor  to  Lender,  whether  Debtor's
obligation to pay Lender said amounts be direct,  indirect,  contingent,  joint,
several,  or otherwise  secured and are evidenced by a promissory  note or other
written instrument; and

<PAGE>

3.3. Due,  prompt and faithful  performance of all of Debtor's  obligations  and
agreements contained in this Agreement or any other agreement to which Debtor is
a party (or by which Debtor is bound) and to which Lender is a party or of which
Lender is a beneficiary.

4. Events of Default. For all purposes of this Agreement,  the occurrence of any
or more of the  following  shall  constitute  a "Default"  by Debtor  under this
Agreement  (whatever the reason for such Default and whether it may be voluntary
or  involuntary  or be effected by operation  of law  pursuant to any  judgment,
decree  or  order  of any  court  or  any  order,  rule  or  regulations  of any
administrative or governmental body):

4.1.  Debtor's breach or failure to pay when due any principal or interest under
the Note and such failure continues for a period of thirty (30) Days.

4.2.  Debtor's  breach or failure to comply  with any of its  obligations  under
Section 8 or Section 9 and such failure  continues  beyond the applicable  grace
period set forth in Section 6.

4.3. The filing by or against Debtor of any petition,  or commencement by Debtor
of any  proceeding,  under the Bankruptcy Act or any state  insolvency law which
remains undismissed or otherwise unstayed for a period of sixty (60) days.

4.4.  The  making  by  Debtor  of any  general  assignment  for the  benefit  of
creditors.

4.5. The filing of a voluntary or involuntary  application for or appointment of
a receiver with regard to Debtor,  which filing remains undismissed or otherwise
unstayed for a period of sixty (60) days.

4.6. The  occurrence of any such petition,  filing or application  naming Debtor
which then results in entry of an order for relief and any such  adjudication or
appointment remains undischarged,  undismissed or unstayed for a period of sixty
(60) days.

4.7.     The liquidation of Debtor.

4.8.     The dissolution of Debtor.

4.9. The Debtors  failure to perform any material terms of this  agreement,  the
Note or the Technology  Development  Agreement and Debtor's failure to cure such
failure under Section 6.

5.  Remedies  in  Event  of  Default.  After  a  Default  hereunder,  and  after
application  of any applicable  cure period set forth herein,  Lender may do any
one or more or all of the following:

<PAGE>

5.1. If such Default occurs under Section 4.3, 4.4, 4.5 or 4.6,  without further
notice or demand, accelerate the Note and declare all obligations and sums owing
by Debtor to Lender to become immediately due and payable;

5.2. If such  Default  occurs  under any Section  other than those  described in
Section 5.1 above, upon prior written notice to Debtor,  accelerate the Note and
declare all obligations and sums owing by Debtor to Lender to become immediately
due and payable;

5.3.     Exercise the Conversion Right as described in Section 8.

5.4.     Exercise any other right or remedy provided by law.

6. Cure.  If any  default,  other  than a default in payment of money  under the
Note, is curable and if Debtor has not been given a prior written notice of such
default  by  Lender,  such  default  may be cured  (and no  Default  shall  have
occurred) if Debtor,  after Lender sends written  notice  demanding cure of such
default,  (a) cures such default  within thirty (30) Days (the term "Days" shall
mean calendar  domestic  business days and shall exclude legal federal holidays,
California state holidays, and weekends); or (b), if the cure requires more than
thirty (30) Days,  immediately  initiates  steps which Lender deems, in Lender's
reasonable  discretion,  to be  sufficient  to cure such default and  thereafter
continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

7.  Warranties,  Representations  and  Covenants.  Debtor  hereby  warrants  and
represents to Lender and covenants for the benefit of Lender as follows:

7.1. Debtor is a limited liability company duly organized,  validly existing and
in good  standing  under  the  laws of the  State  of  North  Carolina  with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Debtor has no subsidiaries.
Debtor is duly  qualified  to do business  and is in good  standing as a foreign
limited  liability  company or other  entity in each  jurisdiction  in which the
nature  of the  business  conducted  or  property  owned by  Debtor  makes  such
qualification necessary,  except where the failure to be so qualified or in good
standing, as the case may be, could not,  individually or in the aggregate,  (a)
adversely affect the legality,  validity or enforceability of the Note or any of
this Agreement or the License (collectively,  the "Transaction Documents"),  (b)
have or result  in a  material  adverse  effect on the  results  of  operations,
assets,  or condition  (financial or otherwise) of Debtor,  taken as a whole, or
(c)  adversely  impair the ability of Debtor to perform  fully on a timely basis
its obligations under any of the Transaction Documents.

7.2. Debtor has and at all times will continue to have good and marketable title
to all of its assets used in the  operation of its business  (such  assets,  the
"Assets"),  free  and  clear  of  all  liens,  security  interests,   claims  or
encumbrances of any kind except, if any, those set forth on Schedule 7.2 hereto.

<PAGE>

7.3.  Debtor shall not directly or indirectly  sell,  lease,  transfer,  assign,
abandon or otherwise  dispose of any material  portion of its Assets (other than
(a) sales of inventory to buyers in the ordinary  course of business,  (b) sales
of Assets that Debtor  determines  are no longer used or useful in the  ordinary
course of business or (c) subject to coterminous re-payment or conversion of the
Note  enter  into a sale of all or  substantially  all of the  Assets of (i) the
Company as a whole or (ii) any division or subsidiary of the Company).

7.4. Debtor shall at all times maintain,  with  financially  sound and reputable
insurers,  adequate  insurance  with respect to the Assets.  All such  insurance
policies  shall be in such  form,  substance,  amounts  and  coverage  as may be
satisfactory  to Lender and shall  provide for thirty  (30) days' prior  written
notice to Lender of cancellation or reduction of coverage.  Debtor shall provide
evidence of such insurance and a lender's loss payable endorsement  satisfactory
to Lender.

7.5.  Debtor is and at all  times  will  continue  to be in  compliance,  in all
material   respects,   with  the  requirements  of  all  material  laws,  rules,
regulations and orders of any  governmental  authority  relating to its business
(including laws, rules, regulations and orders relating to income,  withholding,
excise,  property and social security taxes, minimum wages,  employee retirement
and welfare benefits,  employee health and safety, or environmental matters) and
all material  agreements or other instruments binding on Debtor or its property.
Debtor shall pay and discharge all taxes,  assessments and governmental  charges
against  Debtor or any Assets when due,  unless the same are being  contested in
good faith. Lender may establish reserves for the amount contested and penalties
which may accrue thereon.

7.6. With respect to Debtor's equipment, Debtor shall keep the equipment in good
order and repair,  and in running and  marketable  condition,  ordinary wear and
tear excepted.

7.7. Debtor will not,  directly or indirectly  other than in the ordinary course
of business enter into any sale,  lease or other  transaction  with any officer,
director,  employee,  shareholder  or affiliate of Debtor on terms that are less
favorable  to Debtor than those which might be obtained at the time from persons
who are not an officer, director, employee, shareholder or affiliate of Debtor.

7.8. Upon the occurrence of a Default,  Debtor shall pay, on Lender's demand and
subject to all applicable cure periods,  reasonable costs, expenses, filing fees
and taxes payable in connection  with the collection,  liquidation,  enforcement
and defense of the Obligations and Lender's rights under this Agreement.

<PAGE>

7.9. The to the best of Debtor's  knowledge,  none of Debtor's  Assets have ever
been  designated  or  identified  in any manner  pursuant  to any  environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any  environmental  protection  statute.  No
lien  arising  under any  environmental  protection  statute has attached to any
revenues or to any real or  personal  property  owned by Debtor.  Debtor has not
received  a summons,  citation,  notice,  or  directive  from the  Environmental
Protection  Agency or any other federal or state  governmental  agency regarding
any action or  omission  by Debtor  resulting  in the  releasing,  or  otherwise
exposing of hazardous waste or hazardous substances into the environment. Debtor
is and will continue to be in  compliance  (in all material  respects)  with all
statutes, regulations, ordinances and other legal requirements pertaining to the
production, storage, handling, treatment, release, transportation or disposal of
any hazardous waste or hazardous substance.

8. Conversion  Election.  The parties hereto shall have the right to convert all
amounts  outstanding  under the Note (such  right,  the  "Conversion  Right") as
follows:

8.1. At any time after the third (3rd) anniversary of the effective date hereof,
either party may elect,  by  providing  written  notice to the other  party,  to
convert the Note (as defined below).

8.2. If the  Development  and License  Agreement  results in a process which can
produce  solar cells at a cost less than $1 US per peak watt,  then either party
may elect to convert the Note into an extension of the License.

8.3. If the Development and License Agreement does not result in a process which
can  produce  solar  cells at a cost less than $1 US per peak watt,  then either
party may elect, by providing written notice to Lender, to convert the Note into
the Sencera Membership Interest (as defined below).

8.4.  Upon the  conversion  of the Note into an extension  of the  License,  the
License and all terms and conditions  thereunder  shall be extended for a period
of three (3) years.  Upon the conversion of the Note into an equity  interest in
Sencera,  Lender shall agree to be bound by, and execute and deliver to Sencera,
a counterpart  signature page of the amended and restated operating agreement of
Sencera  or any  successor  agreement,  in  each  case,  in form  and  substance
satisfactory to Sencera.  The restated operating  agreement will provide for tax
offset distributions for the benefit of Lender and will not have a Manager Power
of Attorney provision. Upon satisfaction of such conditions, Lender shall become
a "Member" of Sencera with respect to the Sencera  Membership  Interest issuable
to Lender  upon  exercise  of the  Conversion  Rights.  For the  purpose of this
Agreement,  the "Sencera  Membership  Interest" shall mean an equity interest in
Sencera which represents a fully-diluted  ownership  percentage of Sencera equal
to (a) a  fraction,  the  numerator  of  which  is the  total  principal  amount
outstanding  under the Note and the denominator of which is the Total Commitment
(as  increased  pursuant  to the Right of First  Offer set forth in  Section  8)
multiplied by (b) 7.5%. A party  exercising  Conversion  Rights  hereunder  must
provide  the other  party with no more than  ninety (90) and no less than thirty
(30) days prior written notice of the exercise  thereof.  Upon  effectiveness of
such election,  the Note, and all sums due thereunder,  shall be deemed paid and
discharged in full and this Agreement shall be terminated subject to the express
survival of any provisions hereof.

<PAGE>

9. Right of First  Offer.  To the extent that Debtor shall in good faith seek an
aggregate  amount of  financing  or  capital  equal to or less than One  Million
Dollars  ($1,000,000)  aggregate  (the  "Financing  Amount"),  for  any  purpose
whatsoever,  Lender shall have,  and Debtor hereby grants to Lender,  a right of
first offer to lend or fund the  Financing  Amount on the best terms then deemed
reasonable by Lender ("Right of First Offer"). The Right of First Offer shall be
exercised in good faith but shall not obligate  Lender to lend or provide  funds
to Debtor unless it is accepted by Debtor in full by mirror  acceptance  without
alteration or different or additional terms or conditions.  Notwithstanding  the
foregoing,  Lender may waive or decline to exercise its Right of First Offer. If
the  amount  sought by Debtor  is equal to or less  than the  Financing  Amount,
Debtor  shall  provide  Lender  with a written  notice  setting  forth  Debtor's
anticipated   financing  or  capital   requirements  and  acceptable  terms  and
conditions.   Lender   shall  have  ten  (10)  Days  to  make  its  best  offer.
Notwithstanding  anything  contained  herein,  if the amount sought by Debtor is
equal to or less than the  Financing  Amount,  Debtor shall not  negotiate  with
third parties to obtain such  financing or capital unless and until Debtor shall
have  rejected  Lender's  best offer in  writing  and,  if Debtor  has  rejected
Lender's best offer,  Debtor shall not obtain such financing or capital on terms
or conditions  which are less favorable than the terms and  conditions,  if any,
offered by Lender.  Any sums loaned to Debtor  pursuant to exercise of the Right
of First Offer may be, if  appropriate,  added to an  included in the  principal
balance  due under the Note.  For the  avoidance  of doubt,  to the extent  that
Debtor  shall in good  faith  seek an amount of  financing  or  capital  that is
greater than the Financing  Amount,  Debtor shall not be subject to the Right of
First Offer  hereunder  and shall have no  obligation to allow Lender to lend or
fund any of the financing or capital sought in such transaction.

10. Notices.  All notices,  requests,  demands, or any other communication under
this  Note  shall be in  writing.  Notice  shall be  sufficiently  given for all
purposes as follows:

10.1. Personal delivery.  When personally delivered to the recipient,  notice is
effective upon delivery.

10.2.  First-class  mail. When mailed via first class to the last address of the
recipient  known to the party giving notice,  notice is effective three (3) mail
delivery days after deposit in a United States Postal Service office or mailbox.

10.3.  Certified mail. When mailed via certified mail, return receipt requested,
notice is effective upon receipt, if delivery is confirmed by a return receipt.

10.4.  Overnight  delivery.  When  delivered  via  overnight  delivery  (Federal
Express,  Airborne, United Parcel Service, DHL, WorldWide Express, United States
Postal Service, or other reputable  carrier),  charges prepaid or charged to the
sender's account, notice is effective upon delivery, if delivery is confirmed by
the delivery service.

10.5. Addresses.  Addresses for purpose of giving notice, or making payment, are
as follows:

<PAGE>

         If to Debtor:

                           Sencera, LLC
                           3101 Stafford Drive
                           Charlotte, NC 28208
                           Attention: Rusty Jewett, President and Manager

         With a copy to (which copy shall not constitute notice):

                           Kennedy Covington Lobdell & Hickman, L.L.P.
                           Hearst Tower
                           214 N. Tryon, Street, 47th Floor
                           Charlotte, NC 28202
                           Attention:  Paul A. Steffens, Esq.

         If to Lender:

                           XsunX, Inc.
                           65 Enterprise
                           Aliso Viejo, CA 92656
                           Attention: Tom Djokovich, President and CEO

         With a copy to (which copy shall not constitute notice):

                           Floratos, Loll & Devine
                           A Professional Law Corporation
                           18881 Von Karman Avenue
                           Suite 220
                           Irvine, CA 92612
                           Attention: Robert A. Loll, Esq.

10.6.  Change of  Address.  Any party may change its address by giving the other
party notice of the change in any manner permitted by this Agreement.

11. Enforcement of Rights.  Debtor agrees to reimburse Lender for all reasonable
costs and expenses (including  reasonable attorneys' fees and costs) incurred by
Lender in protecting and enforcing this Agreement.

12.  Rights  Cumulative.  All rights  and  remedies  granted  Lender by (i) this
Agreement,  (ii) any other agreement Lender may now, or in the future, have with
Debtor, or (iii) otherwise, shall be cumulative and not in the alternative.

13. Each party's obligations under this Agreement are unique. Any non-defaulting
party,  in  addition  to any other  remedies,  may bring an action for  specific
performance without posting bond or other security.

<PAGE>

14. No Waiver.  No waiver by Lender shall be effective  unless in writing signed
by Lender, and it shall be effective only to the extent  specifically  stated in
said  writing.  No failure to  exercise,  or delay in  exercising,  any right or
remedy by Lender shall be a waiver.

15.  Severability.  Should any of the  provisions  of this  Agreement be for any
reason  invalid,  the  invalidity  thereof  shall  not  affect  any of the other
provisions  of this  Agreement,  and all  invalid  provisions  hereof  shall  be
disregarded to the extent of their invalidity.

16. Right to Offset.  Debtor is hereby  authorized  at any time and from time to
time, with 30 days notice to the Lender, to setoff and apply any and all amounts
at any time owing by Lender,  (which  notice will  include a full  statement  of
account detailing the proposed offset),  to Debtor against all amounts which may
be owed to Lender by Debtor in  connection  with this  Agreement  or the Note in
connection with royalty obligations contained in the Development Agreement.

17.  Successors and Assigns.  The  provisions of this  Agreement  shall bind and
inure to the benefit of the parties  hereto and their  successors  and  assigns.
Neither  party  hereto may  assign any of its  rights,  or  delegate  any of its
obligations,  under this Agreement or the Note without the prior written consent
of the other  party,  such  consent not to be  unreasonably  withheld.  Any such
purported  assignment  or delegation  without the prior  written  consent of the
other party shall be void and of no effect.

18.  Entire  Agreement.  This  Agreement  and the Note  constitutes  the  entire
agreement of the parties in relation to the subject matter hereof and supersedes
all prior and contemporaneous agreements, representations, and understandings of
the parties. No supplement, modification, or amendment of this agreement will be
binding unless  executed in writing by all the parties.  No waiver of any of the
provisions of this  agreement will  constitute a waiver of any other  provision,
whether or not similar,  nor will any waiver constitute a continuing  waiver. No
waiver  will be binding  unless  executed  in  writing  by the party  making the
waiver.

19.  Governing  Law. This Agreement will be construed and enforced in accordance
with,  and the rights of the parties  will be governed by, the laws of the State
of California  without  regard to or application of choice of law or conflict of
law rules or principles.

20. Venue.  Venue in any action  arising by reason of this  Agreement  shall lie
exclusively in Orange County, California.

21. Forum  Selection.  Any litigation  hereunder  shall be brought and litigated
exclusively in the state courts sitting in Orange County,  California, or in the
United  States  District  Court(s)  sitting in Orange  County,  California.  All
parties hereto consent to the personal jurisdiction of such courts and waive any
defense of forum non conveniens.  Each party hereby  irrevocably  waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such  action,  suit or  proceeding  brought in
such a court and any claim that any such action,  suit or proceeding  brought in
such a court has been brought in an inconvenient forum.

<PAGE>

         IN WITNESS WHEREOF, Debtor and Lender have hereunto made this Agreement
effective as of the day and year first hereinabove written.

                                            Debtor:

                                            SENCERA, LLC,
                                            a North Carolina limited liability
                                            company

                                            By: ________________________________
                                             Rusty Jewett, President and Manager

                                            Lender:

                                            XSUNX, INC.,
                                            a Colorado corporation

                                            By: ________________________________
                                               Tom Djokovich, President and CEO

<PAGE>

                                                   Schedule 7.2

                                                       Liens

1. Liens for taxes,  assessments or other governmental charges which are not yet
due and  payable  or which are being  contested  in good faith with a reserve or
other appropriate provision having been made therefor.

2. Liens of landlords, carriers, warehousemen,  mechanics, materialmen and other
similar  liens  imposed by law,  which are  incurred in the  ordinary  course of
business for sums not more than thirty (30) days  delinquent  or which are being
contested in good faith.

3.  Liens  (other  than any lien  imposed  under or in  connection  with  ERISA)
incurred or deposits made in the ordinary  course of business in connection with
workers'  compensation,   unemployment  insurance  and  other  types  of  social
security,  or to secure  the  performance  of  tenders,  statutory  obligations,
surety,  stay,  customs and appeal bonds, bids,  leases,  government  contracts,
trade  contracts,  performance  and  return of money  bonds  and  other  similar
obligations (exclusive of obligations for the payment of borrowed money).

4.       Liens for purchase money obligations to acquire assets.

5.  Easements,  rights  of  way,  restrictions  and  other  similar  charges  or
encumbrances  not interfering in any material  respect with the ordinary conduct
of the business of the Debtor.PROMISSORY NOTE

                               INSTALLMENT CREDIT
                       Secured Pursuant to Loan Agreement

$1,500,000 Maximum Installment Credit                        January 01, 2007
Subject to Increase Pursuant to Loan Agreement

         For value received,  the  undersigned,  Sencera,  LLC, a North Carolina
limited liability company  ("Maker"),  hereby promises to pay to XsunX,  Inc., a
Colorado corporation  ("Holder"),  or order at such place or to such other party
or parties as Holder may from time to time  designate,  the principal sum of all
credit extensions made by Holder under the Loan Agreement (as defined below), in
lawful money of the United States of America,  with accrued  interest thereon at
the rate of ten percent (10%) per annum,  compounded  annually on the basis of a
365 day year.  The unpaid  principal  balance  and all unpaid  interest  accrued
thereon  shall be due and payable on the seventh (7th)  anniversary  of the date
hereof,  except as  otherwise  set forth  herein  or in the Loan  Agreement  (as
defined below).

         Holder shall make credit extensions under this Promissory Note ("Note")
from time to time in lawful  money of the United  States of America on the terms
and conditions set forth in that certain Loan Agreement of even date herewith by
and among  Maker,  as Debtor,  and  Holder,  as Lender  (the "Loan  Agreement").
Capitalized  terms used but not defined herein shall have the meanings  ascribed
to such terms in the Loan Agreement.  This Note is secured  pursuant to the Loan
Agreement.

         The maximum  principal  credit extension under the Loan Agreement shall
be One Million Five Hundred Thousand Dollars  ($1,500,000.00) in lawful money of
the United States of America, subject to increase pursuant to the Right of First
Offer or otherwise  as set forth in the Loan  Agreement.  Any Default  under the
Loan Agreement shall be a breach hereunder,  allowing Holder to, among its other
remedies,  accelerate  this Note in accordance with the terms and conditions set
forth in the Loan Agreement.

         This Note shall be subject to the payment provisions and the conversion
provisions, as set forth in the Loan Agreement, by which this Note may be deemed
to be paid and discharged in full.

         Maker may at any  time,  and from time to time,  prepay  the  principal
and/or interest  outstanding  hereunder,  in whole or in part,  without penalty.
Such prepayment shall be made in lawful money of the United States of America to
the address  provided by Holder for such  purposes or at such other place as the
holder hereof may designate from time to time.

         Any delay by Holder or its  assignee in  exercising,  or the failure to
exercise,  any rights  under this Note shall not  constitute  a waiver of any of
Holder's rights,  or of any breach,  default or failure of condition of or under
this  Note.  No waiver by Holder of any of its  rights,  or of any such  breach,
default  or  failure  of  condition  shall be  effective,  unless  the waiver is
expressly  stated in a writing  signed by Holder.  All of  Holder's  remedies in
connection  with this Note or under  applicable  law  shall be  cumulative,  and
Holder's  exercise of any one or more of those  remedies shall not constitute an
election of remedies.

<PAGE>

         If this  Note is not paid (or  deemed to have  been  paid  pursuant  to
permissible  offset or as otherwise set forth in the Loan  Agreement)  when due,
whether at  maturity  or by  acceleration,  Maker  promises  to pay all costs of
collection,  including, but not limited to, reasonable attorneys' fees and costs
in accordance with the terms and conditions set forth in the Loan Agreement.

         Maker  expressly  waives  presentment,  protest and  demand,  notice of
protest,  demand and dishonor and  nonpayment of this Note and all other notices
of any kind, and expressly agrees that this Note, or any payment thereunder, may
be extended from time to time without  affecting the liability of Maker.  To the
fullest  extent  permitted by law, the defense of the statute of  limitations in
any action on this Note is waived by the undersigned.

Maker and Holder shall only assign their respective rights and obligations under
this Note in the manner set forth in the Loan Agreement. To the extent that this
Note may be assigned by either  Maker or Holder,  it shall inure to and bind the
heirs, legal representatives,  successors and assigns of Maker, Holder and their
respective successors and permitted assigns.

         No single or partial exercise of any power hereunder shall preclude any
other or  further  exercise  thereof or the  exercise  of any other  power.  The
release of any party  liable  under this Note shall not  operate to release  any
other party liable hereon. Time is of the essence of this Note.

         All agreements  between Maker and Holder are expressly  limited so that
in no contingency or event  whatsoever,  whether by  acceleration of maturity of
the unpaid principal balance hereof or otherwise, shall the amount, if any, paid
or agreed to be paid to Holder  for the use,  forbearance  or  detention  of the
money to be advanced  hereunder exceed the highest lawful rate permissible under
applicable usury laws. If, for any circumstances whatsoever,  fulfillment of any
provision  hereof at the time  performance of such provision shall be due, shall
involve  transcending  the limit of validity  prescribed by law which a court of
competent  jurisdiction  may deem  applicable  thereto,  then  ipso  facto,  the
obligation to be fulfilled  shall be reduced to the limit of such validity,  and
if from any  circumstances  Holder  shall ever  receive an amount which would be
excessive  interest,  the same shall be applied to the  reduction  of the unpaid
principal  balance  due  hereunder  and not to the  payment  of  interest.  This
provision  shall control  every other  provision of all  agreements  between the
undersigned and Holder.

This Note,  along with the Loan Agreement,  including all exhibits,  constitutes
the entire agreement of the parties in relation to the subject matter hereof and
supersedes  all  prior  and  contemporaneous  agreements,  representations,  and
understandings of the parties.

This Note has been executed and  delivered in the State of California  and is to
be governed by and construed  according to the laws thereof without reference to
application  of choice of law rules or  principles.  Venue in any action arising
hereunder  shall lie  exclusively in Orange County,  California.  Any litigation
shall be brought  and  litigated  in the state  courts of  California  or in the
United States District Court(s) servicing California

<PAGE>

                        Maker:

                       Sencera, LLC, a North Carolina limited liability company

                       By: _______________________________
                           Rusty Jewett, President and Manager

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