EXHIBIT 10.6
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
December ___, 2005
Mountain Share Transfer
1625 Abilene Drive
Broomfield, CO 80020-1147
RE:
XSUNX, INC.
Ladies and Gentlemen:
Reference
is made to that
certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith by and
between XsunX,
Inc., a Colorado corporation (the "Company"), and the Buyers set forth on
Schedule I attached thereto (collectively
the "Buyers"), and that certain Pledge
and Escrow Agreement (the "Pledge
Agreement")
dated July 14, 2005,
as amended,
among the Company, the Buyers and the David
Gonzalez, Esq. (the "Escrow Agent").
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, an the Buyers shall purchase from
the Company,
convertible
debentures
(collectively, the "Debentures") in the aggregate principal amount of Five
Million Dollars ($5,000,000), plus accrued interest, which are
convertible into
shares of the Company's common stock, no par value per share (the "Common
Stock"), at the Buyers discretion. The Company has also issued to the Buyer
warrants to purchase up to 4,375,000 shares of Common Stock, at the Buyer's
discretion (the "Warrant"). These instructions relate to the
following stock or
proposed stock issuances or transfers:
1.
Shares of
Common Stock to be issued to the Buyers upon conversion of
the Debentures ("Conversion Shares") plus the shares of Common
Stock
to be issued to the Buyers upon conversion of accrued interest and
liquidated damages into Common Stock (the "Interest Shares").
2.
Up to
4,375,000 shares of Common Stock to be issued to the
Buyer
upon exercise of the Warrant (the "Warrant Shares").
3.
The
transfer of up to 26,798,418 shares of Common Stock (the
"Escrowed Shares")
that have been
delivered to the Escrow Agent
pursuant to the Pledge Agreement and the Insider Pledge
Agreement.
<PAGE>
This
letter shall serve as our irrevocable authorization and direction to
Mountain Share Transfer (the "Transfer
Agent") to do the following:
1.
Conversion
Shares and Warrant Shares.
a.
Instructions Applicable to Transfer Agent. With respect to the
Conversion Shares, Warrant Shares and the Interest Shares, the
Transfer Agent shall
issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time
upon delivery to the
Transfer Agent of a
properly completed
and duly executed Conversion Notice (the "Conversion Notice")
in the form attached
as Exhibit A to the Debentures, or a
properly completed
and duly executed Exercise Notice (the
"Exercise Notice") in the form attached as Exhibit A to the
Warrant, delivered to
the Transfer Agent by
the Escrow Agent
on behalf of the Company. Upon receipt of a Conversion
Notice
or an Exercise Notice,
the Transfer Agent
shall within three
(3) Trading
Days thereafter (i) issue and surrender to a
common carrier
for overnight delivery to the address as
specified in the Conversion Notice or the Exercise
Notice, a
certificate,
registered in
the name of the Buyer or its
designees, for the
number of shares of Common Stock to which
the Buyer shall be
entitled as set forth in the Conversion
Notice or Exercise
Notice or (ii) provided the Transfer Agent
is participating in
The Depository Trust Company ("DTC") Fast
Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock
to which the Buyers
shall be entitled to the Buyer's or their
designees' balance
account with DTC through its Deposit
Withdrawal At
Custodian ("DWAC")
system provided the Buyer
causes its bank or broker to initiate the DWAC transaction.
For purposes hereof
"Trading Day" shall mean any day on which
the
Nasdaq Market is open for customary trading.
b. The
Company hereby confirms to the Transfer Agent and the
Buyer that certificates representing the Conversion Shares and
the Warrant
Shares shall not bear any legend restricting
transfer and
should not be subject to any stop-transfer
restrictions and shall otherwise be freely transferable on the
books and records of the Company; provided that counsel to the
Company delivers (i) the Notice of Effectiveness set forth in
Exhibit I attached
hereto and (ii) an opinion of counsel
in
the form set forth in Exhibit II attached hereto, and that if
the Conversion Shares,
Warrant Shares and the Interest Shares
are not registered for
sale under the Securities Act of 1933,
as amended, then the
certificates for the Conversion Shares,
Warrant Shares and
Interest Shares shall
bear the following
legend:
"THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF
1933, AS AMENDED,
OR
APPLICABLE STATE
SECURITIES
LAWS. THE SECURITIES
HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
2
<PAGE>
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT."
c.
In the
event that counsel to
the Company fails or
refuses to
render an opinion as required to issue the Conversion Shares
or the Warrant Shares in accordance with the preceding
paragraph (either
with or without
restrictive
legends, as
applicable),
then the Company irrevocably and expressly
authorizes counsel to
the Buyer to render such opinion. The
Transfer Agent
shall accept and be entitled to rely on
such
opinion for the purposes of issuing the Conversion Shares.
d.
Instructions
Applicable to
Escrow Agent. Upon the Escrow
Agent's receipt of a properly completed Conversion Notice or
Exercise Notice and
the Aggregate Exercise
Price (as defined
in the Warrant),
the Escrow Agent shall, within one (1)
Trading Day
thereafter,
send to the Transfer Agent the
Conversion Notice or
Exercise Notice, which
shall constitute
an irrevocable
instruction
to the Transfer Agent
to process
such Conversion
Notice or Exercise
Notice in accordance with
the terms of these instructions.
2.
Escrowed
Shares.
a. With
respect to the Escrowed Shares, upon an event of default
as set forth in the Pledge Agreement or the Insider Pledge
Agreement, the Escrow
Agent shall send written notice to the
Transfer Agent
("Escrow Notice") to transfer such number
of
Escrow Shares as set forth in the Escrow Notice to the Buyers.
Upon receipt of an Escrow Notice, the Transfer Agent shall
promptly transfer
such number of Escrow
Shares to the Buyers
as shall be set forth in the Escrow Notice delivered to the
Transfer Agent by the
Escrow Agent.
Further, the Transfer
Agent shall promptly
transfer such shares
from the Buyers to
any subsequent
transferee
promptly upon receipt of written
notice from the Buyers or their counsel. If the Escrow Shares
are not registered for
sale under the Securities Act of 1933,
as amended, then the
certificates for the Escrow Shares shall
bear the legend set forth in Section 1b.
b. In the
event that counsel to
the Company fails or
refuses to
render an opinion as may be required by the Transfer Agent to
affect a transfer of the Escrow Shares (either with or without
restrictive
legend
