Document:

REGISTRATION
        RIGHTS AGREEMENT

       

      REGISTRATION
        RIGHTS AGREEMENT
        (this
“Agreement”),
        dated
        as of July ___, 2005, by and between XSUNX,
        INC.,
        a
        Colorado corporation (the “Company”),
        and
CORNELL
        CAPITAL PARTNERS, LP,
        a
        Delaware limited partnership (the “Investor”).

       

      WHEREAS:

       

      A. In
        connection with the Standby Equity Distribution Agreement by and between
        the
        parties hereto of even date herewith (the “Standby
        Equity Distribution Agreement”),
        the
        Company has agreed, upon the terms and subject to the conditions of the Standby
        Equity Distribution Agreement, to issue and sell to the Investor that number
        of
        shares of the Company’s common stock, no par value per share (the “Common
        Stock”),
        which
        can be purchased pursuant to the terms of the Standby Equity Distribution
        Agreement for an aggregate purchase price of up to Ten Million
        Dollars ($10,000,000). Capitalized terms not defined herein shall
        have the
        meaning ascribed to them in the Standby Equity Distribution
        Agreement.

       

      B. To
        induce
        the Investor to execute and deliver the Standby Equity Distribution Agreement,
        the Company has agreed to provide certain registration rights under the
        Securities Act of 1933, as amended, and the rules and regulations thereunder,
        or
        any similar successor statute (collectively, the “Securities
        Act”),
        and
        applicable state securities laws.

       

      NOW,
        THEREFORE,
        in
        consideration of the premises and the mutual covenants contained herein and
        other good and valuable consideration, the receipt and sufficiency of which
        are
        hereby acknowledged, the Company and the Investor hereby agree as
        follows:

       

      1.  DEFINITIONS.

       

      As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      a.  “Person”
        means a
        corporation, a limited liability company, an association, a partnership,
        an
        organization, a business, an individual, a governmental or political subdivision
        thereof or a governmental agency.

       

      b.  “Register,”“registered,”
        and
“registration”
        refer
        to a registration effected by preparing and filing one or more Registration
        Statements (as defined below) in compliance with the Securities Act and pursuant
        to Rule 415 under the Securities Act or any successor rule providing for
        offering securities on a continuous or delayed basis (“Rule
        415”),
        and
        the declaration or ordering of effectiveness of such Registration Statement(s)
        by the United States Securities and Exchange Commission (the “SEC”).

       

      c.  “Registrable
        Securities”
        means
        the Investor’s Shares, as defined in the Standby Equity Distribution Agreement
        and shares of Common Stock issuable to Investors pursuant to the Standby
        Equity
        Distribution Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      d.  “Registration
        Statement”
        means a
        registration statement under the Securities Act which covers the Registrable
        Securities.

       

      2.  REGISTRATION.

       

      a.  Mandatory
        Registration.
        The
        Company shall prepare and file with the SEC a Registration Statement on Form
        S-1, SB-2 or on such other form as is available. The Company shall cause
        such
        Registration Statement to be declared effective by the SEC prior to the first
        sale to the Investor of the Company’s Common Stock pursuant to the Standby
        Equity Distribution Agreement.

       

      b.  Sufficient
        Number of Shares Registered.
        In the
        event the number of shares available under a Registration Statement filed
        pursuant to Section 2(a) is insufficient to cover all of the Registrable
        Securities which the Investor has purchased pursuant to the Standby Equity
        Distribution Agreement, the Company shall amend the Registration Statement,
        or
        file a new Registration Statement (on the short form available therefore,
        if
        applicable), or both, so as to cover all of such Registrable Securities which
        the Investor has purchased pursuant to the Standby Equity Distribution Agreement
        as soon as practicable, but in any event not later than fifteen (15) days
        after
        the necessity therefore arises. The Company shall use it best efforts to
        cause
        such amendment and/or new Registration Statement to become effective as soon
        as
        practicable following the filing thereof. For purposes of the foregoing
        provision, the number of shares available under a Registration Statement
        shall
        be deemed “insufficient to cover all of the Registrable Securities” if at any
        time the number of Registrable Securities issuable on an Advance Notice Date
        is
        greater than the number of shares available for resale under such Registration
        Statement.

       

      3.  RELATED
        OBLIGATIONS.

       

      a.  The
        Company shall keep the Registration Statement effective pursuant to Rule
        415 at
        all times until the date on which the Investor shall have sold all the
        Registrable Securities covered by such Registration Statement (the “Registration
        Period”),
        which
        Registration Statement (including any amendments or supplements thereto and
        prospectuses contained therein) shall not contain any untrue statement of
        a
        material fact or omit to state a material fact required to be stated therein,
        or
        necessary to make the statements therein, in light of the circumstances in
        which
        they were made, not misleading.

       

      b.  The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to a Registration Statement and
        the
        prospectus used in connection with such Registration Statement, which prospectus
        is to be filed pursuant to Rule 424 promulgated under the Securities Act,
        as may
        be necessary to keep such Registration Statement effective at all times during
        the Registration Period, and, during such period, comply with the provisions
        of
        the Securities Act with respect to the disposition of all Registrable Securities
        of the Company covered by such Registration Statement until such time as
        all of
        such Registrable Securities shall have been disposed of in accordance with
        the
        intended methods of disposition by the seller or sellers thereof as set forth
        in
        such Registration Statement. In the case of amendments and supplements to
        a
        Registration Statement which are required to be filed pursuant to this Agreement
        (including pursuant to this Section 3(b)) by reason of the Company’s filing a
        report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under
        the
        Securities Exchange Act of 1934, as amended (the “Exchange
        Act”),
        the
        Company shall have incorporated such report by reference into the Registration
        Statement, if applicable, or shall file such amendments or supplements with
        the
        SEC on the same day on which the Exchange Act report is filed which created
        the
        requirement for the Company to amend or supplement the Registration
        Statement.

       

      
        
           

        

        
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      c.  The
        Company shall furnish to the Investor without charge, (i) at least one copy
        of
        such Registration Statement as declared effective by the SEC and any
        amendment(s) thereto, including financial statements and schedules, all
        documents incorporated therein by reference, all exhibits and each preliminary
        prospectus, (ii) ten (10) copies of the final prospectus included in such
        Registration Statement and all amendments and supplements thereto (or such
        other
        number of copies as such Investor may reasonably request) and (iii) such
        other
        documents as such Investor may reasonably request from time to time in order
        to
        facilitate the disposition of the Registrable Securities owned by such
        Investor.

       

      d.  The
        Company shall use its best efforts to (i) register and qualify the Registrable
        Securities covered by a Registration Statement under such other securities
        or
“blue sky” laws of such jurisdictions in the United States as the Investor
        reasonably requests, (ii) prepare and file in those jurisdictions,
        such
        amendments (including post-effective amendments) and supplements to such
        registrations and qualifications as may be necessary to maintain the
        effectiveness thereof during the Registration Period, (iii) take such other
        actions as may be necessary to maintain such registrations and qualifications
        in
        effect at all times during the Registration Period, and (iv) take all other
        actions reasonably necessary or advisable to qualify the Registrable Securities
        for sale in such jurisdictions; provided, however, that the Company shall
        not be
        required in connection therewith or as a condition thereto to (w) make any
        change to its certificate of incorporation or by-laws, (x) qualify to do
        business in any jurisdiction where it would not otherwise be required to
        qualify
        but for this Section 3(d), (y) subject itself to general taxation in any
        such
        jurisdiction, or (z) file a general consent to service of process in any
        such
        jurisdiction. The Company shall promptly notify the Investor of the receipt
        by
        the Company of any notification with respect to the suspension of the
        registration or qualification of any of the Registrable Securities for sale
        under the securities or “blue sky” laws of any jurisdiction in the United States
        or its receipt of actual notice of the initiation or threat of any proceeding
        for such purpose.

       

      e.  As
        promptly as practicable after becoming aware of such event or development,
        the
        Company shall notify the Investor in writing of the happening of any event
        as a
        result of which the prospectus included in a Registration Statement, as then
        in
        effect, includes an untrue statement of a material fact or omission to state
        a
        material fact required to be stated therein or necessary to make the statements
        therein, in light of the circumstances under which they were made, not
        misleading (provided that in no event shall such notice contain any material,
        nonpublic information), and promptly prepare a supplement or amendment to
        such
        Registration Statement to correct such untrue statement or omission, and
        deliver
        ten (10) copies of such supplement or amendment to each Investor. The Company
        shall also promptly notify the Investor in writing (i) when a prospectus
        or any
        prospectus supplement or post-effective amendment has been filed, and when
        a
        Registration Statement or any post-effective amendment has become effective
        (notification of such effectiveness shall be delivered to the Investor by
        facsimile on the same day of such effectiveness), (ii) of any request by
        the SEC
        for amendments or supplements to a Registration Statement or related prospectus
        or related information, and (iii) of the Company’s reasonable determination
        that a post-effective amendment to a Registration Statement would be
        appropriate. 

       

      
        
           

        

        
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      f.  The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of a Registration Statement, or the suspension
        of the qualification of any of the Registrable Securities for sale in any
        jurisdiction within the United States of America and, if such an order or
        suspension is issued, to obtain the withdrawal of such order or suspension
        at
        the earliest possible moment and to notify the Investor of the issuance of
        such
        order and the resolution thereof or its receipt of actual notice of the
        initiation or threat of any proceeding for such purpose.

       

      g.  At
        the
        reasonable request of the Investor, the Company shall furnish to the Investor,
        on the date of the effectiveness of the Registration Statement and thereafter
        from time to time on such dates as the Investor may reasonably request (i)
        a
        letter, dated such date, from the Company’s independent certified public
        accountants in form and substance as is customarily given by independent
        certified public accountants to underwriters in an underwritten public offering,
        and (ii) an opinion, dated as of such date, of counsel representing the Company
        for purposes of such Registration Statement, in form, scope and substance
        as is
        customarily given in an underwritten public offering, addressed to the
        Investor.

       

      h.  The
        Company shall make available for inspection by (i) the Investor and (ii)
        one
        firm of accountants or other agents retained by the Investor (collectively,
        the
“Inspectors”)
        all
        pertinent financial and other records, and pertinent corporate documents
        and
        properties of the Company (collectively, the “Records”),
        as
        shall be reasonably deemed necessary by each Inspector, and cause the Company’s
        officers, directors and employees to supply all information which any Inspector
        may reasonably request; provided, however, that each Inspector shall agree,
        and
        the Investor hereby agrees, to hold in strict confidence and shall not make
        any
        disclosure (except to an Investor) or use of any Record or other information
        which the Company determines in good faith to be confidential, and of which
        determination the Inspectors are so notified, unless (a) the disclosure of
        such
        Records is necessary to avoid or correct a misstatement or omission in any
        Registration Statement or is otherwise required under the Securities Act,
        (b)
        the release of such Records is ordered pursuant to a final, non-appealable
        subpoena or order from a court or government body of competent jurisdiction,
        or
        (c) the information in such Records has been made generally available to
        the
        public other than by disclosure in violation of this or any other agreement
        of
        which the Inspector and the Investor has knowledge. The Investor agrees that
        it
        shall, upon learning that disclosure of such Records is sought in or by a
        court
        or governmental body of competent jurisdiction or through other means, give
        prompt notice to the Company and allow the Company, at its expense, to undertake
        appropriate action to prevent disclosure of, or to obtain a protective order
        for, the Records deemed confidential.

       

      i.  The
        Company shall hold in confidence and not make any disclosure of information
        concerning the Investor provided to the Company unless (i) disclosure of
        such
        information is necessary to comply with federal or state securities laws,
        (ii)
        the disclosure of such information is necessary to avoid or correct a
        misstatement or omission in any Registration Statement, (iii) the release
        of
        such information is ordered pursuant to a subpoena or other final,
        non-appealable order from a court or governmental body of competent
        jurisdiction, or (iv) such information has been made generally available
        to the
        public other than by disclosure in violation of this Agreement or any other
        agreement. The Company agrees that it shall, upon learning that disclosure
        of
        such information concerning the Investor is sought in or by a court or
        governmental body of competent jurisdiction or through other means, give
        prompt
        written notice to the Investor and allow the Investor, at the Investor’s
        expense, to undertake appropriate action to prevent disclosure of, or to
        obtain
        a protective order for, such information.

       

      
        
           

        

        
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      j.  The
        Company shall use its best efforts either to cause all the Registrable
        Securities covered by a Registration Statement (i) to be listed on each
        securities exchange on which securities of the same class or series issued
        by
        the Company are then listed, if any, if the listing of such Registrable
        Securities is then permitted under the rules of such exchange or to secure
        the
        inclusion for quotation on the National Association of Securities Dealers,
        Inc.
        OTC Bulletin Board for such Registrable Securities. The Company shall pay
        all
        fees and expenses in connection with satisfying its obligation under this
        Section 3(j).

       

      k.  The
        Company shall cooperate with the Investor to the extent applicable, to
        facilitate the timely preparation and delivery of certificates (not bearing
        any
        restrictive legend) representing the Registrable Securities to be offered
        pursuant to a Registration Statement and enable such certificates to be in
        such
        denominations or amounts, as the case may be, as the Investor may reasonably
        request and registered in such names as the Investor may request.

       

      l.  The
        Company shall use its best efforts to cause the Registrable Securities covered
        by the applicable Registration Statement to be registered with or approved
        by
        such other governmental agencies or authorities as may be necessary to
        consummate the disposition of such Registrable Securities.

       

      m.  The
        Company shall make generally available to its security holders as soon as
        practical, but not later than ninety (90) days after the close of the period
        covered thereby, an earnings statement (in form complying with the provisions
        of
        Rule 158 under the Securities Act) covering a twelve-month period beginning
        not
        later than the first day of the Company’s fiscal quarter next following the
        effective date of the Registration Statement.

       

      n.  The
        Company shall otherwise use its best efforts to comply with all applicable
        rules
        and regulations of the SEC in connection with any registration
        hereunder.

       

      o.  Within
        two (2) business days after a Registration Statement which covers Registrable
        Securities is ordered effective by the SEC, the Company shall deliver, and
        shall
        cause legal counsel for the Company to deliver, to the transfer agent for
        such
        Registrable Securities (with copies to the Investor) confirmation that such
        Registration Statement has been declared effective by the SEC in the form
        attached hereto as Exhibit
        A.

       

      p.  The
        Company shall take all other reasonable actions necessary to expedite and
        facilitate disposition by the Investor of Registrable Securities pursuant
        to a
        Registration Statement.

       

      
        
           

        

        
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      4.  OBLIGATIONS
        OF THE INVESTOR.

       

      The
        Investor agrees that, upon receipt of any notice from the Company of the
        happening of any event of the kind described in Section 3(f) or the first
        sentence of 3(e), the Investor will immediately discontinue disposition of
        Registrable Securities pursuant to any Registration Statement(s) covering
        such
        Registrable Securities until the Investor’s receipt of the copies of the
        supplemented or amended prospectus contemplated by Section 3(e) or receipt
        of
        notice that no supplement or amendment is required. Notwithstanding anything
        to
        the contrary, the Company shall cause its transfer agent to deliver unlegended
        certificates for shares of Common Stock to a transferee of the Investor in
        accordance with the terms of the Standby Equity Distribution Agreement in
        connection with any sale of Registrable Securities with respect to which
        the
        Investor has entered into a contract for sale prior to the Investor’s receipt of
        a notice from the Company of the happening of any event of the kind described
        in
        Section 3(f) or the first sentence of 3(e) and for which the Investor has
        not
        yet settled.

       

      5.  EXPENSES
        OF REGISTRATION.

       

      All
        expenses incurred in connection with registrations, filings or qualifications
        pursuant to Sections 2 and 3, including, without limitation, all registration,
        listing and qualifications fees, printers, legal and accounting fees shall
        be
        paid by the Company. 

       

      6.  INDEMNIFICATION.

       

      With
        respect to Registrable Securities which are included in a Registration Statement
        under this Agreement:

       

      a.  To
        the
        fullest extent permitted by law, the Company will, and hereby does, indemnify,
        hold harmless and defend the Investor, the directors, officers, partners,
        employees, agents, representatives of, and each Person, if any, who controls
        the
        Investor within the meaning of the Securities Act or the Exchange Act (each,
        an
“Indemnified
        Person”),
        against any losses, claims, damages, liabilities, judgments, fines, penalties,
        charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
        expenses, joint or several (collectively, “Claims”)
        incurred in investigating, preparing or defending any action, claim, suit,
        inquiry, proceeding, investigation or appeal taken from the foregoing by
        or
        before any court or governmental, administrative or other regulatory agency,
        body or the SEC, whether pending or threatened, whether or not an indemnified
        party is or may be a party thereto (“Indemnified
        Damages”),
        to
        which any of them may become subject insofar as such Claims (or actions or
        proceedings, whether commenced or threatened, in respect thereof) arise out
        of
        or are based upon: (i) any untrue statement or alleged untrue statement of
        a
        material fact in a Registration Statement or any post-effective amendment
        thereto or in any filing made in connection with the qualification of the
        offering under the securities or other “blue sky” laws of any jurisdiction in
        which Registrable Securities are offered (“Blue
        Sky Filing”),
        or
        the omission or alleged omission to state a material fact required to be
        stated
        therein or necessary to make the statements therein not misleading;
        (ii) any untrue statement or alleged untrue statement of a material
        fact
        contained in any final prospectus (as amended or supplemented, if the Company
        files any amendment thereof or supplement thereto with the SEC) or the omission
        or alleged omission to state therein any material fact necessary to make
        the
        statements made therein, in light of the circumstances under which the
        statements therein were made, not misleading; or (iii) any violation or alleged
        violation by the Company of the Securities Act, the Exchange Act, any other
        law,
        including, without limitation, any state securities law, or any rule or
        regulation there under relating to the offer or sale of the Registrable
        Securities pursuant to a Registration Statement (the matters in the foregoing
        clauses (i) through (iii) being, collectively, “Violations”).
        The
        Company shall reimburse the Investor and each such controlling person promptly
        as such expenses are incurred and are due and payable, for any legal fees
        or
        disbursements or other reasonable expenses incurred by them in connection
        with
        investigating or defending any such Claim. Notwithstanding anything to the
        contrary contained herein, the indemnification agreement contained in this
        Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
        out of or based upon a Violation which occurs in reliance upon and in conformity
        with information furnished in writing to the Company by such Indemnified
        Person
        expressly for use in connection with the preparation of the Registration
        Statement or any such amendment thereof or supplement thereto; (y) shall
        not be
        available to the extent such Claim is based on a failure of the Investor
        to
        deliver or to cause to be delivered the prospectus made available by the
        Company, if such prospectus was timely made available by the Company pursuant
        to
        Section 3(e); and (z) shall not apply to amounts paid in settlement of any
        Claim
        if such settlement is effected without the prior written consent of the Company,
        which consent shall not be unreasonably withheld. Such indemnity shall remain
        in
        full force and effect regardless of any investigation made by or on behalf
        of
        the Indemnified Person.

       

      
        
           

        

        
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      b.  In
        connection with a Registration Statement, the Investor agrees to indemnify,
        hold
        harmless and defend, to the same extent and in the same manner as is set
        forth
        in Section 6(a), the Company, each of its directors, each of its officers
        who
        signs the Registration Statement and each Person, if any, who controls the
        Company within the meaning of the Securities Act or the Exchange Act (each
        an
“Indemnified
        Party”),
        against any Claim or Indemnified Damages to which any of them may become
        subject, under the Securities Act, the Exchange Act or otherwise, insofar
        as
        such Claim or Indemnified Damages arise out of or is based upon any Violation,
        in each case to the extent, and only to the extent, that such Violation occurs
        in reliance upon and in conformity with written information furnished to
        the
        Company by the Investor expressly for use in connection with such Registration
        Statement; and, subject to Section 6(d), the Investor will reimburse any
        legal
        or other expenses reasonably incurred by them in connection with investigating
        or defending any such Claim; provided, however, that the indemnity agreement
        contained in this Section 6(b) and the agreement with respect to contribution
        contained in Section 7 shall not apply to amounts paid in settlement of any
        Claim if such settlement is effected without the prior written consent of
        the
        Investor, which consent shall not be unreasonably withheld; provided, further,
        however, that the Investor shall be liable under this Section 6(b) for only
        that
        amount of a Claim or Indemnified Damages as does not exceed the net proceeds
        to
        the Investor as a result of the sale of Registrable Securities pursuant to
        such
        Registration Statement. Such indemnity shall remain in full force and effect
        regardless of any investigation made by or on behalf of such Indemnified
        Party.
        Notwithstanding anything to the contrary contained herein, the indemnification
        agreement contained in this Section 6(b) with respect to any prospectus shall
        not inure to the benefit of any Indemnified Party if the untrue statement
        or
        omission of material fact contained in the prospectus was corrected and such
        new
        prospectus was delivered to the Investor prior to the Investor’s use of the
        prospectus to which the Claim relates.

       

      
        
           

        

        
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      c.  Promptly
        after receipt by an Indemnified Person or Indemnified Party under this Section
        6
        of notice of the commencement of any action or proceeding (including any
        governmental action or proceeding) involving a Claim, such Indemnified Person
        or
        Indemnified Party shall, if a Claim in respect thereof is to be made against
        any
        indemnifying party under this Section 6, deliver to the indemnifying party
        a
        written notice of the commencement thereof, and the indemnifying party shall
        have the right to participate in, and, to the extent the indemnifying party
        so
        desires, jointly with any other indemnifying party similarly noticed, to
        assume
        control of the defense thereof with counsel mutually satisfactory to the
        indemnifying party and the Indemnified Person or the Indemnified Party, as
        the
        case may be; provided, however, that an Indemnified Person or Indemnified
        Party
        shall have the right to retain its own counsel with the fees and expenses
        of not
        more than one counsel for such Indemnified Person or Indemnified Party to
        be
        paid by the indemnifying party, if, in the reasonable opinion of counsel
        retained by the indemnifying party, the representation by such counsel of
        the
        Indemnified Person or Indemnified Party and the indemnifying party would
        be
        inappropriate due to actual or potential differing interests between such
        Indemnified Person or Indemnified Party and any other party represented by
        such
        counsel in such proceeding. The Indemnified Party or Indemnified Person shall
        cooperate fully with the indemnifying party in connection with any negotiation
        or defense of any such action or claim by the indemnifying party and shall
        furnish to the indemnifying party all information reasonably available to
        the
        Indemnified Party or Indemnified Person which relates to such action or claim.
        The indemnifying party shall keep the Indemnified Party or Indemnified Person
        fully apprised at all times as to the status of the defense or any settlement
        negotiations with respect thereto. No indemnifying party shall be liable
        for any
        settlement of any action, claim or proceeding effected without its prior
        written
        consent, provided, however, that the indemnifying party shall not unreasonably
        withhold, delay or condition its consent. No indemnifying party shall, without
        the prior written consent of the Indemnified Party or Indemnified Person,
        consent to entry of any judgment or enter into any settlement or other
        compromise which does not include as an unconditional term thereof the giving
        by
        the claimant or plaintiff to such Indemnified Party or Indemnified Person
        of a
        release from all liability in respect to such claim or litigation. Following
        indemnification as provided for hereunder, the indemnifying party shall be
        subrogated to all rights of the Indemnified Party or Indemnified Person with
        respect to all third parties, firms or corporations relating to the matter
        for
        which indemnification has been made. The failure to deliver written notice
        to
        the indemnifying party within a reasonable time of the commencement of any
        such
        action shall not relieve such indemnifying party of any liability to the
        Indemnified Person or Indemnified Party under this Section 6, except to the
        extent that the indemnifying party is prejudiced in its ability to defend
        such
        action.

      d.  The
        indemnification required by this Section 6 shall be made by periodic payments
        of
        the amount thereof during the course of the investigation or defense, as
        and
        when bills are received or Indemnified Damages are incurred.

       

      e.  The
        indemnity agreements contained herein shall be in addition to (i) any cause
        of
        action or similar right of the Indemnified Party or Indemnified Person against
        the indemnifying party or others, and (ii) any liabilities the indemnifying
        party may be subject to pursuant to the law.

       

      
        
           

        

        
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      7.  CONTRIBUTION.

       

      To
        the
        extent any indemnification by an indemnifying party is prohibited or limited
        by
        law, the indemnifying party agrees to make the maximum contribution with
        respect
        to any amounts for which it would otherwise be liable under Section 6 to
        the
        fullest extent permitted by law; provided, however, that: (i) no seller of
        Registrable Securities guilty of fraudulent misrepresentation (within the
        meaning of Section 11(f) of the Securities Act) shall be entitled to
        contribution from any seller of Registrable Securities who was not guilty
        of
        fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
        Securities shall be limited in amount to the net amount of proceeds received
        by
        such seller from the sale of such Registrable Securities.

       

      8.  REPORTS
        UNDER THE EXCHANGE ACT.

       

      With
        a
        view to making available to the Investor the benefits of Rule 144 promulgated
        under the Securities Act or any similar rule or regulation of the SEC that
        may
        at any time permit the Investors to sell securities of the Company to the
        public
        without registration (“Rule
        144”)
        the
        Company agrees to:

       

      a.  make
        and
        keep public information available, as those terms are understood and defined
        in
        Rule 144;

       

      b.  file
        with
        the SEC in a timely manner all reports and other documents required of the
        Company under the Securities Act and the Exchange Act so long as the Company
        remains subject to such requirements (it being understood that nothing herein
        shall limit the Company’s obligations under Section 6.3 of the Standby Equity
        Distribution Agreement) and the filing of such reports and other documents
        is
        required for the applicable provisions of Rule 144; and

       

      c.  furnish
        to the Investor so long as the Investor owns Registrable Securities, promptly
        upon request, (i) a written statement by the Company that it has complied
        with
        the reporting requirements of Rule 144, the Securities Act and the Exchange
        Act,
        (ii) a copy of the most recent annual or quarterly report of the Company
        and
        such other reports and documents so filed by the Company, and (iii) such
        other
        information as may be reasonably requested to permit the Investor to sell
        such
        securities pursuant to Rule 144 without registration.

       

      9.  AMENDMENT
        OF REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only by a written agreement between the Company and the
        Investor. Any amendment or waiver effected in accordance with this Section
        9
        shall be binding upon the Investor and the Company. No consideration shall
        be
        offered or paid to any Person to amend or consent to a waiver or modification
        of
        any provision of any of this Agreement unless the same consideration also
        is
        offered to all of the parties to this Agreement.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      10.  MISCELLANEOUS.

       

      a.  A
        Person
        is deemed to be a holder of Registrable Securities whenever such Person owns
        or
        is deemed to own of record such Registrable Securities. If the Company receives
        conflicting instructions, notices or elections from two or more Persons with
        respect to the same Registrable Securities, the Company shall act upon the
        basis
        of instructions, notice or election received from the registered owner of
        such
        Registrable Securities.

       

      b.  Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms of this Agreement 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, to:

              	
                XsunX,
                  Inc.

              
	 	
                65
                  Enterprise 

              
	 	
                Aliso
                  Viejo, CA 92656

              
	 	
                Attention: Tom
                  Djokovich

              
	 	
                Telephone: (949)
                  330-8060

              
	 	
                Facsimile: (949)
                  266-5823

              
	 	 
	
                With
                  a copy to:

              	
                Sichenzia
                  Ross Friedman Ference LLP

              
	 	
                1065
                  Avenue of the Americas

              
	 	
                New
                  York, NY 10018

              
	 	
                Attention: 

              
	 	
                Telephone: (212)
                  930-9700

              
	 	
                Facsimile: (212)
                  930-9725

              
	 	 
	
                If
                  to the Investor, to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, New Jersey 07302

              
	 	
                Attention: Mark
                  Angelo

              
	 	
                Portfolio
                  Manager

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	
                With
                  a copy to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Attention: Troy
                  J. Rillo, Esq.

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	 	 

      

       

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      Any
        party
        may change its address by providing written notice to the other parties hereto
        at least five 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, recipient facsimile
        number and an image of the first page of such transmission or (C) provided
        by a
        courier or overnight courier 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.

       

      c.  Failure
        of any party to exercise any right or remedy under this Agreement or otherwise,
        or delay by a party in exercising such right or remedy, shall not operate
        as a
        waiver thereof.

       

      d.  The
        corporate laws of the State of New Jersey shall govern all issues concerning
        the
        relative rights of the Company and the Investor. All other questions concerning
        the construction, validity, enforcement and interpretation of this Agreement
        shall be governed by the internal laws of the State of New Jersey, without
        giving effect to any choice of law or conflict of law provision or rule (whether
        of the State of New Jersey or any other jurisdiction) that would cause the
        application of the laws of any jurisdiction other than the State of New Jersey.
        Each party hereby irrevocably submits to the non-exclusive jurisdiction of
        the
        Superior Courts of the State of New Jersey, sitting in Hudson County, New
        Jersey
        and the Federal District Court for the District of New Jersey sitting in
        Newark,
        New Jersey, for the adjudication of any dispute hereunder or in connection
        herewith 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.
        If any provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement in that jurisdiction
        or the
        validity or enforceability of any provision of this Agreement in any other
        jurisdiction. 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.

       

      e.  This
        Agreement, the Standby Equity Distribution Agreement, the Escrow Agreement,
        and
        the Placement Agent Agreement constitute the entire agreement among the parties
        hereto with respect to the subject matter hereof and thereof. There are no
        restrictions, promises, warranties or undertakings, other than those set
        forth
        or referred to herein and therein. This Agreement, the Standby Equity
        Distribution Agreement, the Escrow Agreement, and the Placement Agent Agreement
        supersede all prior agreements and understandings among the parties hereto
        with
        respect to the subject matter hereof and thereof.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      f.  This
        Agreement shall inure to the benefit of and be binding upon the permitted
        successors and assigns of each of the parties hereto.

       

      g.  The
        headings in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect the meaning hereof.

       

      h.  This
        Agreement may be executed in identical counterparts, each of which shall
        be
        deemed an original but all of which shall constitute one and the same agreement.
        This Agreement, once executed by a party, may be delivered to the other party
        hereto by facsimile transmission of a copy of this Agreement bearing the
        signature of the party so delivering this Agreement.

       

      i.  Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      j.  The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent and no rules of strict construction
        will
        be applied against any party.

       

      k.  This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other Person.

       

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

      

      

      
         

        
          
             

          

          
            11

            
              

            

          

          
             

          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        parties have caused this Registration Rights Agreement to be duly executed
        as of
        day and year first above written.

       

      
        	 	
                COMPANY:

              
	 	
                XSUNX,
                  INC.

              
	 	 
	 	
                By:_________________________      

              
	 	
                Name: Tom
                  Djokovich

              
	 	
                Title: Chief
                  Executive Officer

              
	 	 
	 	 
	 	
                INVESTOR:

              
	 	
                CORNELL
                  CAPITAL PARTNERS, LP

              
	 	 
	 	
                By: Yorkville
                  Advisors, LLC

              
	 	
                Its: General
                  Partner

              
	 	 
	 	
                By:___________________________      

              
	 	
                Name: Mark
                  Angelo

              
	 	
                Title: Portfolio
                  Manager

              
	 	 

      

      

      

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      

      

      EXHIBIT
        A

      FORM
        OF NOTICE OF EFFECTIVENESS

       

      OF
        REGISTRATION STATEMENT

       

      

      

      Attention: 

      

      Re: XSUNX,
        INC.

      

      Ladies
        and Gentlemen:

      

      We
        are
        counsel to XsunX, Inc. (the “Company”),
        and
        have represented the Company in connection with that certain Standby Equity
        Distribution Agreement (the “Standby
        Equity Distribution Agreement”)
        entered into by and between the Company and Cornell Capital Partners, LP
        (the
“Investor”)
        pursuant to which the Company issued to the Investor shares of its Common
        Stock,
        no par value per share (the “Common
        Stock”).
        Pursuant to the Standby Equity Distribution Agreement, the Company also has
        entered into a Registration Rights Agreement with the Investor (the
“Registration
        Rights Agreement”)
        pursuant to which the Company agreed, among other things, to register the
        Registrable Securities (as defined in the Registration Rights Agreement)
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).
        In
        connection with the Company’s obligations under the Registration Rights
        Agreement, on ____________ ____, the Company filed a Registration Statement
        on
        Form ________ (File No. 333-_____________) (the “Registration
        Statement”)
        with
        the Securities and Exchange Commission (the “SEC”)
        relating to the Registrable Securities which names the Investor as a selling
        stockholder thereunder.

       

      In
        connection with the foregoing, we advise you that a member of the SEC’s staff
        has advised us by telephone that the SEC has entered an order declaring the
        Registration Statement effective under the Securities Act at [ENTER
        TIME OF EFFECTIVENESS]
        on
[ENTER
        DATE OF EFFECTIVENESS]
        and we
        have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
        any stop order suspending its effectiveness has been issued or that any
        proceedings for that purpose are pending before, or threatened by, the SEC
        and
        the Registrable Securities are available for resale under the Securities
        Act
        pursuant to the Registration Statement.

       

                      Very
        truly
        yours,

      

      

      

                      By:_________________________      

      

      cc: Cornell
        Capital Partners, LPPLEDGE
          AND ESCROW AGREEMENT

         

        THIS
          PLEDGE AND ESCROW AGREEMENT
          (the
“Agreement”)
          is
          made and entered into as of July ___, 2005 (the “Effective
          Date”)
          by and
          among CORNELL
          CAPITAL PARTNERS, LP,
          (the
“Pledgee”),
          XSUNX,
          INC.,
          a
          corporation organized and existing under the laws of the State of Colorado
          (the
“Pledgor”),
          and
DAVID
          GONZALEZ,
          ESQ.,
          as
          escrow agent (“Escrow
          Agent”).
          

         

        RECITALS:

         

        WHEREAS,
          in
          order
          to secure the full and prompt payment when due (whether at the stated maturity,
          by acceleration or otherwise) of all of the Company’s obligations (the
“Obligations”)
          to the
          Pledgee or any successor to the Pledgee under this
          Agreement, the Securities Purchase Agreement of even date herewith between
          the
          Pledgor and the Pledgee (the “Securities
          Purchase Agreement”),
          the
          Convertible Debentures (the “Convertible
          Debentures”)
          issued
          or to be issued by the Company to the Pledgee, either now or in the future,
          up
          to a total of Eight Hundred Fifty Thousand Dollars ($850,000) of principal,
          plus
          any interest, costs, fees, and other amounts owed to the Pledgee thereunder,
          the
          Security Agreement of even date herewith between the Pledgor and the Pledgee
          (the “Security
          Agreement”),
          and
          all other contracts entered into between the parties hereto (collectively,
          the
“Transaction
          Documents”),
          the
          Pledgor has agreed to irrevocably pledge to the Pledgee Twenty Six Million
          Seven
          Hundred Ninety Eight Thousand Four Hundred Eighteen (26,798,418) shares
          (the
“Pledged
          Shares”)
          of the
          Pledgor’s common stock. 

         

        NOW,
          THEREFORE,
          in
          consideration of the mutual covenants, agreements, warranties, and
          representations herein contained, and for other good and valuable consideration,
          the receipt and sufficiency of which is hereby acknowledged, the parties
          hereto
          agree as follows:

         

         

        TERMS
          AND CONDITIONS

         

        1.  Pledge
          and Transfer of Pledged Shares.
          

         

        1.1.  The
          Pledgor hereby grants to Pledgee a security interest in all Pledged Shares
          as
          security for Pledgor’s obligations under the Convertible Debentures.
          Simultaneously with the execution of the Transaction Documents, the Pledgor
          shall deliver to the Escrow Agent stock certificates representing the Pledged
          Shares, together with duly executed stock powers or other appropriate transfer
          documents executed in blank by the Pledgor (the “Transfer
          Documents”),
          and
          such stock certificates and Transfer Documents shall be held by the Escrow
          Agent
          until the full payment of all amounts due to the Pledgee under the Convertible
          Debentures and through repayment in accordance with the terms of the Convertible
          Debentures, or the termination or expiration of this Agreement.

         

        2.  Rights
          Relating to Pledged Shares.
          Upon
          the occurrence of an Event of Default (as defined herein), the Pledgee
          shall be
          entitled to vote the Pledged Shares, to receive dividends and other
          distributions thereon, and to enjoy all other rights and privileges incident
          to
          the ownership of the Pledged Shares.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        3.  Release
          of Pledged Shares from Pledge.
          Upon
          the payment of all amounts due to the Pledgee under the Convertible Debentures
          by repayment in accordance with the terms of the Note, the parties hereto
          shall
          notify the Escrow Agent to such effect in writing. Upon receipt of such
          written
          notice for payment of the amounts due to the Pledgee under the Convertible
          Debentures, the Escrow Agent shall return to the Pledgor the Transfer Documents
          and the certificates representing the Pledged Shares, (collectively the
          “Pledged
          Materials”),
          whereupon any and all rights of Pledgee in the Pledged Materials shall
          be
          terminated. Notwithstanding anything to the contrary contained herein,
          upon full
          payment of all amounts due to the Pledgee under the Convertible Debentures,
          by
          repayment in accordance with the terms of the Note, this Agreement and
          Pledgee’s
          security interest and rights in and to the Pledged Shares shall
          terminate.

         

        4.  Event
          of Default.
          An
          “Event
          of Default”
          shall
          be deemed to have occurred under this Agreement upon an Event of Default
          under
          the Transaction Documents.

         

        5.  Remedies.
          Upon
          and anytime after the occurrence of an Event of Default, the Pledgee shall
          have
          the right to provide written notice of such Event of Default (the “Default
          Notice”)
          to the
          Escrow Agent, with a copy to the Pledgor. As soon as practicable after
          receipt
          of the Default Notice, the Escrow Agent shall deliver to Pledgee the Pledged
          Materials held by the Escrow Agent hereunder. Upon receipt of the Pledged
          Materials, the Pledgee shall have the right to (i) sell the Pledged Shares
          and
          to apply the proceeds of such sales, net of any selling commissions, to
          the
          Obligations owed to the Pledgee by the Pledgor under the Transaction Documents,
          including, without limitation, outstanding principal, interest, legal fees,
          and
          any other amounts owed to the Pledgee, and exercise all other rights and
          (ii)
          any and all remedies of a secured party with respect to such property as
          may be
          available under the Uniform Commercial Code as in effect in the State of
          New
          Jersey. To the extent that the net proceeds received by the Pledgee are
          insufficient to satisfy the Obligations in full, the Pledgee shall be entitled
          to a deficiency judgment against the Pledgor for such amount. The Pledgee
          shall
          have the absolute right to sell or dispose of the Pledged Shares in any
          manner
          it sees fit and shall have no liability to the Pledgor or any other party
          for
          selling or disposing of such Pledged Shares even if other methods of sales
          or
          dispositions would or allegedly would result in greater proceeds than the
          method
          actually used. The Escrow Agent shall have the absolute right to disburse
          the
          Pledged Shares to the Pledgee in batches not to exceed 9.9% of the outstanding
          capital of the Pledgor (which limit may be waived by the Pledgee providing
          not
          less than 65 days’ prior written notice to the Escrow Agent). The Pledgee shall
          return any Pledged Shares released to it and remaining after the Pledgee
          has
          applied the net proceeds to all amounts owed to the Pledgee. 

         

        5.1.  Each
          right, power and remedy of the Pledgee provided for in this Agreement or
          any
          other Transaction Document shall be cumulative and concurrent and shall
          be in
          addition to every other such right, power or remedy. The
          exercise or beginning of the exercise by the Pledgee of any one or more
          of the
          rights, powers or remedies provided for in this Agreement or any
          other
          Transaction Document or
          now or
          hereafter existing at law or in equity or by statute or otherwise shall
          not
          preclude the simultaneous or later exercise by the
          Pledgee of all such other rights, powers or remedies, and no failure or
          delay on
          the part of the Pledgee to exercise any such right, power or remedy shall
          operate as a waiver thereof. No notice to or demand on the Pledgor in any
          case
          shall entitle it to any other or further notice or demand in similar or
          other
          circumstances or constitute a waiver of any of the rights of the Pledgee
          to any
          other further action in any circumstances without demand or notice. The
          Pledgee
          shall have the full power to enforce or to assign or contract is rights
          under
          this Agreement to a third party.

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

         

        5.2.  Demand
          Registration Rights. In
          addition to all other remedies available to the Pledgee, upon an Event
          of
          Default, the Pledgor shall promptly, but in no event more than thirty (30)
          days
          after the date of the Default Notice, file a registration statement to
          register
          with the Securities and Exchange Commission the Pledged Shares for the
          resale by
          the Pledgee. The Pledgor shall cause the registration statement to remain
          in
          effect until all of the Pledged Shares have been sold by the Pledgee.

         

        6.  Concerning
          the Escrow Agent.

         

        6.1.  The
          Escrow Agent undertakes to perform only such duties as are expressly set
          forth
          herein and no implied duties or obligations shall be read into this Agreement
          against the Escrow Agent.

         

        6.2.  The
          Escrow Agent may act in reliance upon any writing or instrument or signature
          which it, in good faith, believes to be genuine, may assume the validity
          and
          accuracy of any statement or assertion contained in such a writing or
          instrument, and may assume that any person purporting to give any writing,
          notice, advice or instructions in connection with the provisions hereof
          has been
          duly authorized to do so. The Escrow Agent shall not be liable in any manner
          for
          the sufficiency or correctness as to form, manner, and execution, or validity
          of
          any instrument deposited in this escrow, nor as to the identity, authority,
          or
          right of any person executing the same; and its duties hereunder shall
          be
          limited to the safekeeping of such certificates, monies, instruments, or
          other
          document received by it as such escrow holder, and for the disposition
          of the
          same in accordance with the written instruments accepted by it in the
          escrow.

         

        6.3.  Pledgee
          and the Pledgor hereby agree, to defend and indemnify the Escrow Agent
          and hold
          it harmless from any and all claims, liabilities, losses, actions, suits,
          or
          proceedings at law or in equity, or any other expenses, fees, or charges
          of any
          character or nature which it may incur or with which it may be threatened
          by
          reason of its acting as Escrow Agent under this Agreement; and in connection
          therewith, to indemnify the Escrow Agent against any and all expenses,
          including
          attorneys’ fees and costs of defending any action, suit, or proceeding or
          resisting any claim (and any costs incurred by the Escrow Agent pursuant
          to
          Sections 6.4 or 6.5 hereof). The Escrow Agent shall be vested with a lien
          on all
          property deposited hereunder, for indemnification of attorneys’ fees and court
          costs regarding any suit, proceeding or otherwise, or any other expenses,
          fees,
          or charges of any character or nature, which may be incurred by the Escrow
          Agent
          by reason of disputes arising between the makers of this escrow as to the
          correct interpretation of this Agreement and instructions given to the
          Escrow
          Agent hereunder, or otherwise, with the right of the Escrow Agent, regardless
          of
          the instructions aforesaid, to hold said property until and unless said
          additional expenses, fees, and charges shall be fully paid. Any fees and
          costs
          charged by the Escrow Agent for serving hereunder shall be paid by the
          Pledgor.

         

        6.4.  If
          any of
          the parties shall be in disagreement about the interpretation of this Agreement,
          or about the rights and obligations, or the propriety of any action contemplated
          by the Escrow Agent hereunder, the Escrow Agent may, at its sole discretion
          deposit the Pledged Materials with the Clerk of the United States District
          Court
          of New Jersey, sitting in Newark, New Jersey, and, upon notifying all parties
          concerned of such action, all liability on the part of the Escrow Agent
          shall
          fully cease and terminate. The Escrow Agent shall be indemnified by the
          Pledgor,
          the Company and Pledgee for all costs, including reasonable attorneys’ fees in
          connection with the aforesaid proceeding, and shall be fully protected
          in
          suspending all or a part of its activities under this Agreement until a
          final
          decision or other settlement in the proceeding is received.

         

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

         

        6.5.  The
          Escrow Agent may consult with counsel of its own choice (and the costs
          of such
          counsel shall be paid by the Pledgor and Pledgee) and shall have full and
          complete authorization and protection for any action taken or suffered
          by it
          hereunder in good faith and in accordance with the opinion of such counsel.
          The
          Escrow Agent shall not be liable for any mistakes of fact or error of judgment,
          or for any actions or omissions of any kind, unless caused by its willful
          misconduct or gross negligence.

         

        6.6.  The
          Escrow Agent may resign upon ten (10) days’ written notice to the parties in
          this Agreement. If a successor Escrow Agent is not appointed within this
          ten
          (10) day period, the Escrow Agent may petition a court of competent jurisdiction
          to name a successor.

         

        6.7  Conflict
          Waiver.
          The
          Pledgor hereby acknowledges that the Escrow Agent is general counsel to
          the
          Pledgee, a partner in the general partner of the Pledgee, and counsel to
          the
          Pledgee in connection with the transactions contemplated and referred herein.
          The Pledgor agrees that in the event of any dispute arising in connection
          with
          this Agreement or otherwise in connection with any transaction or agreement
          contemplated and referred herein, the Escrow Agent shall be permitted to
          continue to represent the Pledgee and the Pledgor will not seek to disqualify
          such counsel and waives any objection Pledgor might have with respect to
          the
          Escrow Agent acting as the Escrow Agent pursuant to this Agreement.

         

        6.8  Notices.
          Unless
          otherwise provided herein, all demands, notices, consents, service of process,
          requests and other communications hereunder shall be in writing and shall
          be
          delivered in person or by overnight courier service, or mailed by certified
          mail, return receipt requested, addressed:

         

        
          
             

          

          
            4

            
              

            

          

          
             

          

        

         

        
          	
                  If
                    to the Pledgor, to:

                	
                  XsunX,
                    Inc.

                
	 	
                  65
                    Enterprise 

                
	 	
                  Aliso
                    Viejo, CA 92656

                
	 	
                  Attention: Tom
                    Djokovich

                
	 	
                  Telephone: (949)
                    330-8060

                
	 	
                  Facsimile: 
                     (949)
                    266-5823

                
	 	 
	
                  With
                    a copy to:

                	
                  Sichenzia
                    Ross Friedman Ference LLP

                
	 	
                  1065
                    Avenue of the Americas

                
	 	
                  New
                    York, NY 10018

                
	 	
                  Attention: 

                
	 	
                  Telephone: (212)
                    930-9700

                
	 	
                  Facsimile:   
                    (212)
                    930-9725

                
	 	 
	
                  If
                    to the Pledgee:

                	
                  Cornell
                    Capital Partners, LP

                
	 	
                  101
                    Hudson Street, Suite 3700

                
	 	
                  Jersey
                    City, NJ 07302

                
	 	
                  Attention:
                     Mark
                    A. Angelo

                
	 	
                  Telephone: (201)
                    985-8300

                
	 	
                  Facsimile: 
                     (201)
                    985-8744

                
	 	 
	
                  With
                    copy to:

                	
                  Troy
                    Rillo, Esq.

                
	 	
                  101
                    Hudson Street, Suite 3700

                
	 	
                  Jersey
                    City, NJ 07302

                
	 	
                  Telephone: (201)
                    985-8300

                
	 	
                  Facsimile: 
                     (201)
                    985-1964

                
	 	 

        

        

        Any
          such
          notice shall be effective (a) when delivered, if delivered by hand
          delivery
          or overnight courier service, or (b) five (5) days after deposit
          in the
          United States mail, as applicable.

         

        7.  Binding
          Effect.
          All of
          the covenants and obligations contained herein shall be binding upon and
          shall
          inure to the benefit of the respective parties, their successors and
          assigns.

         

        8.  Governing
          Law; Venue; Service of Process.
          The
          validity, interpretation and performance of this Agreement shall be determined
          in accordance with the laws of the State of New Jersey applicable to contracts
          made and to be performed wholly within that state except to the extent
          that
          Federal law applies. The parties hereto agree that any disputes, claims,
          disagreements, lawsuits, actions or controversies of any type or nature
          whatsoever that, directly or indirectly, arise from or relate to this Agreement,
          including, without limitation, claims relating to the inducement, construction,
          performance or termination of this Agreement, shall be brought in the state
          superior courts located in Hudson County, New Jersey or Federal district
          courts
          located in Newark, New Jersey, and the parties hereto agree not to challenge
          the
          selection of that venue in any such proceeding for any reason, including,
          without limitation, on the grounds that such venue is an inconvenient forum.
          The
          parties hereto specifically agree that service of process may be made,
          and such
          service of process shall be effective if made, pursuant to Section 8
          hereto.

         

        9.  Enforcement
          Costs.
          If any
          legal action or other pro-ceeding is brought for the enforcement of this
          Agreement, or because of an alleged dispute, breach, default or
          misrepresenta-tion in connection with any provisions of this Agreement,
          the
          successful or prevailing party or parties shall be entitled to recover
          reasonable attorneys’ fees, court costs and all expenses even if not taxable as
          court costs (including, without limita-tion, all such fees, costs and expenses
          incident to appeals), incurred in that action or proceeding, in addition
          to any
          other relief to which such party or parties may be entitled.

         

        
          
             

          

          
            5

            
              

            

          

          
             

          

        

        10.  Remedies
          Cumulative.
          No
          remedy herein conferred upon any party is intended to be exclusive of any
          other
          remedy, and each and every such remedy shall be cumulative and shall be
          in
          addition to every other remedy given hereunder or now or here-after existing
          at
          law, in equity, by statute, or otherwise. No single or partial exercise
          by any
          party of any right, power or remedy hereunder shall preclude any other
          or
          further exercise thereof. 

         

        11.  Counterparts.
          This
          Agreement may be executed in one or more counterparts, each of which shall
          be
          deemed an original, but all of which together shall constitute the same
          instrument.

         

        12.  No
          Penalties.
          No
          provision of this Agreement is to be interpreted as a penalty upon any
          party to
          this Agreement.

         

        13.  JURY
          TRIAL.
          EACH OF
          THE PLEDGEE AND THE PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
          WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM, DEMAND,
          ACTION OR CAUSE OF ACTION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
          ANY WAY
          CONNECTED WITH THE DEALINGS BETWEEN PLEDGEE AND PLEDGOR, THIS PLEDGE AND
          ESCROW
          AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE
          OF
          CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
          OF
          ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
          ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. 

         

        
          
            
               

            

             

          

          
            6

            
              

            

          

          
             

          

        

        

        IN
          WITNESS WHEREOF,
          the
          parties hereto have duly executed this Pledge and Escrow Agreement as of
          the
          date first above written. 

         

        

         

        
          	 	 	 
	 	Cornell
                  Capital Partners, LP
	 
 	 
 	 
 
	 	By:  	/s/ Yorkville
                  Advisors, LLC
	 	
                  

                
	 	Its: General
                  Partner

           

          
            	 	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                    

                    Mark Angelo
	 	Title:
                    Portfolio Manager 

          

        
          	 	 	 
	 	XsunX,
                  Inc.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                  
Tom
                  Djokovich
	 	Title:
                  Chief Executive Officer 

        
          	 	 	 
	 	Escrow
                  Agent
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                  
David
                  Gonzalez, Esq. 
	 	 

        
          

        
          
             

          

            7

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