CONSULTING AND ADVISORY AGREEMENT BY AND BETWEEN XSUNX, INC. AND DR. ARUN MADAN

EXHIBIT 10.4

CONSULTING AND ADVISORY AGREEMENT

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EXHIBIT 10.4

CONSULTING AND ADVISORY AGREEMENT

BY AND BETWEEN

XSUNX, INC.

AND

DR. ARUN MADAN

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CONSULTING AND ADVISORY AGREEMENT

THIS CONSULTING AGREEMENT ("Agreement"), made effective as of the 17th

day of September, 2004, is entered into by and between Xsunx, Inc., a Colorado

corporation ("Company"), and Dr. Arun Madan, an individual ("Consultant"). The

Company and Consultant are sometimes herein referred to individually as a

"party" and collectively as the "parties".

R E C I T A L S

WHEREAS, Consultant is currently a shareholder of, and employed by,

MVSystems, Inc. a Colorado corporation ("MVS") which has developed technology

pertaining to solar cells, thin film resistors, imaging, spatial light

modulators, memory devices, and other technology related to amorphous silicon

and related alloys which is of interest to the Company;

WHEREAS, the Company, Consultant, and MVS have entered into a

Technology Sharing and License Agreement ("Technology Agreement") which

contemplates that the company will retain the services of the Consultant for the

purposes stated herein. Capitalized terms herein will have the same meaning as

those in the Technology Agreement;

WHEREAS, Consultant is a part time research professor at Colorado

School of Mines and is engaged in research in the technology of MVS and other

related fields and shall also continue to be employed as the President and CEO

of MVS; and

WHEREAS, the Company desires to obtain the services of Consultant and

Consultant desires to provide the Company with consultancy and advisory services

as contemplated in the Technology Agreement and pursuant to the terms and

conditions contained herein; and

WHEREAS, the undersigned parties desire to formalize such consultant

relationship;

NOW, THEREFORE, in consideration of the promises, mutual covenants and

agreements contained herein, and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the parties to this

Agreement agree as follows:

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1. Engagement of Services. The Company hereby engages Consultant as an

independent contractor to provide consulting and advisory services as set forth

herein. All such consulting and services shall be performed in accordance with

the terms and conditions contained herein. Consultant hereby accepts such

engagement in accordance with such terms and conditions.

2. Services of Consultant. Consultant shall, in its sole discretion,

provide consultancy and advisory services under the title of Chairman of the

Scientific Advisory Board. Notwithstanding the foregoing title Consultant shall

remain an independent contractor. Consultant shall provide such services

incident thereto as may be necessary from time to time which services shall

include, without limitation, providing the Company with his best efforts and

technical expertise in advising the Company in the areas of research &

development, process development, planning, product specifications, third party

technical and resource requirements, scheduling, and management of developing

intellectual assets pertaining to the Business of XsunX and the XsunX Field of

Use. Consultant is not a corporate officer or director of XsunX and will not be

represented as such.

2.1. Consultant shall provide such other related services as may be

requested of Consultant by the Company and as are not inconsistent with the

provisions of this Agreement or the Technology Agreement. Consultant agrees to

devote Consultant's best efforts, skills, and technical expertise to the

business of the Company, to do Consultant's utmost to further enhance and

develop the interests and welfare of the Company, and to devote necessary time

and attention to the business of the Company, while recognizing Consultant's

duties to MVS.

2.2. Consultant shall truthfully and accurately make, maintain and

preserve all records and reports that the Company may, from time to time,

request or require, and shall fully account for all money, records, equipment,

materials or other property belonging to the Company of which Consultant may

have custody and shall pay over and deliver same promptly whenever and however

Consultant may be directed to do so.

2.3. Consultant shall make available to the Company any and all

information of which Consultant has knowledge that is relevant to the Company's

business, but is not otherwise prohibited from disclosing, and make all

suggestions and recommendation which Consultant believes will be of benefit to

the Company.

2.4. Consultant shall, at his own cost, prepare for and attend such

meetings as may be reasonably requested by the Company, provided, however, that

the Company shall pay for the reasonable travel and lodging costs incurred by

Consultant in regard to the foregoing. The Company may request at least one

meeting per month for the purpose of discussion of the development matters

referenced hereinabove, and the conformance or variance of the foregoing to or

with the Business of XsunX.

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3. Duty to MVS. The parties recognize that Consultant is and shall

remain employed by MVS and that as a shareholder, officer, director, and/or

employee of MVS, Consultant shall devote time and effort to the business of MVS.

Notwithstanding the same, Consultant shall conform Consultants' conduct to the

fiduciary duties of confidentiality and loyalty owed to the Company. In that

regard, Consultant shall inform the Company at the earliest opportunity at such

time as Consultant may perceive a potential conflict of interest with regard to

Consultant's duties to MVS and Consultant's duties to the Company. Consultant

shall not make any unauthorized disclosure of the confidential information of

MVS to the Company. Consultant shall not make any unauthorized disclosure of the

confidential information of the Company to MVS (or any other party not permitted

to receive such information).

4. Compensation. For and in consideration of the performance by

Consultant of the services, terms, conditions, covenants and promises herein

recited, the Company agrees and promises to pay to Consultant at the times and

in the manner herein stated and as set forth below:

4.1. As the principal consideration of the services to be performed by

Consultant hereunder during the term of this Agreement, Consultant shall receive

from the Company a grant of a Consultancy and Advisory Warrant for the purchase

of up to One Million (1,000,000) shares of common voting stock of the Company.

Such warrant will vest in accordance with the vesting provisions set for within

an appropriate warrant agreement ("Warrant Instrument"). Except as otherwise set

forth herein, the warrant shall constitute the sole compensation of Consultant

hereunder. Such compensation may sometimes be herein referred to as Consultant's

"Base Compensation".

4.2. The Company will, in addition to Consultant's Base Compensation,

pay Consultant a cash bonus if the Company realizes certain minimum gross profit

attainment during the term of each full fiscal year during the term of

Consultants engagement. The cash bonus will be based upon the following

schedule:

Year End Projected Gross Profit Minimum Attainment Cash Bonus

9/30/05 $ 1,300,000 30% Minimum $ 10,000.00

100% Maximum $ 50,000.00

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9/30/06 $ 17,400,000 30% Minimum $ 80,000.00

100% Maximum $250,000.00

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The foregoing schedule shall apply with regard to the first two (2) years of

Consultants engagement under this Agreement. During this term Consultant shall

be entitled to the specified minimum cash bonus upon the Company's attainment of

at least thirty (30%) percent of the projected gross profit for that year. The

Consultant may receive up to the maximum cash bonus or the apportioned amount

thereof for each percent of attained projected gross profits above 30% up to

100%. This additional compensation will be computed on an annual basis upon the

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end of the Company's fiscal year end and paid to Consultant within sixty days of

completion of an annual audit specific to the performance of Consultant and the

books of the Company.

4.3. Starting in the third (3rd) year, and continuing for the term of

this Agreement, the Consultants cash bonus will be adjusted either up to reflect

an increase in gross profit or down to reflect a decrease in gross profit by a

percentage amount equal to the realized increase or decrease thereof as compared

to the actual amounts from the preceding year.

4.4. The Company shall reimburse Consultant, from time to time, upon

Consultant's submission of expense account and supporting documents as required

by the Internal Revenue Service, for all reasonable out of town travel,

entertainment, and other ordinary, reasonable and necessary business expenses

incurred by Consultant as part of and in connection with the direct performance

of duties specified herein.

5. Relationship of the Parties

5.1 Legal Status. Consultant shall be an independent contractor of the

Company in accordance with the provisions of Sections 2750.5 and 3353 of the

California Labor Code, or any other corresponding provision of the Colorado

Revised Statutes, and not an employee, agent, or partner. It is expressly

declared that such independent contractor status is bona fide and not a

subterfuge to avoid employee status. This Agreement shall not create an

employer-employee relationship and shall not constitute a hiring of such nature

by either party.

5.2. Items Furnished to Consultant. Unless expressly agreed in writing

otherwise by the parties, the Company shall not provide any telephone equipment

or services, office equipment, stationery, secretarial or office support

services or other items or services for the benefit of Consultant. Consultant

shall, at its own expense, provide and make arrangement for all equipment,

stationery, secretarial and office support services.

5.3. Consent of Company. Consultant shall have no right or authority

at any time to make any contract or binding promise of any nature on behalf of

the Company, whether oral or written, without the express prior written consent

of the Company.

5.4. Manner of Performing Services. Consultant shall retain all

discretion and judgment in regard to the manner and means of carrying out its

duties hereunder subject, however, to the reasonable requests of the Company.

Consultant shall have the right to control and discretion as to the manner of

performance of its services hereunder in that the result of the work and not the

means by which it is accomplished shall be the primary factor for which the

parties have bargained hereunder in accordance with Sections 2750.5 and 3353 of

the California Labor Code or any corresponding provision in the Colorado Revised

Statutes. Consultant's obligations for performance of services hereunder shall

be limited to the completion of the consultation and services described above in

accordance with the Business of XsunX and the XsunX Field of Use. Consultant

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shall have no obligation to work any particular hours or days or any particular

number of hours or days. The Company shall have no right to control or direct

the details, manner or means by which Consultant accomplishes the results of the

services performed hereunder.

5.5. Payment of Taxes. Consultant shall be responsible for and pay

Consultant's own self-employment taxes, estimated tax liabilities, business

equipment or personal property taxes and other similar obligations, whether

federal, state or local. The Company shall not pay or w