Key Employee Retention Agreement

Key Employee Retention Agreement

This Key Employee Retention Agreement (the “Agreement”), is entered into as of this 1 ^st day of September, 2009 (the “Effective Date”), by and between XsunX, Inc., a Colorado corporation, (the “Company”), and Robert G. Wendt (the “Employee”).  Company and Employee may be referred collectively hereafter as the “Parties” and individually as a “Party”.

RECITALS

WHEREAS, the Company recognizes the valuable services that the Employee will render to the Company and the Company desires to retain the services of Employee; and

WHEREAS, the Employee is willing to serve the Company, but desires a severance arrangement in the event the Employee’s employment is terminated as provided herein.

NOW, THEREFORE, in consideration of the Employee’s service to the Company and the mutual agreements herein contained, and for other god and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Employee agree as follows:

AGREEMENT

ARTICLE 1

Eligibility of Benefits

1.3          Term of Agreement.  This agreement shall be effective as of the date first indicated above and shall remain in effect until the earlier of: (a) Two years from the Effective Date; or (b) the effective date of Employee’s promotion to another position in the Company which position provides severance or change in control benefits in an amount which exceeds the amount of severance payable to Employee in the event of a Qualifying Termination hereunder, or (c) the Employee and Company agree to the mutual termination of this Agreement.

ARTICLE II

Benefits After A Qualifying Termination

2.1           Release Agreement .      Prior to and as a condition of the payment of any severance or benefit amounts by the Company to the Employee hereunder, the Employee shall execute a Release and Compromise of All Claims Agreement in the form similar to Exhibit “A” attached hereto and incorporated herein (the “Release”).

2.2           Basic Severance Payment .     The Company shall pay to the Employee as severance pay, a cash lump sum amount to twelve (12) month’s salary at the base salary amount at the Effective Date of this agreement.  This includes the cash value of Employee’s accrued and unused vacation benefits up to the date of the Qualifying Termination.  Said severance payment shall be made by the Company to the Employee after the Release becomes effective, as set forth in the Release.

2.3           Benefits .     If the Employee was a participant in one of the Company’s sponsored medical and/or dental plans at the time of the Qualifying Termination and the Employee elects to receive continuing medical and/or dental coverage under COBRA following such Qualifying Termination, the Company shall reimburse Employee for actual costs paid by Employee per month for such COBRA coverage, up to the same dollar contribution level previously paid by the Company at the time of the Qualifying Termination.  Such reimbursement payments shall commence on the date employee makes his first COBRA payment for continuation coverage and shall continue until the earlier of the Employee’s termination of said COBRA coverage or twelve (12) months following the Qualifying Termination.  The Employee must continue to pay the monthly COBRA premiums to receive continued medical/dental benefits during said twelve month period will be made available to the Employee at his sole cost under COBRA.

2.4            Relocation .      It is understood by Company that Employee has relocated for the benefit of the Company.  Upon a Qualifying Termination, the Company will pay to the Employee reasonable cost up to $2,500 dollars to relocate to his permanent address and for any cost incurred for breaking lease obligations at his temporary housing location.

2.5            Income Tax Withholding .      The Company may withhold from any payments made under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

2.6            Sole Severance Obligation .      The severance, benefit, and relocation amounts set forth in Sections 2.2, 2.3, and 2.4 herein shall be the sole severance obligation of the Company to Employee in the event of a Qualifying Termination.  This Agreement does not preclude Employee’s participation in any voluntary severance plan that the Company may establish in the future, in accordance with the provision specified in any such plan.  For the purpose of this Agreement, the Employee’s participation in any such voluntary severance plan shall not constitute a Qualifying Termination.

ARTICLE III

Miscellaneous

3.1            At-Will Employment .      Employee and Company acknowledge that, except and otherwise may be provided under any other written agreement between Company and Employee, the employment of Employee is “at will”, meaning either Party may terminate employment for any reason at any time with or without Cause.  Employee acknowledges no statements, representation or promises as to employment longevity have been made to Employee whatsoever.

3.2           Arbitration.   Any controversy or claim arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration.  The Party desiring arbitration shall deliver written notice of demand for arbitration to the other Party within a reasonable time after the controversy or claim arises, but in not event after the date when institution of legal or equitable proceedings based on such controversy or claim would be barred by applicable statute of limitations.

The arbitration shall be heard before a single neutral arbitrator appointed by mutual agreement of the Parties.  If the Parties fail to agree upon a single arbitrator within ten (10) days of the referral of the dispute to arbitration, each Party shall choose on arbitrator who shall sit on a three-member arbitration panel.  The two arbitrators so chosen shall within ten (10) days select a third arbitrator.  In either case, the arbitrator(s) shall be knowledgeable in executive and employee compensation matters, and shall not have any current or past substantial business or financial relationships with any Party to the arbitration.  The arbitration shall be conducted under the rules of the Federal Arbitrat