Document:

EXHIBIT 10.1

                             STOCK OPTION AGREEMENT
                                (JOSEPH GRIMES)
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THE SECURITY  REPRESENTED BY THIS  CERTIFICATE  HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION  MAY BE EFFECTED  WITHOUT AN EFFECTIVE  REGISTRATION
STATEMENT  RELATED THERETO OR AN OPINION OF COUNSEL  SATISFACTORY TO THE COMPANY
THAT SUCH  REGISTRATION  IS NOT REQUIRED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED.

                             STOCK OPTION AGREEMENT

         THIS STOCK OPTION  AGREEMENT  ("Agreement") is made effective as of the
date of grant set forth below  ("Date of Grant") by and between  XSUNX,  INC., a
Colorado corporation  ("Company"),  and the optionee named below ("Optionee") as
contemplated in the Company's 2007 Option Plan ("Plan").  Capitalized  terms not
defined herein shall have the meaning ascribed to them in the Plan.

Optionee:         Joseph Grimes

Social Security Number: ###-##-####

Address:  # @@@@@@, @@@@@@ @@@@@, @@ #####

Total Option Shares:       500,000

Exercise Price Per Share: $0.46

Date of Grant: January 26, 2007

First Vesting Date:        April 1, 2007

Expiration Date for Exercise of Options:    January 26, 2012

Stock Option Number: 07-018

Type of Stock Option:
(Check one)        [ X ] Incentive Stock Option       [ ] Statutory Stock Option

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1.  Conditional  Grant of Option.  The Company  hereby  conditionally  grants to
Optionee an option  ("Option")  to purchase the total number of shares of Common
Stock of the Company set forth above  ("Shares") at the Exercise Price Per Share
set forth above ("Exercise  Price"),  subject to all of the terms and conditions
of this  Agreement  and the Plan.  If  designated  as an Incentive  Stock Option
above,  the Option is intended to qualify as an "incentive stock option" ("ISO")
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended  ("Code").  Subject to the Plan,  only  Employees  of the Company  shall
receive ISOs. This Agreement shall be deemed a Stock Option Agreement as defined
in the Plan.  The terms and  conditions of the Plan are  incorporated  herein by
this reference.  All specific terms and references,  including capitalized terms
and references, which are undefined in this Agreement, shall have the definition
and meaning ascribed to them in the Plan,  including,  without  limitation,  the
definition of the terms Employee and Consultant.

2. Exercise  Price.  The Exercise  Price, is not less than the fair market value
per share of Common  Stock on the date of grant,  as  determined  by the  Board;
provided,  however,  in  the  event  Optionee  is an  Employee  and  owns  stock
representing  more than ten percent (10%) of the total combined  voting power of
all classes of stock of the Company or of its Parent or Subsidiary  corporations
immediately  before the Option is granted,  said exercise price is not less than
one  hundred ten  percent  (110%) of the fair  market  value per share of Common
Stock on the date of grant as determined by the Board.

3. Exercise of Option.  Subject to the vesting schedule contained herein and the
other  conditions set forth in this Agreement,  all or part of the Option may be
exercised  prior to its  expiration  from the first vesting date set forth above
("First  Vesting Date") up to and including 5:00 p.m.  Pacific  Standard Time on
the expiration date set forth above ("Expiration Date") at the time or times set
forth herein in accordance with the provisions of the Plan as follows:

         (i)      Vesting:

                (a)   The  Option  shall  become  exercisable  in the  amount of
                      50,000 shares upon the First Vesting Date. Thereafter, the
                      Option  shall vest and become  exercisable  at the rate of
                      50,000  Shares  per  calendar  quarter  up to a  total  of
                      400,000 shares.

                (b)   This Option shall  become  exercisable  in  the amount  of
                      50,000 shares for each of the first two sales/licensure of
                      an XsunX system.

                (c)   This   Option may  not  be  exercised  for a fraction of a
                      Share.

                (d)   In the  event of  Optionee's  death,  disability  or other
                      termination  of  employment,  the  exercisability  of  the
                      Option is governed  by Sections 7, 8 and 9 below,  subject
                      to the limitations contained in subsection 3(i)(d) below.

                (e)   In no event may the Option be  exercised after the date of
                      expiration  of the  term of  the  Option  as set  forth in
                      Section 11 below.

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         (ii)     Method of Exercise. The Option shall be exercisable by written
                  notice which shall state the election to  exercise the Option,
                  the number  of Shares  in respect of which the Option is being
                  exercised, and such other representations and agreements as to
                  the holder's investment intent with  respect to such shares of
                  Common Stock as may be required by the Company pursuant to the
                  provisions of the Plan. Such written notice shall be signed by
                  Optionee and shall be delivered in person or by certified mail
                  to the President, Secretary  or Chief Financial Officer of the
                  Company. The written notice shall be accompanied by payment of
                  the exercise price.

         (iii)    Compliance  with Law. No Shares will be issued pursuant to the
                  exercise of an Option  unless such  issuance and such exercise
                  shall  comply  with  all  relevant  provisions  of law and the
                  requirements  of any stock  exchange or quotation  medium upon
                  which the Shares may then be listed or quoted.  Assuming  such
                  compliance,  for  income  tax  purposes  the  Shares  shall be
                  considered  transferred  to the  Optionee on the date on which
                  the Option is exercised with respect to such Shares.

         (iv)     Adjustments, Merger,  etc.  The number and class of the Shares
                  and/or the  exercise  price  specified  above are  subject  to
                  appropriate  adjustment  in  the  event   of  changes  in  the
                  capital  stock of the Company by reason   of stock  dividends,
                  stock  splits,   combination   or   recombination  of  shares,
                  reclassifications,  mergers,  consolidations,  reorganizations
                  or  liquidations.  Subject  to  any  required   action  of the
                  stockholders  of the  Company,  if the Company  shall  be  the
                  surviving  corporation  in any merger or  consolidation,   the
                  Option (to the extent  that  it  is still  outstanding)  shall
                  pertain to and apply to the  securities  to  which a holder of
                  the same  number  of  shares  of  Common  Stock  that are then
                  subject  to  the  Option    would  have   been   entitled.   A
                  dissolution or  liquidation  of  the  Company,  or a merger or
                  consolidation  in which  the  Company  is  not  the  surviving
                  corporation,  will cause the Option  to terminate,  unless the
                  agreement  or  merger   or   consolidation    shall  otherwise
                  provide,  provided  that  the  Optionee  shall,  if  the Board
                  expressly   authorizes,   in   such   event   have  the  right
                  immediately  prior to  such  dissolution  or  liquidation,  or
                  merger or consolidation,  to exercise  the Option in  whole or
                  part. To the extent that the foregoing  adjustments  relate to
                  stock or  securities of the Company,  such  adjustments  shall
                  be made by  the Board,  whose  determination  in  that respect
                  shall be final, binding and conclusive.

4. Optionee's  Representations.  By receipt of the Option, by its execution, and
by its  exercise in whole or in part,  Optionee  represents  to the Company that
Optionee understands that:

         (i)      Both the Option and any Shares purchased upon its exercise are
                  securities, the issuance by the Company of which requires com-
                  pliance with federal and state securities laws;

         (ii)     These  securities  are made  available to Optionee only on the
                  condition that Optionee makes the representations contained in
                  this Section 4 to the Company;

         (iii)    Optionee has made a reasonable investigation of the affairs of
                  the Company  sufficient to be well  informed as to  the rights
                  and the value of these securities;

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         (iv)     Optionee  understands   that  the  securities  have  not  been
                  registered under the Securities Act of 1933, as \amended  (the
                  "Act") in  reliance upon  one or more specific exemptions con-
                  tained in  the Act,  which may  include reliance  on  Rule 701
                  promulgated under the Act, if available,  or  which may depend
                  upon: (a) Optionee's bona fide investment intention in acquir-
                  ing  these  securities; (b) Optionee's intention to hold these
                  securities in  compliance  with  federal  and state securities
                  laws; (c) Optionee having  no present intention of selling  or
                  transferring any part thereof (recognizing that  the Option is
                  not transferable) in violation of applicable federal and state
                  securities laws; and (d) there being certain  restrictions  on
                  transfer  of the Shares  subject to the Option;

         (v)      Optionee understands that the Shares subject to the Option, in
                  addition  to  other  restrictions  on  transfer,  must be held
                  indefinitely unless subsequently  registered under the Act, or
                  unless an exemption from registration is available;  that Rule
                  144, the usual exemption from registration,  is only available
                  after the  satisfaction  of certain holding periods and in the
                  presence of a public  market for the Shares;  that there is no
                  certainty that a public market for the Shares will exist,  and
                  that  otherwise it will be  necessary  that the Shares be sold
                  pursuant to another exemption from  registration  which may be
                  difficult to satisfy; and,

         (vi)     Optionee  understands  that the certificate  representing  the
                  Shares will bear a legend  prohibiting  their  transfer in the
                  absence of their  registration  or the  opinion of counsel for
                  the Company that  registration  is not required,  and a legend
                  prohibiting their transfer in compliance with applicable state
                  securities laws unless otherwise exempted.

5. Method of Payment.  Payment of the purchase  price may be made subject to the
terms of Section 14 herein,  or by cash, check or, in the sole discretion of the
Board at the time of exercise,  promissory notes or other Shares of Common Stock
having  a fair  market  value on the date of  surrender  equal to the  aggregate
purchase price of the Shares being purchased.

6. Restrictions on Exercise.  The Option may not be exercised if the issuance of
such Shares upon such  exercise  or the method of payment of  consideration  for
such Shares  would  constitute a violation  of any  applicable  federal or state
securities  or other law or  regulation.  As a condition  to the exercise of the
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

7.  Termination  of  Status  as an  Employee  or  Consultant.  In the  event  of
termination of Optionee's  continuous  status as an Employee or  Consultant,  as
such  status  may be  determined  and  construed  by  the  Company  in its  sole
discretion  ("Continuous Status"), for any reason other than death or disability
or the  completed  term and  performance  under  any  consulting  or  employment
agreement  between the Optionee and the Company,  Optionee  may, but only within
thirty (30) days after the date of such  termination (but in no event later than

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the date of  expiration  of the term of the  Option as set forth in  Section  11
below), exercise the Option to the extent that Optionee was entitled to exercise
it at the date of such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of such termination,  or if Optionee does not
exercise  the  Option  within  the  time  specified  herein,  the  Option  shall
terminate.

8. Disability of Optionee.  In the event of termination of Optionee's Continuous
Status  as an  Employee  or  Consultant  as a result of  Optionee's  disability,
Optionee  may,  but only within six (6) months from the date of  termination  of
employment  or consulting  relationship  (but in no event later than the date of
expiration of the term of the Option as set forth in Section 11 below), exercise
the Option to the extent  Optionee  was  entitled  to exercise it at the date of
such  termination;  provided,  however that if the  disability  is not total and
permanent  (as  defined  in  Section  22(e)(3)  of the  Code)  and the  Optionee
exercises the option within the period provided above but more than three months
after the date of termination,  the Option shall automatically be deemed to be a
Nonstatutory  Stock  Option and not an Incentive  Stock  Option;  and  provided,
further,  that if the  disability  is total and permanent (as defined in Section
22(e)(3) of the Code),  then the Optionee may, but only within one (1) year from
the date of  termination  of employment or  consulting  relationship  (but in no
event later than the date of  expiration  of the term of the Option as set forth
in Section 11 below), exercise the Option to the extent Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination,  or if Optionee does
not exercise  such Option (which  Optionee was entitled to exercise)  within the
time periods specified herein, the Option shall terminate.

9.       Death of Optionee. In the event of the death of Optionee:

         (i)      During the term of  the Option while an Employee or Consultant
                  of the  Company and  having been  in  Continuous  Status as an
                  Employee or Consultant since the date  of grant of the Option,
                  the Option may be exercised,  at any time  within one (1) year
                  following the date of death (but, in the  case of an Incentive
                  Stock Option,  in no event later than the  date of  expiration
                  of the term of the Option as set  forth in  Section 11 below),
                  by Optionee's  estate or by a person who acquired the right to
                  exercise the Option by bequest or inheritance, but only to the
                  extent of the right to exercise  that had  accrued at the time
                  of death of the  Optionee. To the extent that such Employee or
                  Consultant was not entitled to exercise the Option at the date
                  of death,  or if  such Employee,  Consultant,  estate or other
                  person does  not  exercise such  Option (which  such Employee,
                  Consultant, estate or person was  entitled to exercise) within
                  the one (1) year  time  period specified  herein,  the  Option
                  shall terminate; or,

         (ii)     During the thirty  (30) day period  specified  in Section 7 or
                  the  one (1)  year period  specified in  Section  8, after the
                  termination of Optionee's Continuous Status as an  Employee or
                  Consultant, the Option  may be  exercised,  at any time within
                  one (1)  year following the date of death (but, in the case of
                  an  Incentive Stock Option, in no event later than the date of
                  expiration of the term of the  Option as set forth in  Section
                  11  below),  by Optionee's estate or by a  person who acquired
                  the  right to exercise  the Option by bequest or  inheritance,
                  but only to  the extent  of the  right  to  exercise  that had
                  accrued at the  date  of termination.  To the extent that such
                  Employee or Consultant was not entitled to exercise the Option

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                  at the date of death, or if such Employee, Consultant,  estate
                  or  other  person  does not  exercise  such Option (which such
                  Employee,  Consultant,  estate  or    person was  entitled  to
                  exercise)  within  the  one  (1)  year time  period  specified
                  herein, the Option shall terminate.

10.  Non-Transferability  of Option.  The Option may not be  transferred  in any
manner  otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee, only by Optionee. The terms of the
Option shall be binding upon the executors,  administrators,  heirs,  successors
and assigns of Optionee.

11.  Term of Option.  The Option may not be  exercised  more than five (5) years
from the date of grant of the Option, and may be exercised during such term only
in accordance with the Plan and terms of the Option; provided, however, that the
term of this option, if it is a Nonstatutory  Stock Option,  may be extended for
the period set forth in Section 9(i) or Section 9(ii) in the  circumstances  set
forth in such Sections.

12. Early Disposition of Stock; Taxation Upon Exercise of Option. If Optionee is
an Employee and the Option qualifies as an ISO,  Optionee  understands  that, if
Optionee  disposes of any Shares  received under the Option within two (2) years
after the date of this  Agreement  or within one (1) year after such Shares were
transferred to Optionee, Optionee may be treated for federal income tax purposes
as having received ordinary income at the time of such disposition in any amount
generally  measured as the difference  between the price paid for the Shares and
the lower of the fair market  value of the Shares at the date of exercise or the
fair market value of the Shares at the of  disposition.  Any gain  recognized on
such  premature  sale of the Shares in excess of the amount  treated as ordinary
income may be  characterized  as capital gain.  Optionee hereby agrees to notify
the  Company  in  writing  within  thirty  (30) days  after the date of any such
disposition.  Optionee  understands that if Optionee  disposes of such Shares at
any time after the expiration of such two-year and one-year holding periods, any
gain on such sale may be  treated  as  long-term  capital  gain laws  subject to
meeting  various  qualifications.  If  Optionee  is a  Consultant  or  this is a
Nonstatutory  Stock  Option,  Optionee  understands  that,  upon exercise of the
Option, Optionee may recognize income for tax purposes in an amount equal to the
excess of the then fair market value of the Shares over the exercise price. Upon
a resale of such shares by the Optionee,  any difference  between the sale price
and the fair  market  value of the Shares on the date of  exercise of the Option
may be treated as capital gain or loss.  Optionee  understands  that the Company
may be required to withhold tax from Optionee's current  compensation in some of
the  circumstances  described  above  (and  Optionee  hereby so  authorizes  the
Company);  to the extent that Optionee's current compensation is insufficient to
satisfy the withholding  tax liability,  the Company may require the Optionee to
make a cash  payment to cover such  liability  as a condition to exercise of the
Option.

13.  Tax  Consequences.  The  Optionee  understands  that  any of the  foregoing
references to taxation are based on federal income tax laws and  regulations now
in  effect,   and  may  not  be  applicable   to  the  Optionee   under  certain
circumstances.  The Optionee may also have adverse tax consequences  under state
or local law. The Optionee has reviewed with the Optionee's own tax advisors the
federal,   state,  local  and  foreign  tax  consequences  of  the  transactions
contemplated by this Agreement.  The Optionee is relying solely on such advisors
and  not on any  statements  or  representations  of the  Company  or any of its
agents.  The Optionee  understands that the Optionee (and not the Company) shall
be  responsible  for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement.

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14. Net Issue Exercise.  Notwithstanding  any provisions herein to the contrary,
if the fair market value of one share of the  Company's  Common Stock is greater
than the Per  Share  Exercise  Price  (at the date of  calculation  as set forth
below),  in lieu of  exercising  the Option for cash,  the Optionee may elect to
receive  shares equal to the value (as  determined  below) of the Option (or the
portion  thereof  being  canceled) by  surrender of the Option at the  principal
office of the Company together with the properly endorsed Notice of Exercise and
Subscription  Form and notice of such election,  in which event the Company will
issue to the  Optionee  a number of shares of Common  Stock  computed  using the
following formula:

                  X = Y (A-B)
                      -------
                         A

         Where  X = the  number of  shares of  Common Stock  to be issued to the
         Optionee

                            Y = the number of shares of Common Stock purchasable
         under  the  Option  or,  if  only a  portion  of the  Option  is  being
         exercised,  the portion of the Option  being  canceled  (at the date of
         such calculation)

                            A = the  fair  market  value  of  one  share  of the
         Company's Common Stock (at the date of such calculation)

                            B = Per Share  Exercise Price  (as adjusted  to  the
         date of such calculation)

         For purposes of the above  calculation,  fair market value of one share
of the  Company's  Stock  will  be the  average  of the  closing  prices  of the
Company's  shares of  Common  Stock as quoted  on the OTC  Bulletin  Board  (the
"OTCBB") (or on such other United States stock exchange or public trading market
or quotation medium on or by which the shares of the Company trade or are quoted
if, at the time of the  election,  they are not  trading or being  quoted on the
OTCBB), for the five (5) consecutive trading days immediately preceding the date
of the date the completed,  executed Notice of Exercise and Subscription Form is
received.

15.  Damages.  The parties  agree that any violation of the Option (other than a
default in the payment of money) cannot be compensated  for by damages,  and any
aggrieved  party shall have the right,  and is hereby granted the privilege,  of
obtaining  specific  performance  of  the  Option  in  any  court  of  competent
jurisdiction in the event of any breach hereunder.

16. Delay. No delay or failure on the part of the Company or the Optionee in the
exercise of any right,  power or remedy shall operate as a waiver  thereof,  nor
shall any  single or  partial  exercise  by any of them of any  right,  power or
remedy preclude other or further exercise thereof,  or the exercise of any other
right, power or remedy.

17.  Restrictions.  Notwithstanding  anything  herein to the contrary,  Optionee
understands  and agrees  that  Optionee  shall not dispose of any of the Shares,
whether  by  sale,  exchange,  assignment,   transfer,  gift,  devise,  bequest,
mortgage, pledge, encumbrance or otherwise,  except in accordance with the terms
and conditions of this Agreement, and Optionee shall not take or omit any action

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which will impair the absolute and  unrestricted  right,  power,  authority  and
capacity of Optionee to sell Shares in accordance  with the terms and conditions
hereof.

Any purported transfer of Shares by Optionee that violates any provision of this
Section 17 shall be wholly void and ineffectual and shall give to the Company or
its  designee the right to purchase  from  Optionee all but not less than all of
the Shares then owned by Optionee for a period of ninety (90) days from the date
the Company first learns of the purported transfer at the Agreement Price and on
the Agreement  Terms (as those terms are defined in subsections  (vi) and (vii),
respectively,  of this  Section  17).  If the  Shares are not  purchased  by the
Company or its designee,  the purported  transfer  thereof shall remain void and
ineffectual and they shall continue to be subject to this Agreement.

The Company  shall not cause or permit the  transfer of any Shares to be made on
its books except in accordance with the terms hereof.

         (i)      Permitted Transfers.

                  (a)      Optionee may sell, assign or transfer any Shares held
                           by the  Optionee  but  only  by  complying  with  the
                           provisions of subsection (iv) of this Section 17.

                  (b)      Optionee may sell, assign or transfer any Shares held
                           by the Optionee without complying with the provisions
                           of  subsection  (iv) by obtaining  the prior  written
                           consent of the Company's  shareholders  owning 50% of
                           the  then  issued  and  outstanding   shares  of  the
                           Company's Common Stock (determined on a fully diluted
                           basis) or a majority  of the  members of the Board of
                           Directors   of  the   Company,   provided   that  the
                           transferee  agrees  in  writing  to be  bound  by the
                           provisions  of the Option and the transfer is made in
                           accordance with any other  restrictions or conditions
                           contained  in the written  consent and in  accordance
                           with applicable federal and state securities laws.

                  (c)      Upon  the  death  of  Optionee,  Shares  held  by the
                           Optionee   may  be   transferred   to  the   personal
                           representative   of  the  Optionee's  estate  without
                           complying  with the  provisions of  subsection  (iv).
                           Shares so  transferred  shall be subject to the other
                           provisions  of the Option,  including in  particular,
                           and without limitation, subsection (v).

         (ii)     No Pledge.  Unless a majority  of the  members of the Board of
                  Directors  consent,  Shares may not be pledged,  mortgaged  or
                  otherwise encumbered to secure indebtedness for money borrowed
                  or any other obligation for which the Optionee is primarily or
                  secondarily liable.

         (iii)    Stock  Certificate  Legend.  Each stock certificate for Shares
                  issued  to the  Optionee  shall  have  conspicuously  written,
                  printed,  typed or stamped upon the face thereof,  or upon the
                  reverse  thereof  with a  conspicuous  reference  on the  face
                  thereof, one or both of the following legends:

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                  THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE BEEN ISSUED
                  WITHOUT  REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS
                  AMENDED,  AND  MAY  NOT  BE  TRANSFERRED  IN  THE  ABSENCE  OF
                  REGISTRATION  THEREUNDER OR AN APPLICABLE  EXEMPTION  FROM THE
                  REGISTRATION  REQUIREMENTS OF SUCH ACT. SUCH SHARES MAY NOT BE
                  SOLD, ASSIGNED,  TRANSFERRED,  OR OTHERWISE DISPOSED OF IN ANY
                  MANNER EXCEPT IN  ACCORDANCE  WITH AND SUBJECT TO THE TERMS OF
                  THE STOCK OPTION AGREEMENT,  A COPY OF WHICH IS ON FILE AT THE
                  PRINCIPAL  OFFICE OF THE  COMPANY.  UNLESS A  MAJORITY  OF THE
                  MEMBERS OF THE BOARD OF DIRECTORS  CONSENT,  SUCH STOCK OPTION
                  AGREEMENT PROHIBITS ANY PLEDGE,  MORTGAGE OR OTHER ENCUMBRANCE
                  OF SUCH SHARES TO SECURE ANY  OBLIGATION OF THE HOLDER HEREOF.
                  EVERY  CREDITOR OF THE HOLDER HEREOF AND ANY PERSON  ACQUIRING
                  OR PURPORTING TO ACQUIRE THIS CERTIFICATE OR THE SHARES HEREBY
                  EVIDENCED  OR ANY INTEREST  THEREIN IS HEREBY  NOTIFIED OF THE
                  EXISTENCE OF SUCH STOCK OPTION AGREEMENT,  AND ANY ACQUISITION
                  OR PURPORTED  ACQUISITION  OF THIS  CERTIFICATE  OR THE SHARES
                  HEREBY  EVIDENCED OR ANY INTEREST  THEREIN SHALL BE SUBJECT TO
                  ALL RIGHTS AND OBLIGATIONS OF THE PARTIES TO SUCH STOCK OPTION
                  AGREEMENT AS THEREIN SET FORTH.

                  IT IS  UNLAWFUL  TO  CONSUMMATE  A SALE  OR  TRANSFER  OF THIS
                  SECURITY,   OR  ANY  INTEREST  THEREIN,   OR  TO  RECEIVE  ANY
                  CONSIDERATION  THEREFOR,  WITHOUT THE PRIOR WRITTEN CONSENT OF
                  THE  COMMISSIONER  OF CORPORATIONS OF THE STATE OF CALIFORNIA,
                  EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

         (iv)     Sales of Shares.

                  (a)      Company's  Right of First Refusal.  In the event that
                           the Optionee shall desire to sell, assign or transfer
                           any Shares held by the  Optionee to any other  person
                           (the  "Offered  Shares") and shall be in receipt of a
                           bona  fide  offer  to  purchase  the  Offered  Shares
                           ("Offer"),  the following  procedure shall apply. The
                           Optionee  shall give to the  Company  written  notice
                           containing  the terms and  conditions  of the  Offer,
                           including,  but  not  limited  to (a) the  number  of
                           Offered  Shares;  (b) the  price per  Share;  (c) the
                           method  of  payment;  and  (d)  the  name(s)  of  the
                           proposed purchaser(s).

                  (b)      An offer  shall not be deemed  bona fide  unless  the
                           Optionee has informed  the  prospective  purchaser of
                           the  Optionee's  obligation  under the Option and the
                           prospective  purchaser  has  agreed to become a party

                                    9 of 17
<PAGE>
                           hereunder  and to be bound  hereby.  The  Company  is
                           entitled to take such steps as it reasonably may deem
                           necessary  to  determine  the  validity and bona fide
                           nature of the Offer.

                  (c)      Until  thirty  (30) days after such  notice is given,
                           the Company or its  designee  shall have the right to
                           purchase  all  of the  Offered  Shares  at the  price
                           offered by the prospective purchaser and specified in
                           such notice.  Such purchase shall be on the Agreement
                           Terms, as defined in subsection (vi).

                  (d)      Failure  of  Company  or  its  Designee  to  Purchase
                           Offered Shares. If all of the Offered  Shares are not
                           purchased by the  Company and/or its designee  within
                           the  thirty  (30)  day   period  granted   for   such
                           purchases, then any remaining  Offered  Shares may be
                           sold, assigned or transferred  pursuant to the Offer;
                           provided, that the Offered Shares are so  transferred
                           within 30 days of the  expiration  of the thirty (30)
                           day period to  the  person or  persons named in,  and
                           under the  terms and  conditions  of,  the bona  fide
                           Offer  described in the  notice to  the Company;  and
                           provided  further, that such persons agree to execute
                           and deliver to  the Company a  written agreement,  in
                           form and  content satisfactory to the Company, agree-
                           ing to  be bound  by the  terms and conditions of the
                           Option.

         (v)      Manner of Exercise.  Any right to purchase  hereunder shall be
                  exercised  by  giving   written  notice  of  election  to  the
                  Optionee, the Optionee's personal  representative or any other
                  selling person, as the case may be, prior to the expiration of
                  such right to purchase.

         (vi)     Agreement Price. The "Agreement  Price" shall be the higher of
                  (a) the  fair  market  value  of the  Shares  to be  purchased
                  determined  in good  faith by the  Board of  Directors  of the
                  Company and (b) the original  exercise  price of the Shares to
                  be purchased.

         (vii)    Agreement Terms. "Agreement  Terms" shall mean and include the
                  following:

                  (a)      Delivery of Shares and Closing  Date. At the closing,
                           the Optionee, the Optionee's personal  representative
                           or such  other  selling  person,  as the case may be,
                           shall deliver  certificates  representing the Shares,
                           properly   endorsed  for   transfer,   and  with  the
                           necessary  documentary  and transfer  tax stamps,  if
                           any,  affixed,  to  the  purchaser  of  such  Shares.
                           Payment  of  the  purchase  price   therefore   shall
                           concurrently be made to the Optionee,  the Optionee's
                           personal representative or such other selling person,
                           as  provided  in  subsection  (b) of this  subsection
                           (vii). Such delivery and payment shall be made at the
                           principal  office  of the  Company  or at such  other
                           place as the parties mutually agree.

                  (b)      Payment of  Purchase Price. The Company shall pay the
                           purchase price to the Optionee at the closing.

                                    10 of 17
<PAGE>
         (viii)   Right to Purchase Upon Certain  Other  Events.  The Company or
                  its  designee  shall have the right to purchase  all,  but not
                  less than  all,  of the  Shares  held by the  Optionee  at the
                  Agreement  Price  and on the  Agreement  Terms for a period of
                  ninety (90) days after any of the following events:

                  (a)      An  attempt by a creditor to levy upon or sell any of
                           the Optionee's Shares;

                  (b)      The filing  of a petition by  the Optionee  under the
                           U.S. Bankruptcy Code or any insolvency laws;

                  (c)      The filing of a petition  against  Optionee under any
                           insolvency or bankruptcy  laws by any creditor of the
                           Optionee  if such  petition is not  dismissed  within
                           thirty (30) days of filing;

                  (d)      The entry of a decree of divorce between the Optionee
                           and the Optionee's spouse; or,

                  (e)      The termination of Optionee's services as an employee
                           or consultant with the Company.

                  The Optionee  shall provide the Company  written notice of the
                  occurrence of any such event within 30 days of such event.

         (ix)     Termination. The provisions of this Section 17 shall terminate
                  and all rights of each such party hereunder shall cease except
                  for  those  which  shall  have  theretofore  accrued  upon the
                  occurrence of any of the following events:

                  (a)      Cessation of the Company's business;

                  (b)      Bankruptcy,   receivership  or   dissolution  of  the
                           Company;

                  (c)      Ownership of all of the issued and outstanding shares
                           of  the  Company  by  a  single  shareholder  of  the
                           Company;

                  (d)      Written  consent or agreement of the  shareholders of
                           the Company  holding  Fifty Percent (50%) of the then
                           issued  and   outstanding   shares  of  the   Company
                           (determined on a fully diluted basis);

                  (e)      Consent or agreement  of a majority of the members of
                           the Board of Directors of the Company; or,

                  (f)      Registration of any class of equity securities of the
                           Company pursuant  to  Section  12  of the  Securities
                           Exchange Act of 1934, as amended.

         (x)      Amendment. This Section 17 may be modified or amended in whole
                  or in part by a written  instrument  signed by shareholders of
                  the Company  holding 50% of the  outstanding  shares of Common

                                    11 of 17
<PAGE>
                  Stock  (determined  on a fully diluted basis) or a majority of
                  the members of the Board of Directors of the Company.

18. Market Standoff. Unless the Board of Directors otherwise consents,  Optionee
agrees hereby not to sell or otherwise  transfer any Shares or other  securities
of the Company  during the 180-day  period  following  the  effective  date of a
registration  statement of the Company filed under the Act;  provided,  however,
that such restriction shall apply only to the first two registration  statements
of the Company to become effective under the Act which includes securities to be
sold on behalf of the Company to the public in an  underwritten  public offering
under the Act. The Company may impose stop-transfer instructions with respect to
securities  subject to the foregoing  restrictions until the end of such 180-day
period.

19.  Rule 144.  Optionee  acknowledges  and  understands  that the Shares may be
subject to transfer and sale  restrictions  imposed  pursuant to SEC Rule 144 of
the  Rules  promulgated  under  the  Securities  Act of  1933  ("Act")  and  the
regulations promulgated thereunder. Optionee shall comply with Rule 144 and with
all policies and  procedures  established by the Company with regard to Rule 144
matters.  Optionee  acknowledged  that the Company or its  attorneys or transfer
agent  may  require a  restrictive  legend on the  certificate  or  certificates
representing  the Shares pursuant to the  restrictions on transfer of the Shares
imposed by Rule 144.

20. No Distribution. Notwithstanding anything in this Agreement to the contrary,
Optionee acknowledges that: (i) the Option, and the Shares upon exercise, is and
are being acquired in a private  transaction which is not part of a distribution
of the Option or Shares; (ii) the Optionee intends to hold the Option and Shares
for the account of the Optionee and does not intend to sell the Option or Shares
as a part of a distribution or otherwise; and (iii) neither the Optionee nor the
Company is an  underwriter  with regard to the Option or the Shares for purposes
of Rule 144.

21. Securities  Compliance.  Optionee understands that the Option and the Shares
may be  offered  and  sold  in  reliance  on one or  more  exemptions  from  the
registration requirements of federal and state securities laws, which exemptions
may include,  without limitation,  Regulation D promulgated under the Securities
Act,  and that the  Company  is  relying  upon the  truth  and  accuracy  of the
representations,  warranties, agreements,  acknowledgments and understandings of
Optionee  set  forth  herein in order to  determine  the  applicability  of such
exemptions and the suitability of Optionee to acquire the Option and the Shares.
The  representations,  warranties and agreements  contained  herein are true and
correct as of the date hereof and may be relied upon by the Company and Optionee
will  notify  the  Company  immediately  of  any  adverse  change  in  any  such
representations  and warranties which may occur prior to the issuance of Shares.
The  representations,  warranties  and agreements of Optionee  contained  herein
shall survive the  execution and delivery of this  Agreement and the exercise of
the Option and the issuance of the Shares.

22. Complete Agreement.  This Agreement constitutes the entire agreement between
the parties with respect to its subject  matter,  and supersedes all other prior
or contemporaneous  agreements and understandings both oral or written; subject,
however,  that in the event of any conflict between this Agreement and the Plan,
the Plan shall govern. This Agreement may only be amended in a writing signed by
the Company and the Optionee.

                                    12 of 17
<PAGE>
23. Privileges of Stock Ownership.  Optionee shall not have any of the rights of
a shareholder with respect to any Shares until Optionee exercises the Option and
pays the  Exercise  Price,  Shares are issued and  delivered  to  Optionee,  and
Optionee  is shown as a  shareholder  of record on the books and  records of the
Company.

24. Further Acts. The parties hereto shall cooperate with each other and execute
such additional documents or instruments and perform such further acts as may be
reasonably necessary to affect the purpose and intent of the Agreement.

25. Effect of Headings. The subject headings of the paragraphs and subparagraphs
of this Agreement are included for purposes of  convenience  only, and shall not
affect the construction or interpretation of any of its provisions.

26.  Notices.  Any notice required to be given or delivered to the Company under
the terms of this  Agreement  shall be in writing and addressed to the Corporate
Secretary of the Company at its principal corporate offices. Any notice required
to be given or  delivered  to  Optionee  shall be in writing  and  addressed  to
Optionee at the address  indicated herein or to such other address as such party
may designate in writing from time to time to the Company.  All notices shall be
deemed to have been given or delivered upon actual personal delivery;  three (3)
days after  deposit in the United  States mail by certified or  registered  mail
(return receipt  requested);  one (1) business day after deposit with any return
receipt express courier (prepaid); or one (1) business day after transmission by
facsimile with a corresponding facsimile transmission confirmation sheet.

27. Counterparts.  This Agreement may be executed  simultaneously in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall  constitute one and the same  instrument.  The exhibits  attached
hereto and  initialed  by the parties  are made a part  hereof and  incorporated
herein by this reference.

28. Parties in Interest. Nothing in this Agreement,  whether express or implied,
is  intended  to  confer  any  rights  or  remedies  under or by  reason of this
Agreement  on any  persons  other than the  parties  to it and their  respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third party to this Agreement,  nor
shall any  provision  give any third person any right of  subrogation  or action
over against any party to this Agreement.

29.  Recovery of Litigation  Costs.  If any legal action or any  arbitration  or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute,  breach, default or misrepresentation in connection with any
of the  provisions of this  Agreement,  the  successful  or prevailing  party or
parties shall be entitled to recover as an element of their damages,  reasonable
attorneys'  fees and other  costs  incurred  in that  action or  proceeding,  in
addition to any other relief to which they may be entitled.

30.  Severability;  Construction.  In the  event  that  any  provision  in  this
Agreement shall be invalid or  unenforceable,  such provision shall be severable

                                    13 of 17
<PAGE>
from, and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining  provisions of this Agreement.  This Agreement shall be
construed as to its fair meaning and not for or against either party.

31. Survival of Representations and Obligations. All representations, warranties
and agreements of the parties contained in this Agreement, or in any instrument,
certificate,  opinion or other  writing  provided for in it,  shall  survive the
exercise of the Option and the issuance of the Shares.

32.  Specific  Performance.  Each party's  obligations  under this Agreement are
unique. If any party should default in its obligations under this Agreement, the
parties each acknowledge that it would be extremely impracticable to measure the
resulting  damages;  accordingly,  the  nondefaulting  party, in addition to any
other available rights or remedies,  may sue in equity for specific  performance
without the necessity of posting a bond or other security,  and the parties each
expressly waive the defense that a remedy in damages will be adequate.

33.  Gender;  Number.  Whenever  the  context of this  Agreement  requires,  the
masculine gender includes the feminine or neuter gender, and the singular number
includes the plural.

34.  Governing Law and Venue.  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 conflict of laws principles.  Venue in
any action arising by reason of this Agreement  shall lie  exclusively in Orange
County, California.

35.  Employment  Agreement.  This  Option is  issued  pursuant  to that  certain
Employment  Agreement  effective  January 1st, 2007 between the Optionee and the
Company.   The  terms  of  the  Employment  Agreement  shall  control  over  any
conflicting  terms in this  Option.  Any breach under the  Employment  Agreement
shall  constitute a breach under this Option and allows the Company to terminate
this Option in whole or in part.

IN WITNESS WHEREOF, this Agreement is made effective on the date first set forth
above at Orange County, California.

                                   Company:

                                   XSUNX, INC, a Colorado Corporation

                                   By:      ________________________________
                                            Name: Tom M. Djokovich
                                            Title: CEO

                                    14 of 17
<PAGE>
OPTIONEE  ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
3 HEREOF IS EARNED ONLY BY  CONTINUING  SERVICE AS AN EMPLOYEE OR  CONSULTANT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,  BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS INCORPORATED  HEREIN BY REFERENCE,
THE  TRANSACTIONS  CONTEMPLATED  HEREUNDER  AND THE VESTING  SCHEDULE  SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED  PROMISE OF CONTINUED  ENGAGEMENT
AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD,  FOR ANY PERIOD, OR AT ALL,
AND  SHALL  NOT  INTERFERE  WITH  OPTIONEE'S  RIGHT  OR THE  COMPANY'S  RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING  RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan, represents that Optionee is
familiar with the terms and  provisions  thereof,  and hereby accepts the Option
subject to all of the terms and  provisions  thereof.  Optionee has reviewed the
Plan and this Agreement in their entirety,  has had an opportunity to obtain the
advice of counsel prior to executing  this Agreement and fully  understands  all
provisions of the Plan and this  Agreement.  Optionee hereby agrees to accept as
binding,  conclusive and final all decisions or  interpretations of the Board or
of the Committee upon any questions arising under the Plan.

         IN WITNESS WHEREOF,  this Agreement is made effective on the date first
set forth above at Orange County, California.

                                            OPTIONEE

                                        ------------------------------
                                            Name:  Joseph Grimes

                                    15 of 17
<PAGE>
CONSENT OF SPOUSE

The undersigned  spouse of the Optionee to the foregoing Stock Option  Agreement
acknowledges  on his or her own behalf  that:  I have read the  foregoing  Stock
Option Agreement and I know its contents. I hereby consent to and approve of the
provisions of the Stock Option Agreement,  and agree that the Shares issued upon
exercise of the Option covered  thereby and my interest in them shall be subject
to the  provisions of the Stock Option  Agreement and that I will take no action
at any time to hinder  operation of the Stock Option  Agreement as to the Shares
or my interest in the Shares.

 IN WITNESS  WHEREOF,  this  Agreement  is made  effective on the date first set
forth above at Orange County, California.

                                        ---------------------------------
                                        Name:

                                    16 of 17
<PAGE>
                                EXHIBIT TO OPTION

                    SUBSCRIPTION FORM AND NOTICE OF EXERCISE

Xsunx, Inc.                                                Date:
Attn: President
65 Enterprise
Aliso Viejo, CA 92656

Ladies and Gentlemen:

                  The  undersigned,  the holder of the enclosed  Option,  hereby
irrevocably elects to exercise the purchase rights represented by the Option and
to purchase there under  __________  shares of Common Stock of XSUNX,  INC. (the
"Company"),  and herewith  encloses payment of $___________  and/or  ___________
shares of the Company's common stock,  (the "Purchase Price") in full payment of
the Purchase Price of such shares being purchased.

Exercise of the Option shall not be deemed  effective  unless and until good and
immediately  available  funds in the full amount of the Purchase Price have been
confirmed in the account of the Company.  The original Option shall be presented
with this Subscription Form and Notice of Exercise.

         The Company may, in its  discretion,  withhold a portion of some or all
of the  exercised  shares or other  amounts  for the  payment  of taxes or other
items.  Holder  represents that Holder is not subject to any backup  withholding
requirements. Holder acknowledges that the shares of stock of the Company issued
upon  exercise  will not be entitled to any  dividend  declared  upon such stock
prior to the effective date of exercise of the Option.

         Holder hereby constitutes this Subscription Form and Notice of Exercise
as an  assignment,  deposit  tender,  and transfer in blank of the Option as set
forth therein.  Holder hereby irrevocably constitutes and appoints the secretary
of the Company as Holder's attorney in fact to issue shares upon the exercise of
the Option and reflect the same on the books and records of the Company,  cancel
the Option, issue a new Option, if applicable,  and perform any necessary act on
behalf of Holder, with full power substitution.

                                        Very truly yours,

                                        -------------------------------------

                                        By: __________________________________

                                        Title: _________________________________

                                    17 of 17EXHIBIT 10.2

                             STOCK OPTION AGREEMENT
                                  (JEFF HUITT)
<PAGE>
THE SECURITY  REPRESENTED BY THIS  CERTIFICATE  HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION  MAY BE EFFECTED  WITHOUT AN EFFECTIVE  REGISTRATION
STATEMENT  RELATED THERETO OR AN OPINION OF COUNSEL  SATISFACTORY TO THE COMPANY
THAT SUCH  REGISTRATION  IS NOT REQUIRED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED.

                             STOCK OPTION AGREEMENT

         THIS STOCK OPTION  AGREEMENT  ("Agreement") is made effective as of the
date of grant set forth below  ("Date of Grant") by and between  XSUNX,  INC., a
Colorado corporation  ("Company"),  and the optionee named below ("Optionee") as
contemplated in the Company's 2007 Option Plan ("Plan").  Capitalized  terms not
defined herein shall have the meaning ascribed to them in the Plan.

Optionee:         Jeff Huitt

Social Security Number:  ###-##-####

Address:  ##### @. ##@@ @@@@@, @@@@@ @@@@@, @@ #####

Total Option Shares:       500,000

Exercise Price Per Share: $0.46

Date of Grant: January 26, 2007

First Vesting Date:        April 1, 2007

Expiration Date for Exercise of Options:    January 26, 2012

Stock Option Number: 07-015

Type of Stock Option:
(Check one)        [ X ] Incentive Stock Option       [ ] Statutory Stock Option

                                    1 of 17
<PAGE>
1.  Conditional  Grant of Option.  The Company  hereby  conditionally  grants to
Optionee an option  ("Option")  to purchase the total number of shares of Common
Stock of the Company set forth above  ("Shares") at the Exercise Price Per Share
set forth above ("Exercise  Price"),  subject to all of the terms and conditions
of this  Agreement  and the Plan.  If  designated  as an Incentive  Stock Option
above,  the Option is intended to qualify as an "incentive stock option" ("ISO")
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended  ("Code").  Subject to the Plan,  only  Employees  of the Company  shall
receive ISOs. This Agreement shall be deemed a Stock Option Agreement as defined
in the Plan.  The terms and  conditions of the Plan are  incorporated  herein by
this reference.  All specific terms and references,  including capitalized terms
and references, which are undefined in this Agreement, shall have the definition
and meaning ascribed to them in the Plan,  including,  without  limitation,  the
definition of the terms Employee and Consultant.

2. Exercise  Price.  The Exercise  Price, is not less than the fair market value
per share of Common  Stock on the date of grant,  as  determined  by the  Board;
provided,  however,  in  the  event  Optionee  is an  Employee  and  owns  stock
representing  more than ten percent (10%) of the total combined  voting power of
all classes of stock of the Company or of its Parent or Subsidiary  corporations
immediately  before the Option is granted,  said exercise price is not less than
one  hundred ten  percent  (110%) of the fair  market  value per share of Common
Stock on the date of grant as determined by the Board.

3. Exercise of Option.  Subject to the vesting schedule contained herein and the
other  conditions set forth in this Agreement,  all or part of the Option may be
exercised  prior to its  expiration  from the first vesting date set forth above
("First  Vesting Date") up to and including 5:00 p.m.  Pacific  Standard Time on
the expiration date set forth above ("Expiration Date") at the time or times set
forth herein in accordance with the provisions of the Plan as follows:

         (i)      Vesting:

                (a)   The  Option  shall  become  exercisable  in the  amount of
                      50,000 shares upon the First Vesting Date. Thereafter, the
                      Option  shall vest and become  exercisable  at the rate of
                      50,000  Shares  per  calendar  quarter  up to a  total  of
                      400,000 shares.

                (b)   This Option shall  become  exercisable  in  the amount  of
                      50,000 shares for each of the first two sales/licensure of
                      an XsunX system.

                (c)   This   Option may  not  be  exercised  for a fraction of a
                      Share.

                (d)   In the  event of  Optionee's  death,  disability  or other
                      termination  of  employment,  the  exercisability  of  the
                      Option is governed  by Sections 7, 8 and 9 below,  subject
                      to the limitations contained in subsection 3(i)(d) below.

                (e)   In no event may the Option be  exercised after the date of
                      expiration  of the  term of  the  Option  as set  forth in
                      Section 11 below.

                                    2 of 17
<PAGE>
         (ii)     Method of Exercise. The Option shall be exercisable by written
                  notice which shall state the election to  exercise the Option,
                  the number  of Shares  in respect of which the Option is being
                  exercised, and such other representations and agreements as to
                  the holder's investment intent with  respect to such shares of
                  Common Stock as may be required by the Company pursuant to the
                  provisions of the Plan. Such written notice shall be signed by
                  Optionee and shall be delivered in person or by certified mail
                  to the President, Secretary  or Chief Financial Officer of the
                  Company. The written notice shall be accompanied by payment of
                  the exercise price.

         (iii)    Compliance  with Law. No Shares will be issued pursuant to the
                  exercise of an Option  unless such  issuance and such exercise
                  shall  comply  with  all  relevant  provisions  of law and the
                  requirements  of any stock  exchange or quotation  medium upon
                  which the Shares may then be listed or quoted.  Assuming  such
                  compliance,  for  income  tax  purposes  the  Shares  shall be
                  considered  transferred  to the  Optionee on the date on which
                  the Option is exercised with respect to such Shares.

         (iv)     Adjustments, Merger,  etc.  The number and class of the Shares
                  and/or the  exercise  price  specified  above are  subject  to
                  appropriate  adjustment  in  the  event   of  changes  in  the
                  capital  stock of the Company by reason   of stock  dividends,
                  stock  splits,   combination   or   recombination  of  shares,
                  reclassifications,  mergers,  consolidations,  reorganizations
                  or  liquidations.  Subject  to  any  required   action  of the
                  stockholders  of the  Company,  if the Company  shall  be  the
                  surviving  corporation  in any merger or  consolidation,   the
                  Option (to the extent  that  it  is still  outstanding)  shall
                  pertain to and apply to the  securities  to  which a holder of
                  the same  number  of  shares  of  Common  Stock  that are then
                  subject  to  the  Option    would  have   been   entitled.   A
                  dissolution or  liquidation  of  the  Company,  or a merger or
                  consolidation  in which  the  Company  is  not  the  surviving
                  corporation,  will cause the Option  to terminate,  unless the
                  agreement  or  merger   or   consolidation    shall  otherwise
                  provide,  provided  that  the  Optionee  shall,  if  the Board
                  expressly   authorizes,   in   such   event   have  the  right
                  immediately  prior to  such  dissolution  or  liquidation,  or
                  merger or consolidation,  to exercise  the Option in  whole or
                  part. To the extent that the foregoing  adjustments  relate to
                  stock or  securities of the Company,  such  adjustments  shall
                  be made by  the Board,  whose  determination  in  that respect
                  shall be final, binding and conclusive.

4. Optionee's  Representations.  By receipt of the Option, by its execution, and
by its  exercise in whole or in part,  Optionee  represents  to the Company that
Optionee understands that:

         (i)      Both the Option and any Shares purchased upon its exercise are
                  securities, the issuance by the Company of which requires com-
                  pliance with federal and state securities laws;

         (ii)     These  securities  are made  available to Optionee only on the
                  condition that Optionee makes the representations contained in
                  this Section 4 to the Company;

         (iii)    Optionee has made a reasonable investigation of the affairs of
                  the Company  sufficient to be well  informed as to  the rights
                  and the value of these securities;

                                    3 of 17
<PAGE>
         (iv)     Optionee  understands   that  the  securities  have  not  been
                  registered under the Securities Act of 1933, as \amended  (the
                  "Act") in  reliance upon  one or more specific exemptions con-
                  tained in  the Act,  which may  include reliance  on  Rule 701
                  promulgated under the Act, if available,  or  which may depend
                  upon: (a) Optionee's bona fide investment intention in acquir-
                  ing  these  securities; (b) Optionee's intention to hold these
                  securities in  compliance  with  federal  and state securities
                  laws; (c) Optionee having  no present intention of selling  or
                  transferring any part thereof (recognizing that  the Option is
                  not transferable) in violation of applicable federal and state
                  securities laws; and (d) there being certain  restrictions  on
                  transfer  of the Shares  subject to the Option;

         (v)      Optionee understands that the Shares subject to the Option, in
                  addition  to  other  restrictions  on  transfer,  must be held
                  indefinitely unless subsequently  registered under the Act, or
                  unless an exemption from registration is available;  that Rule
                  144, the usual exemption from registration,  is only available
                  after the  satisfaction  of certain holding periods and in the
                  presence of a public  market for the Shares;  that there is no
                  certainty that a public market for the Shares will exist,  and
                  that  otherwise it will be  necessary  that the Shares be sold
                  pursuant to another exemption from  registration  which may be
                  difficult to satisfy; and,

         (vi)     Optionee  understands  that the certificate  representing  the
                  Shares will bear a legend  prohibiting  their  transfer in the
                  absence of their  registration  or the  opinion of counsel for
                  the Company that  registration  is not required,  and a legend
                  prohibiting their transfer in compliance with applicable state
                  securities laws unless otherwise exempted.

5. Method of Payment.  Payment of the purchase  price may be made subject to the
terms of Section 14 herein,  or by cash, check or, in the sole discretion of the
Board at the time of exercise,  promissory notes or other Shares of Common Stock
having  a fair  market  value on the date of  surrender  equal to the  aggregate
purchase price of the Shares being purchased.

6. Restrictions on Exercise.  The Option may not be exercised if the issuance of
such Shares upon such  exercise  or the method of payment of  consideration  for
such Shares  would  constitute a violation  of any  applicable  federal or state
securities  or other law or  regulation.  As a condition  to the exercise of the
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

7.  Termination  of  Status  as an  Employee  or  Consultant.  In the  event  of
termination of Optionee's  continuous  status as an Employee or  Consultant,  as
such  status  may be  determined  and  construed  by  the  Company  in its  sole
discretion  ("Continuous Status"), for any reason other than death or disability
or the  completed  term and  performance  under  any  consulting  or  employment
agreement  between the Optionee and the Company,  Optionee  may, but only within
thirty (30) days after the date of such  termination (but in no event later than

                                    4 of 17
<PAGE>
the date of  expiration  of the term of the  Option as set forth in  Section  11
below), exercise the Option to the extent that Optionee was entitled to exercise
it at the date of such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of such termination,  or if Optionee does not
exercise  the  Option  within  the  time  specified  herein,  the  Option  shall
terminate.

8. Disability of Optionee.  In the event of termination of Optionee's Continuous
Status  as an  Employee  or  Consultant  as a result of  Optionee's  disability,
Optionee  may,  but only within six (6) months from the date of  termination  of
employment  or consulting  relationship  (but in no event later than the date of
expiration of the term of the Option as set forth in Section 11 below), exercise
the Option to the extent  Optionee  was  entitled  to exercise it at the date of
such  termination;  provided,  however that if the  disability  is not total and
permanent  (as  defined  in  Section  22(e)(3)  of the  Code)  and the  Optionee
exercises the option within the period provided above but more than three months
after the date of termination,  the Option shall automatically be deemed to be a
Nonstatutory  Stock  Option and not an Incentive  Stock  Option;  and  provided,
further,  that if the  disability  is total and permanent (as defined in Section
22(e)(3) of the Code),  then the Optionee may, but only within one (1) year from
the date of  termination  of employment or  consulting  relationship  (but in no
event later than the date of  expiration  of the term of the Option as set forth
in Section 11 below), exercise the Option to the extent Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination,  or if Optionee does
not exercise  such Option (which  Optionee was entitled to exercise)  within the
time periods specified herein, the Option shall terminate.

9.       Death of Optionee. In the event of the death of Optionee:

         (i)      During the term of  the Option while an Employee or Consultant
                  of the  Company and  having been  in  Continuous  Status as an
                  Employee or Consultant since the date  of grant of the Option,
                  the Option may be exercised,  at any time  within one (1) year
                  following the date of death (but, in the  case of an Incentive
                  Stock Option,  in no event later than the  date of  expiration
                  of the term of the Option as set  forth in  Section 11 below),
                  by Optionee's  estate or by a person who acquired the right to
                  exercise the Option by bequest or inheritance, but only to the
                  extent of the right to exercise  that had  accrued at the time
                  of death of the  Optionee. To the extent that such Employee or
                  Consultant was not entitled to exercise the Option at the date
                  of death,  or if  such Employee,  Consultant,  estate or other
                  person does  not  exercise such  Option (which  such Employee,
                  Consultant, estate or person was  entitled to exercise) within
                  the one (1) year  time  period specified  herein,  the  Option
                  shall terminate; or,

         (ii)     During the thirty  (30) day period  specified  in Section 7 or
                  the  one (1)  year period  specified in  Section  8, after the
                  termination of Optionee's Continuous Status as an  Employee or
                  Consultant, the Option  may be  exercised,  at any time within
                  one (1)  year following the date of death (but, in the case of
                  an  Incentive Stock Option, in no event later than the date of
                  expiration of the term of the  Option as set forth in  Section
                  11  below),  by Optionee's estate or by a  person who acquired
                  the  right to exercise  the Option by bequest or  inheritance,
                  but only to  the extent  of the  right  to  exercise  that had
                  accrued at the  date  of termination.  To the extent that such
                  Employee or Consultant was not entitled to exercise the Option

                                    5 of 17
<PAGE>
                  at the date of death, or if such Employee, Consultant,  estate
                  or  other  person  does not  exercise  such Option (which such
                  Employee,  Consultant,  estate  or    person was  entitled  to
                  exercise)  within  the  one  (1)  year time  period  specified
                  herein, the Option shall terminate.

10.  Non-Transferability  of Option.  The Option may not be  transferred  in any
manner  otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee, only by Optionee. The terms of the
Option shall be binding upon the executors,  administrators,  heirs,  successors
and assigns of Optionee.

11.  Term of Option.  The Option may not be  exercised  more than five (5) years
from the date of grant of the Option, and may be exercised during such term only
in accordance with the Plan and terms of the Option; provided, however, that the
term of this option, if it is a Nonstatutory  Stock Option,  may be extended for
the period set forth in Section 9(i) or Section 9(ii) in the  circumstances  set
forth in such Sections.

12. Early Disposition of Stock; Taxation Upon Exercise of Option. If Optionee is
an Employee and the Option qualifies as an ISO,  Optionee  understands  that, if
Optionee  disposes of any Shares  received under the Option within two (2) years
after the date of this  Agreement  or within one (1) year after such Shares were
transferred to Optionee, Optionee may be treated for federal income tax purposes
as having received ordinary income at the time of such disposition in any amount
generally  measured as the difference  between the price paid for the Shares and
the lower of the fair market  value of the Shares at the date of exercise or the
fair market value of the Shares at the of  disposition.  Any gain  recognized on
such  premature  sale of the Shares in excess of the amount  treated as ordinary
income may be  characterized  as capital gain.  Optionee hereby agrees to notify
the  Company  in  writing  within  thirty  (30) days  after the date of any such
disposition.  Optionee  understands that if Optionee  disposes of such Shares at
any time after the expiration of such two-year and one-year holding periods, any
gain on such sale may be  treated  as  long-term  capital  gain laws  subject to
meeting  various  qualifications.  If  Optionee  is a  Consultant  or  this is a
Nonstatutory  Stock  Option,  Optionee  understands  that,  upon exercise of the
Option, Optionee may recognize income for tax purposes in an amount equal to the
excess of the then fair market value of the Shares over the exercise price. Upon
a resale of such shares by the Optionee,  any difference  between the sale price
and the fair  market  value of the Shares on the date of  exercise of the Option
may be treated as capital gain or loss.  Optionee  understands  that the Company
may be required to withhold tax from Optionee's current  compensation in some of
the  circumstances  described  above  (and  Optionee  hereby so  authorizes  the
Company);  to the extent that Optionee's current compensation is insufficient to
satisfy the withholding  tax liability,  the Company may require the Optionee to
make a cash  payment to cover such  liability  as a condition to exercise of the
Option.

13.  Tax  Consequences.  The  Optionee  understands  that  any of the  foregoing
references to taxation are based on federal income tax laws and  regulations now
in  effect,   and  may  not  be  applicable   to  the  Optionee   under  certain
circumstances.  The Optionee may also have adverse tax consequences  under state
or local law. The Optionee has reviewed with the Optionee's own tax advisors the
federal,   state,  local  and  foreign  tax  consequences  of  the  transactions
contemplated by this Agreement.  The Optionee is relying solely on such advisors
and  not on any  statements  or  representations  of the  Company  or any of its
agents.  The Optionee  understands that the Optionee (and not the Company) shall
be  responsible  for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement.

                                    6 of 17
<PAGE>
14. Net Issue Exercise.  Notwithstanding  any provisions herein to the contrary,
if the fair market value of one share of the  Company's  Common Stock is greater
than the Per  Share  Exercise  Price  (at the date of  calculation  as set forth
below),  in lieu of  exercising  the Option for cash,  the Optionee may elect to
receive  shares equal to the value (as  determined  below) of the Option (or the
portion  thereof  being  canceled) by  surrender of the Option at the  principal
office of the Company together with the properly endorsed Notice of Exercise and
Subscription  Form and notice of such election,  in which event the Company will
issue to the  Optionee  a number of shares of Common  Stock  computed  using the
following formula:

                  X = Y (A-B)
                      -------
                         A

         Where  X = the  number of  shares of  Common Stock  to be issued to the
         Optionee

                            Y = the number of shares of Common Stock purchasable
         under  the  Option  or,  if  only a  portion  of the  Option  is  being
         exercised,  the portion of the Option  being  canceled  (at the date of
         such calculation)

                            A = the  fair  market  value  of  one  share  of the
         Company's Common Stock (at the date of such calculation)

                            B = Per Share  Exercise Price  (as adjusted  to  the
         date of such calculation)

         For purposes of the above  calculation,  fair market value of one share
of the  Company's  Stock  will  be the  average  of the  closing  prices  of the
Company's  shares of  Common  Stock as quoted  on the OTC  Bulletin  Board  (the
"OTCBB") (or on such other United States stock exchange or public trading market
or quotation medium on or by which the shares of the Company trade or are quoted
if, at the time of the  election,  they are not  trading or being  quoted on the
OTCBB), for the five (5) consecutive trading days immediately preceding the date
of the date the completed,  executed Notice of Exercise and Subscription Form is
received.

15.  Damages.  The parties  agree that any violation of the Option (other than a
default in the payment of money) cannot be compensated  for by damages,  and any
aggrieved  party shall have the right,  and is hereby granted the privilege,  of
obtaining  specific  performance  of  the  Option  in  any  court  of  competent
jurisdiction in the event of any breach hereunder.

16. Delay. No delay or failure on the part of the Company or the Optionee in the
exercise of any right,  power or remedy shall operate as a waiver  thereof,  nor
shall any  single or  partial  exercise  by any of them of any  right,  power or
remedy preclude other or further exercise thereof,  or the exercise of any other
right, power or remedy.

17.  Restrictions.  Notwithstanding  anything  herein to the contrary,  Optionee
understands  and agrees  that  Optionee  shall not dispose of any of the Shares,
whether  by  sale,  exchange,  assignment,   transfer,  gift,  devise,  bequest,
mortgage, pledge, encumbrance or otherwise,  except in accordance with the terms
and conditions of this Agreement, and Optionee shall not take or omit any action

                                    7 of 17
<PAGE>
which will impair the absolute and  unrestricted  right,  power,  authority  and
capacity of Optionee to sell Shares in accordance  with the terms and conditions
hereof.

Any purported transfer of Shares by Optionee that violates any provision of this
Section 17 shall be wholly void and ineffectual and shall give to the Company or
its  designee the right to purchase  from  Optionee all but not less than all of
the Shares then owned by Optionee for a period of ninety (90) days from the date
the Company first learns of the purported transfer at the Agreement Price and on
the Agreement  Terms (as those terms are defined in subsections  (vi) and (vii),
respectively,  of this  Section  17).  If the  Shares are not  purchased  by the
Company or its designee,  the purported  transfer  thereof shall remain void and
ineffectual and they shall continue to be subject to this Agreement.

The Company  shall not cause or permit the  transfer of any Shares to be made on
its books except in accordance with the terms hereof.

         (i)      Permitted Transfers.

                  (a)      Optionee may sell, assign or transfer any Shares held
                           by the  Optionee  but  only  by  complying  with  the
                           provisions of subsection (iv) of this Section 17.

                  (b)      Optionee may sell, assign or transfer any Shares held
                           by the Optionee without complying with the provisions
                           of  subsection  (iv) by obtaining  the prior  written
                           consent of the Company's  shareholders  owning 50% of
                           the  then  issued  and  outstanding   shares  of  the
                           Company's Common Stock (determined on a fully diluted
                           basis) or a majority  of the  members of the Board of
                           Directors   of  the   Company,   provided   that  the
                           transferee  agrees  in  writing  to be  bound  by the
                           provisions  of the Option and the transfer is made in
                           accordance with any other  restrictions or conditions
                           contained  in the written  consent and in  accordance
                           with applicable federal and state securities laws.

                  (c)      Upon  the  death  of  Optionee,  Shares  held  by the
                           Optionee   may  be   transferred   to  the   personal
                           representative   of  the  Optionee's  estate  without
                           complying  with the  provisions of  subsection  (iv).
                           Shares so  transferred  shall be subject to the other
                           provisions  of the Option,  including in  particular,
                           and without limitation, subsection (v).

         (ii)     No Pledge.  Unless a majority  of the  members of the Board of
                  Directors  consent,  Shares may not be pledged,  mortgaged  or
                  otherwise encumbered to secure indebtedness for money borrowed
                  or any other obligation for which the Optionee is primarily or
                  secondarily liable.

         (iii)    Stock  Certificate  Legend.  Each stock certificate for Shares
                  issued  to the  Optionee  shall  have  conspicuously  written,
                  printed,  typed or stamped upon the face thereof,  or upon the
                  reverse  thereof  with a  conspicuous  reference  on the  face
                  thereof, one or both of the following legends:

                                    8 of 17
<PAGE>
                  THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE BEEN ISSUED
                  WITHOUT  REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS
                  AMENDED,  AND  MAY  NOT  BE  TRANSFERRED  IN  THE  ABSENCE  OF
                  REGISTRATION  THEREUNDER OR AN APPLICABLE  EXEMPTION  FROM THE
                  REGISTRATION  REQUIREMENTS OF SUCH ACT. SUCH SHARES MAY NOT BE
                  SOLD, ASSIGNED,  TRANSFERRED,  OR OTHERWISE DISPOSED OF IN ANY
                  MANNER EXCEPT IN  ACCORDANCE  WITH AND SUBJECT TO THE TERMS OF
                  THE STOCK OPTION AGREEMENT,  A COPY OF WHICH IS ON FILE AT THE
                  PRINCIPAL  OFFICE OF THE  COMPANY.  UNLESS A  MAJORITY  OF THE
                  MEMBERS OF THE BOARD OF DIRECTORS  CONSENT,  SUCH STOCK OPTION
                  AGREEMENT PROHIBITS ANY PLEDGE,  MORTGAGE OR OTHER ENCUMBRANCE
                  OF SUCH SHARES TO SECURE ANY  OBLIGATION OF THE HOLDER HEREOF.
                  EVERY  CREDITOR OF THE HOLDER HEREOF AND ANY PERSON  ACQUIRING
                  OR PURPORTING TO ACQUIRE THIS CERTIFICATE OR THE SHARES HEREBY
                  EVIDENCED  OR ANY INTEREST  THEREIN IS HEREBY  NOTIFIED OF THE
                  EXISTENCE OF SUCH STOCK OPTION AGREEMENT,  AND ANY ACQUISITION
                  OR PURPORTED  ACQUISITION  OF THIS  CERTIFICATE  OR THE SHARES
                  HEREBY  EVIDENCED OR ANY INTEREST  THEREIN SHALL BE SUBJECT TO
                  ALL RIGHTS AND OBLIGATIONS OF THE PARTIES TO SUCH STOCK OPTION
                  AGREEMENT AS THEREIN SET FORTH.

                  IT IS  UNLAWFUL  TO  CONSUMMATE  A SALE  OR  TRANSFER  OF THIS
                  SECURITY,   OR  ANY  INTEREST  THEREIN,   OR  TO  RECEIVE  ANY
                  CONSIDERATION  THEREFOR,  WITHOUT THE PRIOR WRITTEN CONSENT OF
                  THE  COMMISSIONER  OF CORPORATIONS OF THE STATE OF CALIFORNIA,
                  EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

         (iv)     Sales of Shares.

                  (a)      Company's  Right of First Refusal.  In the event that
                           the Optionee shall desire to sell, assign or transfer
                           any Shares held by the  Optionee to any other  person
                           (the  "Offered  Shares") and shall be in receipt of a
                           bona  fide  offer  to  purchase  the  Offered  Shares
                           ("Offer"),  the following  procedure shall apply. The
                           Optionee  shall give to the  Company  written  notice
                           containing  the terms and  conditions  of the  Offer,
                           including,  but  not  limited  to (a) the  number  of
                           Offered  Shares;  (b) the  price per  Share;  (c) the
                           method  of  payment;  and  (d)  the  name(s)  of  the
                           proposed purchaser(s).

                  (b)      An offer  shall not be deemed  bona fide  unless  the
                           Optionee has informed  the  prospective  purchaser of
                           the  Optionee's  obligation  under the Option and the
                           prospective  purchaser  has  agreed to become a party

                                    9 of 17
<PAGE>
                           hereunder  and to be bound  hereby.  The  Company  is
                           entitled to take such steps as it reasonably may deem
                           necessary  to  determine  the  validity and bona fide
                           nature of the Offer.

                  (c)      Until  thirty  (30) days after such  notice is given,
                           the Company or its  designee  shall have the right to
                           purchase  all  of the  Offered  Shares  at the  price
                           offered by the prospective purchaser and specified in
                           such notice.  Such purchase shall be on the Agreement
                           Terms, as defined in subsection (vi).

                  (d)      Failure  of  Company  or  its  Designee  to  Purchase
                           Offered Shares. If all of the Offered  Shares are not
                           purchased by the  Company and/or its designee  within
                           the  thirty  (30)  day   period  granted   for   such
                           purchases, then any remaining  Offered  Shares may be
                           sold, assigned or transferred  pursuant to the Offer;
                           provided, that the Offered Shares are so  transferred
                           within 30 days of the  expiration  of the thirty (30)
                           day period to  the  person or  persons named in,  and
                           under the  terms and  conditions  of,  the bona  fide
                           Offer  described in the  notice to  the Company;  and
                           provided  further, that such persons agree to execute
                           and deliver to  the Company a  written agreement,  in
                           form and  content satisfactory to the Company, agree-
                           ing to  be bound  by the  terms and conditions of the
                           Option.

         (v)      Manner of Exercise.  Any right to purchase  hereunder shall be
                  exercised  by  giving   written  notice  of  election  to  the
                  Optionee, the Optionee's personal  representative or any other
                  selling person, as the case may be, prior to the expiration of
                  such right to purchase.

         (vi)     Agreement Price. The "Agreement  Price" shall be the higher of
                  (a) the  fair  market  value  of the  Shares  to be  purchased
                  determined  in good  faith by the  Board of  Directors  of the
                  Company and (b) the original  exercise  price of the Shares to
                  be purchased.

         (vii)    Agreement Terms. "Agreement  Terms" shall mean and include the
                  following:

                  (a)      Delivery of Shares and Closing  Date. At the closing,
                           the Optionee, the Optionee's personal  representative
                           or such  other  selling  person,  as the case may be,
                           shall deliver  certificates  representing the Shares,
                           properly   endorsed  for   transfer,   and  with  the
                           necessary  documentary  and transfer  tax stamps,  if
                           any,  affixed,  to  the  purchaser  of  such  Shares.
                           Payment  of  the  purchase  price   therefore   shall
                           concurrently be made to the Optionee,  the Optionee's
                           personal representative or such other selling person,
                           as  provided  in  subsection  (b) of this  subsection
                           (vii). Such delivery and payment shall be made at the
                           principal  office  of the  Company  or at such  other
                           place as the parties mutually agree.

                  (b)      Payment of  Purchase Price. The Company shall pay the
                           purchase price to the Optionee at the closing.

                                    10 of 17
<PAGE>
         (viii)   Right to Purchase Upon Certain  Other  Events.  The Company or
                  its  designee  shall have the right to purchase  all,  but not
                  less than  all,  of the  Shares  held by the  Optionee  at the
                  Agreement  Price  and on the  Agreement  Terms for a period of
                  ninety (90) days after any of the following events:

                  (a)      An  attempt by a creditor to levy upon or sell any of
                           the Optionee's Shares;

                  (b)      The filing  of a petition by  the Optionee  under the
                           U.S. Bankruptcy Code or any insolvency laws;

                  (c)      The filing of a petition  against  Optionee under any
                           insolvency or bankruptcy  laws by any creditor of the
                           Optionee  if such  petition is not  dismissed  within
                           thirty (30) days of filing;

                  (d)      The entry of a decree of divorce between the Optionee
                           and the Optionee's spouse; or,

                  (e)      The termination of Optionee's services as an employee
                           or consultant with the Company.

                  The Optionee  shall provide the Company  written notice of the
                  occurrence of any such event within 30 days of such event.

         (ix)     Termination. The provisions of this Section 17 shall terminate
                  and all rights of each such party hereunder shall cease except
                  for  those  which  shall  have  theretofore  accrued  upon the
                  occurrence of any of the following events:

                  (a)      Cessation of the Company's business;

                  (b)      Bankruptcy,   receivership  or   dissolution  of  the
                           Company;

                  (c)      Ownership of all of the issued and outstanding shares
                           of  the  Company  by  a  single  shareholder  of  the
                           Company;

                  (d)      Written  consent or agreement of the  shareholders of
                           the Company  holding  Fifty Percent (50%) of the then
                           issued  and   outstanding   shares  of  the   Company
                           (determined on a fully diluted basis);

                  (e)      Consent or agreement  of a majority of the members of
                           the Board of Directors of the Company; or,

                  (f)      Registration of any class of equity securities of the
                           Company pursuant  to  Section  12  of the  Securities
                           Exchange Act of 1934, as amended.

         (x)      Amendment. This Section 17 may be modified or amended in whole
                  or in part by a written  instrument  signed by shareholders of
                  the Company  holding 50% of the  outstanding  shares of Common

                                    11 of 17
<PAGE>
                  Stock  (determined  on a fully diluted basis) or a majority of
                  the members of the Board of Directors of the Company.

18. Market Standoff. Unless the Board of Directors otherwise consents,  Optionee
agrees hereby not to sell or otherwise  transfer any Shares or other  securities
of the Company  during the 180-day  period  following  the  effective  date of a
registration  statement of the Company filed under the Act;  provided,  however,
that such restriction shall apply only to the first two registration  statements
of the Company to become effective under the Act which includes securities to be
sold on behalf of the Company to the public in an  underwritten  public offering
under the Act. The Company may impose stop-transfer instructions with respect to
securities  subject to the foregoing  restrictions until the end of such 180-day
period.

19.  Rule 144.  Optionee  acknowledges  and  understands  that the Shares may be
subject to transfer and sale  restrictions  imposed  pursuant to SEC Rule 144 of
the  Rules  promulgated  under  the  Securities  Act of  1933  ("Act")  and  the
regulations promulgated thereunder. Optionee shall comply with Rule 144 and with
all policies and  procedures  established by the Company with regard to Rule 144
matters.  Optionee  acknowledged  that the Company or its  attorneys or transfer
agent  may  require a  restrictive  legend on the  certificate  or  certificates
representing  the Shares pursuant to the  restrictions on transfer of the Shares
imposed by Rule 144.

20. No Distribution. Notwithstanding anything in this Agreement to the contrary,
Optionee acknowledges that: (i) the Option, and the Shares upon exercise, is and
are being acquired in a private  transaction which is not part of a distribution
of the Option or Shares; (ii) the Optionee intends to hold the Option and Shares
for the account of the Optionee and does not intend to sell the Option or Shares
as a part of a distribution or otherwise; and (iii) neither the Optionee nor the
Company is an  underwriter  with regard to the Option or the Shares for purposes
of Rule 144.

21. Securities  Compliance.  Optionee understands that the Option and the Shares
may be  offered  and  sold  in  reliance  on one or  more  exemptions  from  the
registration requirements of federal and state securities laws, which exemptions
may include,  without limitation,  Regulation D promulgated under the Securities
Act,  and that the  Company  is  relying  upon the  truth  and  accuracy  of the
representations,  warranties, agreements,  acknowledgments and understandings of
Optionee  set  forth  herein in order to  determine  the  applicability  of such
exemptions and the suitability of Optionee to acquire the Option and the Shares.
The  representations,  warranties and agreements  contained  herein are true and
correct as of the date hereof and may be relied upon by the Company and Optionee
will  notify  the  Company  immediately  of  any  adverse  change  in  any  such
representations  and warranties which may occur prior to the issuance of Shares.
The  representations,  warranties  and agreements of Optionee  contained  herein
shall survive the  execution and delivery of this  Agreement and the exercise of
the Option and the issuance of the Shares.

22. Complete Agreement.  This Agreement constitutes the entire agreement between
the parties with respect to its subject  matter,  and supersedes all other prior
or contemporaneous  agreements and understandings both oral or written; subject,
however,  that in the event of any conflict between this Agreement and the Plan,
the Plan shall govern. This Agreement may only be amended in a writing signed by
the Company and the Optionee.

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<PAGE>
23. Privileges of Stock Ownership.  Optionee shall not have any of the rights of
a shareholder with respect to any Shares until Optionee exercises the Option and
pays the  Exercise  Price,  Shares are issued and  delivered  to  Optionee,  and
Optionee  is shown as a  shareholder  of record on the books and  records of the
Company.

24. Further Acts. The parties hereto shall cooperate with each other and execute
such additional documents or instruments and perform such further acts as may be
reasonably necessary to affect the purpose and intent of the Agreement.

25. Effect of Headings. The subject headings of the paragraphs and subparagraphs
of this Agreement are included for purposes of  convenience  only, and shall not
affect the construction or interpretation of any of its provisions.

26.  Notices.  Any notice required to be given or delivered to the Company under
the terms of this  Agreement  shall be in writing and addressed to the Corporate
Secretary of the Company at its principal corporate offices. Any notice required
to be given or  delivered  to  Optionee  shall be in writing  and  addressed  to
Optionee at the address  indicated herein or to such other address as such party
may designate in writing from time to time to the Company.  All notices shall be
deemed to have been given or delivered upon actual personal delivery;  three (3)
days after  deposit in the United  States mail by certified or  registered  mail
(return receipt  requested);  one (1) business day after deposit with any return
receipt express courier (prepaid); or one (1) business day after transmission by
facsimile with a corresponding facsimile transmission confirmation sheet.

27. Counterparts.  This Agreement may be executed  simultaneously in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall  constitute one and the same  instrument.  The exhibits  attached
hereto and  initialed  by the parties  are made a part  hereof and  incorporated
herein by this reference.

28. Parties in Interest. Nothing in this Agreement,  whether express or implied,
is  intended  to  confer  any  rights  or  remedies  under or by  reason of this
Agreement  on any  persons  other than the  parties  to it and their  respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third party to this Agreement,  nor
shall any  provision  give any third person any right of  subrogation  or action
over against any party to this Agreement.

29.  Recovery of Litigation  Costs.  If any legal action or any  arbitration  or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute,  breach, default or misrepresentation in connection with any
of the  provisions of this  Agreement,  the  successful  or prevailing  party or
parties shall be entitled to recover as an element of their damages,  reasonable
attorneys'  fees and other  costs  incurred  in that  action or  proceeding,  in
addition to any other relief to which they may be entitled.

30.  Severability;  Construction.  In the  event  that  any  provision  in  this
Agreement shall be invalid or  unenforceable,  such provision shall be severable

                                    13 of 17
<PAGE>
from, and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining  provisions of this Agreement.  This Agreement shall be
construed as to its fair meaning and not for or against either party.

31. Survival of Representations and Obligations. All representations, warranties
and agreements of the parties contained in this Agreement, or in any instrument,
certificate,  opinion or other  writing  provided for in it,  shall  survive the
exercise of the Option and the issuance of the Shares.

32.  Specific  Performance.  Each party's  obligations  under this Agreement are
unique. If any party should default in its obligations under this Agreement, the
parties each acknowledge that it would be extremely impracticable to measure the
resulting  damages;  accordingly,  the  nondefaulting  party, in addition to any
other available rights or remedies,  may sue in equity for specific  performance
without the necessity of posting a bond or other security,  and the parties each
expressly waive the defense that a remedy in damages will be adequate.

33.  Gender;  Number.  Whenever  the  context of this  Agreement  requires,  the
masculine gender includes the feminine or neuter gender, and the singular number
includes the plural.

34.  Governing Law and Venue.  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 conflict of laws principles.  Venue in
any action arising by reason of this Agreement  shall lie  exclusively in Orange
County, California.

35.  Employment  Agreement.  This  Option is  issued  pursuant  to that  certain
Employment  Agreement  effective  January 1st, 2007 between the Optionee and the
Company.   The  terms  of  the  Employment  Agreement  shall  control  over  any
conflicting  terms in this  Option.  Any breach under the  Employment  Agreement
shall  constitute a breach under this Option and allows the Company to terminate
this Option in whole or in part.

IN WITNESS WHEREOF, this Agreement is made effective on the date first set forth
above at Orange County, California.

                                   Company:

                                   XSUNX, INC, a Colorado Corporation

                                   By:      ________________________________
                                            Name: Tom M. Djokovich
                                            Title: CEO

                                    14 of 17
<PAGE>
OPTIONEE  ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
3 HEREOF IS EARNED ONLY BY  CONTINUING  SERVICE AS AN EMPLOYEE OR  CONSULTANT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,  BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS INCORPORATED  HEREIN BY REFERENCE,
THE  TRANSACTIONS  CONTEMPLATED  HEREUNDER  AND THE VESTING  SCHEDULE  SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED  PROMISE OF CONTINUED  ENGAGEMENT
AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD,  FOR ANY PERIOD, OR AT ALL,
AND  SHALL  NOT  INTERFERE  WITH  OPTIONEE'S  RIGHT  OR THE  COMPANY'S  RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING  RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan, represents that Optionee is
familiar with the terms and  provisions  thereof,  and hereby accepts the Option
subject to all of the terms and  provisions  thereof.  Optionee has reviewed the
Plan and this Agreement in their entirety,  has had an opportunity to obtain the
advice of counsel prior to executing  this Agreement and fully  understands  all
provisions of the Plan and this  Agreement.  Optionee hereby agrees to accept as
binding,  conclusive and final all decisions or  interpretations of the Board or
of the Committee upon any questions arising under the Plan.

         IN WITNESS WHEREOF,  this Agreement is made effective on the date first
set forth above at Orange County, California.

                                            OPTIONEE

                                        ------------------------------
                                            Name:  Jeff Huitt

                                    15 of 17
<PAGE>
CONSENT OF SPOUSE

The undersigned  spouse of the Optionee to the foregoing Stock Option  Agreement
acknowledges  on his or her own behalf  that:  I have read the  foregoing  Stock
Option Agreement and I know its contents. I hereby consent to and approve of the
provisions of the Stock Option Agreement,  and agree that the Shares issued upon
exercise of the Option covered  thereby and my interest in them shall be subject
to the  provisions of the Stock Option  Agreement and that I will take no action
at any time to hinder  operation of the Stock Option  Agreement as to the Shares
or my interest in the Shares.

 IN WITNESS  WHEREOF,  this  Agreement  is made  effective on the date first set
forth above at Orange County, California.

                                        ---------------------------------
                                        Name:

                                    16 of 17
<PAGE>
                                EXHIBIT TO OPTION

                    SUBSCRIPTION FORM AND NOTICE OF EXERCISE

Xsunx, Inc.                                                Date:
Attn: President
65 Enterprise
Aliso Viejo, CA 92656

Ladies and Gentlemen:

                  The  undersigned,  the holder of the enclosed  Option,  hereby
irrevocably elects to exercise the purchase rights represented by the Option and
to purchase there under  __________  shares of Common Stock of XSUNX,  INC. (the
"Company"),  and herewith  encloses payment of $___________  and/or  ___________
shares of the Company's common stock,  (the "Purchase Price") in full payment of
the Purchase Price of such shares being purchased.

Exercise of the Option shall not be deemed  effective  unless and until good and
immediately  available  funds in the full amount of the Purchase Price have been
confirmed in the account of the Company.  The original Option shall be presented
with this Subscription Form and Notice of Exercise.

         The Company may, in its  discretion,  withhold a portion of some or all
of the  exercised  shares or other  amounts  for the  payment  of taxes or other
items.  Holder  represents that Holder is not subject to any backup  withholding
requirements. Holder acknowledges that the shares of stock of the Company issued
upon  exercise  will not be entitled to any  dividend  declared  upon such stock
prior to the effective date of exercise of the Option.

         Holder hereby constitutes this Subscription Form and Notice of Exercise
as an  assignment,  deposit  tender,  and transfer in blank of the Option as set
forth therein.  Holder hereby irrevocably constitutes and appoints the secretary
of the Company as Holder's attorney in fact to issue shares upon the exercise of
the Option and reflect the same on the books and records of the Company,  cancel
the Option, issue a new Option, if applicable,  and perform any necessary act on
behalf of Holder, with full power substitution.

                                        Very truly yours,

                                        -------------------------------------

                                        By: __________________________________

                                        Title: _________________________________

                                    17 of 17

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