EXHIBIT 10.1

SELLING STOCKHOLDER AND SECURITIES PURCHASE AGREEMENT

This Selling Stockholder and Securities Purchase Agreement (this “Agreement") is
dated as of January 17, 2005, by and among Xenonics Holdings, Inc., a Nevada
corporation (the “Company"), the selling stockholders identified on the
signature pages hereto (each, a “Selling Stockholder” and collectively, the
“Selling Stockholders"), and the investors identified on the signature pages
hereto (each, an “Investor” and collectively, the “Investors").

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to exemptions from registration under the Securities Act (as defined
below), the Company and the Selling Stockholders each desire to issue and sell
to each Investor, and each Investor, severally and not jointly, desires to
purchase from the Company and the Selling Stockholders, shares of the Company’s
Common Stock, as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company, the Selling Stockholders
and the Investors agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

“Business Day” means any day except Saturday, Sunday and any day that is a
federal legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Article II.

“Closing Date” means the Business Day immediately following the date on which
all the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or
such other date as the parties may agree.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, $0.001 par value per
share, and any securities into which such common stock may hereafter be
reclassified.

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which entitle the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock.

“Company Counsel” means Troy & Gould Professional Corporation.

“Disclosure Materials” means the SEC Disclosure Documents and the Company’s
Schedules to this Agreement, collectively.

“Effective Date” means the date that the initial Registration Statement required
by Section 2(a) of the Registration Rights Agreement is first declared effective
by the Commission.

“Escrow Agent” means the Escrow Agent under the Escrow Agreement.

“Escrow Agreement” means the Escrow Agreement, dated as of December 15, 2004,
among the Company (as Escrow Agent) and the Selling Stockholders.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means U.S. generally accepted accounting principles.

“Intellectual Property Rights” means the ownership or right to use patents,
patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights in connection with the
respective businesses of the Company and the Subsidiaries as described in the
SEC Disclosure Documents.

“Investment Amount” means, with respect to each Investor, the investment amount
indicated below such Investor’s name on its signature page to this Agreement.

“Investor Party” shall have the meaning set forth in Section 4.7.

“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal or other restrictions of any kind.

“Losses” means any loss, liability, obligation, claim, contingency, damage, cost
or expense, including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation related thereto.

“Material Adverse Effect” means any of (a) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (b) a material
and adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (c) an adverse impairment to the Company’s ability to perform on a
timely basis its obligations under any Transaction Document.

“Outside Date” means January 28, 2005.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Per Share Purchase Price” equals $5.00.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and the Investors, in the
form of Exhibit A hereto.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

“SEC Disclosure Documents” has the meaning set forth in Section 3.1(h).

“Securities” means the Shares and Selling Stockholder Shares.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Stockholder Shares” means the shares of Common Stock being offered and
sold by the Selling Stockholders to the Investors hereunder in such number as is
set forth below each Selling Stockholders signature to this Agreement.

“Shares” means the shares of Common Stock being offered and sold to the
Investors by the Company hereunder.

“Short Sales” include, without limitation, all “short sales” as defined in
Rule 3b-3 of the Exchange Act and Rule 200 promulgated under Regulation SHO
under the Exchange Act and all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, short sales, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.

“Subsidiary” means any subsidiary of the Company that is required to be listed
in Schedule 3.1(a).

“Trading Day” means (i) a day on which the Common Stock is quoted or traded on a
Trading Market, or (ii) if the Common Stock is not quoted or traded on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i) or (ii) hereof, then Trading Day shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

“Transaction Documents” means this Agreement, the Registration Rights Agreement,
the Escrow Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

ARTICLE II.

PURCHASE AND SALE

2.1 Purchase of Shares; Closing.

(a) Subject to the terms and conditions set forth in this Agreement, at the
Closing: (i) the Company shall sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, Shares in such number as
equals the quotient (rounded down to the nearest whole share) obtained by
dividing (1) 60.92% of such Investor’s Investment Amount by (2) the Per Share
Purchase Price; and (ii) the Selling Stockholders shall sell to each Investor,
and each Investor shall, severally and not jointly, purchase from the Selling
Stockholders, Selling Stockholder Shares in such number as equals the quotient
(rounded down to the nearest whole share) obtained by dividing (1) 39.08% of
such Investor’s Investment Amount by (2) the Per Share Purchase Price. The
Closing shall take place at the offices of Bryan Cave LLP, 1290 Avenue of the
Americas, New York, NY 10104 or at such other location as the parties may agree.

(b) The Company and the Selling Stockholders will cooperate with one another,
and will otherwise use their respective reasonable best efforts, to cause the
Selling Stockholder Shares to be issued to the Investors as part of a single
stock certificate from the Company to each Investor that will include all Shares
and Selling Stockholder Shares being acquired by such Investor under this
Agreement. In furtherance of such efforts, and in accordance with the Escrow
Agreement, each Selling Stockholder will (i) deliver to the Company the Selling
Stockholder Shares they will be selling at the Closing, together with such other
documents as the Company may require to effect the transfer of such shares to
the name of the Investors at the Closing, including executed stock powers and
directions for the Company to effect the transfer of such shares on its books as
of the Closing and (ii) instruct the Company to hold the Selling Stockholder
Shares and deliver the Selling Stockholder Shares at Closing in accordance with
Section 2.2.

2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause
to be delivered to each Investor the following (collectively, the “Company
Deliverables”):

(i) a single certificate representing that number of Shares and Selling
Stockholder Shares to be issued and sold at Closing to such Investor, determined
under Section 2.1(a), registered in the name of such Investor;

(ii) the legal opinion of Company Counsel, in agreed form, addressed to the
Investors; and

(iii) the Registration Rights Agreement duly executed by the Company.

(b) At the Closing, each Investor shall deliver or cause to be delivered to the
Company (for further redistribution to the Selling Stockholders to reflect the
Selling Stockholder Shares being hereby offered and sold consistent with
Section 2.1(a)) the following (collectively, the “Investors Deliverables"):

(i) the Registration Rights Agreement duly executed by each Investor; and

(ii) such Investor’s Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to the account designated for such
purpose by the Company.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.

(b) Organization and Qualification. Each of the Company and each Subsidiary is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and each Subsidiary is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.

(d) No Conflicts. Neither the execution, delivery and performance of the
Transaction Documents by the Company, the consummation by the Company of the
transactions contemplated thereby, nor the sale of the Selling Stockholder
Shares hereunder, (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), for such conflicts,
defaults or violations as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents or by
reason of the sale of the Selling Stockholder Shares hereunder, other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement,
(ii) filings under state securities laws in accordance with the requirements of
the Registration Rights Agreement, which will be made prior to the Effectiveness
Date (as such term is defined in the Registration Rights Agreement), (iii) the
filings required in accordance with Section 4.5, (iv) the filing of a Form D
with the Commission and under applicable state securities statutes pertaining to
the purchase and sale contemplated by this Agreement, and (v) those that have
been made or obtained prior to the date of this Agreement. To the knowledge of
the Company, the Selling Stockholders are not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or any other Person in connection with the execution,
delivery and performance by them of the Transaction Documents or by reason of
the sale of the Selling Stockholder Shares hereunder, except for such as could
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.

(f) Issuance of the Securities. The shares of Common Stock to be issued to the
Investors in accordance with Section 2.2(a)(i) have been duly authorized and,
when issued and paid for in accordance with Section 2.2(b)(ii), will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens. The
Company has reserved from its duly authorized capital stock such shares of
Common Stock. When issued, the Selling Stockholder Shares were duly authorized
and were validly issued, fully paid and nonassessable. Each Selling Stockholder
is the sole record owner of its Selling Stockholder Shares to be sold hereunder.

(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock
reserved for issuance under the Company’s various option and incentive plans, is
as set forth in Schedule 3.1(g). No securities of the Company are entitled to
preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as disclosed
in Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Shares and the Selling Stockholder
Shares hereunder will not, immediately or with the passage of time, obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. Except as disclosed in Schedule 3.1(g), all of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase any capital
stock of the Company. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale of the Securities. There are no stockholders agreements, voting agreements,
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.

(h) SEC Disclosure Documents; Financial Statements. The Company has filed all
reports required to be filed by the Company under the Exchange Act for the
twelve months preceding the date of this Agreement (the “SEC Disclosure
Documents"). The Company has filed all SEC Disclosure Documents on a timely
basis or has timely filed a valid extension of such time of filing and has filed
any such SEC Disclosure Documents prior to the expiration of any such extension.
As of their respective dates, the SEC Disclosure Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Disclosure Documents, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of the date hereof,
no filing needs to be made with the Commission to update any SEC Disclosure
Document or any prior disclosure made therein. The financial statements of the
Company included in the SEC Disclosure Documents were prepared in accordance
with GAAP applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, year-end audit adjustments.
Notwithstanding the foregoing, the Company restated its net loss per share for
the fiscal year ended September 30, 2003 as set forth in Schedule 3.1(h).

(i) Press Releases. The press releases disseminated by the Company during the
one (1) year preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact.

(j) Material Changes. Except as set forth in Schedule 3.1(j) and disclosed in
the SEC Disclosure Documents, since the date of the latest audited financial
statements included within the SEC Disclosure Documents, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice, (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission and (C) other liabilities that would not, individually
or in the aggregate, have a Material Adverse Effect, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans or executive and director
compensation arrangements. The Company does not have pending before the
Commission any request for confidential treatment of information.

(k) Litigation. There is no Action that (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) except as set forth in the SEC Disclosure Documents, could,
if there were an unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. Except as set
forth in the SEC Disclosure Documents, neither the Company nor any Subsidiary,
nor any presently serving director or officer thereof, is or has been during the
ten-year period prior to the Closing Date the subject of any Action involving a
claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

(l) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.

(m) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. The Company is in compliance with the
applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder, except where such noncompliance could not have
or reasonably be expected to result in a Material Adverse Effect.

(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Disclosure Documents, except where
the failure to possess such permits would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.

(o) Title to Assets. The Company and the Subsidiaries do not own any real
property. The Company and the Subsidiaries have good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens described in the SEC
Disclosure Documents and Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

(p) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all Intellectual Property Rights that are necessary or material
for use in connection with their respective businesses as described in the SEC
Disclosure Documents and which the failure to so have could, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Except as set forth in the SEC Disclosure Documents, neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. Except as set forth in the SEC Disclosure Documents, all
such Intellectual Property Rights are enforceable and do not violate or infringe
upon the Intellectual Property Rights of others in any respect that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect and, to the knowledge of the Company, there is no existing
infringement by another Person of any of the Intellectual Property Rights.

(q) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. The Company has no reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.

(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Disclosure Documents, none of the officers or directors of the Company and none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner.

(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s Form 10-KSB or 10-QSB, as
the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-K under the Exchange Act for the
Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation Date"). Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
308(c) of Regulation S-K under the Exchange Act), or in other factors that could
significantly affect the Company’s internal controls.

(t) Solvency. Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company’s fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Investors shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by an
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.

(v) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer and sale of the Securities by
the Company and the Selling Stockholders (as applicable) to the Investors under
the Transaction Documents. Except as described in Schedule 3.1(v), the Company
has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied. The Company is eligible to register the resale of the Shares by
the Investors under Form SB-2 promulgated under the Securities Act and the
Company hereby covenants and agrees to use its best efforts to maintain its
eligibility to use Form SB-2 until the Registration Statement covering the
resale of Shares shall have been filed with, and declared effective by, the
Commission.

(w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act, and the Company has taken no
action designed to, or which is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating such
registration. Except as specified in the SEC Disclosure Documents, the Company
has not, in the two years preceding the date hereof, received notice from any
Trading Market to the effect that the Company is not in compliance with the
listing or maintenance requirements thereof. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued listing
of the Common Stock on the Trading Market. The issuance and sale of the
Securities under the Transaction Documents does not contravene the rules and
regulations of the Trading Market on which the Common Stock is currently listed
or quoted, and no approval of the shareholders of the Company thereunder is
required for the Company to issue and deliver to the Investors the Securities
contemplated by the Transaction Documents.

(x) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after the Closing will not be, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.

(y) Application of Takeover Protections. The Company has taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s Articles
of Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Investors as a result of
the Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without limitation the
Company’s issuance of the Securities and the Investors’ ownership of the
Securities.

(z) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.

(aa) Taxes. Except for matters that could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, the
Company and each of its Subsidiaries has filed all necessary federal, state and
foreign income and franchise tax returns and has paid or accrued all taxes shown
as due thereon, and the Company has no knowledge of a tax deficiency which as
been asserted or threatened against the Company or any Subsidiary.

(bb) Disclosure. The Company confirms that neither it nor any Person acting on
its behalf has provided any of the Investors or their agents or counsel with any
information that the Company believes constitutes material, non-public
information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. To the
knowledge of the Company, the representations and warranties of the Selling
Stockholders are true and accurate in all material respects. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

(cc) Key Employees; Company’s Knowledge. Each Key Employee (as defined below) is
currently serving the Company or a subsidiary of the Company in the capacity
disclosed in the SEC Disclosure Documents. No Key Employee, to the best of the
knowledge of the Company and its subsidiaries, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its
subsidiaries to any liability with respect to any of the foregoing matters. No
Key Employee has, to the best of the knowledge of the Company and its
subsidiaries, any intention to terminate or limit his employment with, or
services to, the Company or any of its subsidiaries, nor is any such Key
Employee subject to any constraints (e.g., litigation) that would cause such
employee to be unable to devote his full time and attention to such employment
or services. “Key Employee” means each of Alan P. Magerman and Jeffery P.
Kennedy. For purposes hereof, the term “knowledge of the Company” shall mean the
knowledge of each of the Key Employees.

(dd) Foreign Corrupt Practices. Neither the Company nor any director, officer,
agent, employee or other person acting on behalf of the Company has, in the
course of its actions for, or on behalf of, the Company, (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (ii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

(ee) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise that has had or could reasonably be expected to result in a Material
Adverse Effect, between the accountants and lawyers formerly or presently
employed by the Company and the Company.

(ff) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has conducted any “general solicitation,” as described in
Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.

(gg) Compliance with Patriot Act. The Company (i) is not and will not become a
Person whose property or interests in property are blocked pursuant to Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)) or (ii) does not knowingly engage and will not
knowingly engage in any dealings or transactions, or be otherwise knowingly
associated, with any such person. The Company is not and will not be in
violation of the Uniting and Strengthening America By Providing Appropriate
Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001).

3.2 Representations and Warranties of the Investors. Each Investor hereby, for
itself and for no other Investor, represents and warrants to the Company as
follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Investor, and when delivered by such Investor in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(b) Investment Intent. Such Investor is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time or shall limit
such Investors’ right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws. Such Investor is acquiring the Securities hereunder in the
ordinary course of its business. Such Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.

(c) Investor Status. Such Investor is an “accredited investor” as defined in
Rule 501(a) under the Securities Act. Such Investor is not a registered
broker-dealer under Section 15 of the Exchange Act. Such Investor acknowledges
that it can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.

(d) General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents.

(f) Independent Investment Decision. Such Investor has independently evaluated
the merits of its decision to purchase Securities pursuant to this Agreement,
such decision has been independently made by such Investor and such Investor
confirms that it has only relied on the advice of its own business and/or legal
counsel (which such Investor acknowledges is not Bryan Cave LLP) and not on the
advice of any other Investor’s business or legal counsel nor upon the counsel of
any investment banker, placement agent, or their respective counsel in making
such decision.

(g) Certain Trading Activities. Such Investor has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the earlier to occur of (1) the time that such Investor was
first contacted by the Company or Roth Capital Partners, LLC or Bryant Park
Capital, Inc. regarding an investment in the Company and (2) the 30th day prior
to the date of this Agreement. Such Investor covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with it will engage
in any transactions in the securities of the Company (including Short Sales)
prior to the time that the transactions contemplated by this Agreement are
publicly disclosed.

Each of the Company and each Selling Stockholder acknowledge and agree that no
Investor makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.

3.3 Representations and Warranties of the Selling Stockholders. Each Selling
Stockholder hereby makes the following representations and warranties to each
Investor:

(a) Organization. If an entity, such Selling Stockholder is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.

(b) Authorization; Enforcement. If applicable, such Selling Stockholder has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by such Selling
Stockholder and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of such Selling
Stockholder and no further action is required by it or its stockholders in
connection therewith. This Agreement has been duly executed and delivered by
such Selling Stockholder and constitutes the valid and binding obligation of
such Selling Stockholder enforceable against it in accordance with its terms
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(c) No Consents. No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body or other Person is
required in connection with the consummation by such Selling Stockholder of the
transactions on its part contemplated by the Transaction Documents, except
(i) filings as may be required under Sections 13(d) and 16(a) of the Exchange
Act, and (ii) those that have been made or obtained prior to the date of this
Agreement.

(d) No Conflicts. The execution, delivery and performance by such Selling
Stockholder of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby do not and will not result
in a breach or violation of, or constitute a default under (with or without
notice or lapse of time), any stockholders agreement, voting trust agreement,
pledge registration rights agreement or other agreement or instrument to which
such Selling Stockholder or any of its properties are bound or affected, and
will not violate or conflict with any judgment, decree or order of any court or
other governmental agency or any law, rule or regulation applicable to such
Selling Stockholder, in each case such as could not have or result in a Material
Adverse Effect.

(e) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(d), no registration
under the Securities Act is required for the purchase and sale of the Selling
Stockholder Shares to the Investors hereunder.

(f) Good and Marketable Title. Such Selling Stockholder is the sole lawful
record and sole beneficial owner of all of the Selling Stockholder Shares to be
sold by it hereunder. Such Selling Stockholder has good and marketable title to
the Selling Stockholder Shares to be sold by it hereunder, free and clear of any
Liens, except for restrictions on subsequent transfer imposed by the securities
laws. Upon consummation of the Closing, the Investors will have good and
marketable title to the Selling Stockholder’s Selling Stockholder Shares
purchased by them, free and clear of all Liens created by or through such
Selling Stockholder.

(g) Certain Fees. Except as described in Schedule 3.3(g), no brokerage or
finder’s fees or commissions are or will be payable by such Selling Stockholder
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.

(h) No Additional Agreements. Such Selling Stockholder does not have any
agreement or understanding with any Investor or with the Company with respect to
the transactions contemplated by the Transaction Documents other than as
specified in the Transaction Documents.

(i) Non-Public Information. Such Selling Stockholder does not possess any
material, non-public information concerning the Company.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Legend. (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.

(b) Certificates evidencing the Securities will contain the following legend,
until such time as they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. The Company may not require its consent or approval to any such pledge
or transfer, nor will the Company request a legal opinion of legal counsel to
the pledgee, secured party or pledgor in connection with the pledge, but such
legal opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required by
the Company of such pledge. At the appropriate Investor’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder.

(c) The Company may not require certificates evidencing the Securities to
contain any legend (including the legend set forth in Section 4.1(b)):
(i) following a sale of such Securities pursuant to an effective registration
statement (including the Registration Statement), or (ii) following a sale of
such Securities pursuant to Rule 144 (assuming the transferor is not an
Affiliate of the Company), or (iii) while such Securities are eligible for sale
under Rule 144(k). The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Notwithstanding the foregoing, at the
election of each Investor, the Company shall remove all legends (including the
legend set forth in Section 4.1(b)) from certificates evidencing the Securities
if and when (i) a registration statement (including the Registration Statement)
covering the resale of such Securities is effective, and (ii) the Company
receives the Investor’s written confirmation that such Securities will not be
disposed of except in compliance with the prospectus delivery requirements of
the Securities Act. If (1) an Investor elects to have the Company remove all
legends from such Investor’s certificates evidencing the Securities in
accordance with the immediately preceding sentence or (2) the Company does not
require certificates evidencing the Securities to contain any legend as
contemplated above in this Section 4.1(c) and an Investor requests that all
legends be removed from such Investor’s certificates evidencing such Securities,
in each case, the Company shall deliver to such Investor new certificates
evidencing such Securities which bear no legends within the time period required
by applicable securities laws or market rules and regulations (whichever is
shorter).

4.2 Furnishing of Information. As long as any Investor owns the Securities that
are not eligible for resale under Rule 144(k) promulgated under the Securities
Act, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. As long
as any Investor owns Securities that are not eligible for resale under Rule
144(k) promulgated under the Securities Act, if the Company is not required to
file reports pursuant to the Exchange Act, it will prepare and furnish to the
Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Shares under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.

4.3 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.

4.4 Subsequent Registrations. Other than pursuant to the Registration Statement,
prior to the Effective Date, the Company may not file any registration statement
(other than on Form S-8) with the Commission with respect to any securities of
the Company. Nothing herein shall, however, prevent the Company from amending or
otherwise maintaining the registration statement on Form SB-2 that was filed by
the Company on May 10, 2004 (other than to add additional selling stockholders).

4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the
Trading Day following the execution of this Agreement, and by 9:00 a.m. (New
York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Closing Date the Company will file an additional Current
Report on Form 8-K to disclose the Closing. In addition, the Company will make
such other filings and notices in the manner and time required by the Commission
and the Trading Market on which the Common Stock is listed. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the Commission (other than
the Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Investor, except to the extent such disclosure is required by
law or Trading Market regulations.

4.6 Limitation on Issuance of Future Priced Securities. During the six months
following the Closing Date, the Company shall not issue any security that would
be a “Future Priced Securities” as such term is described by NASD IM-4350-1.

4.7 Indemnification of Investors. In addition to the indemnity provided in the
Registration Rights Agreement, the Company and each Selling Stockholder hereby
agree to the following indemnification of the Investors:

(a) The Company will indemnify and hold the Investors and their respective
directors, officers, shareholders, partners, employees and agents (each, an
“Investor Party") harmless from any and all Losses that any such Investor Party
may suffer or incur as a result of or relating to any misrepresentation, breach
or inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any Transaction Document. In addition to the indemnity contained
herein, the Company will reimburse each Investor Party for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.

(b) The Selling Stockholders will indemnify and hold each of the Company and
each Investor Party harmless from any and all Losses that the Company or any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Selling Stockholders in any Transaction
Document. In addition, the Selling Stockholders will reimburse each of the
Company and each Investor Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.

4.8 Non-Public Information. The Company and each Selling Stockholder covenant
and agree that neither it nor any other Person acting on its behalf will provide
any Investor or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Investor shall have executed a written agreement regarding the confidentiality
and use of such information. The Company and each Selling Stockholder understand
and confirm that each Investor shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Shares hereunder for working capital purposes and not to redeem any debt, Common
Stock or Common Stock Equivalents or to settle any outstanding Action.

ARTICLE V.

CONDITIONS PRECEDENT

5.1 Conditions Precedent to the Obligations of the Investors to Purchase
Securities. The obligation of each Investor to acquire Securities at the Closing
is subject to the satisfaction or waiver by such Investor, at or before the
Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company and the Selling Stockholders contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing as
though made on and as of such date;

(b) Performance. Each of the Company and the Selling Stockholders shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by them at or prior to the Closing;

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;

(d) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would be expected to have
or result in a (i) an adverse effect on the legality, validity or enforceability
of any Transaction Document, or (ii) a material and adverse effect on the
results of operations, assets, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole;

(e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on a Trading Market;
and

(f) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).

5.2 Conditions Precedent to the Obligations of the Company and Selling
Stockholders to sell Securities. The obligation of the Company and Selling
Stockholders to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company or Selling Stockholders (as the case may be), at or before
the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;

(b) Performance. Each Investor shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by such
Investor at or prior to the Closing;

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents; and

(d) Investors Deliverables. Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b).

ARTICLE VI.

MISCELLANEOUS

6.1 Fees and Expenses. At the Closing, the Company shall pay to Bryan Cave LLP
$25,000 as partial reimbursement of Roth Capital Partners, LLC for its legal
fees in connection with the preparation of the Transaction Documents, it being
understood that Bryan Cave LLP has only rendered legal advice to Roth Capital
Partners, LLC, and not to the Company, any Investor, or any other Person in
connection with the transactions contemplated hereby, and that each of the
Company and each Investor has relied for such matters on the advice of its own
respective counsel. At the Closing, the Company shall pay to Greenberg Traurig,
LLP up to $15,000 as partial reimbursement of Bryant Park Capital, Inc. for its
legal fees in connection with the preparation of the Transaction Documents, it
being understood that Greenberg Traurig LLP has only rendered legal advice to
Bryant Park Capital, Inc., and not to the Company, any Investor, or any other
Person in connection with the transactions contemplated hereby, and that each of
the Company and each Investor has relied for such matters on the advice of its
own respective counsel. Except as specified in the immediately preceding
sentences, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of the Transaction Documents. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Securities.

6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

6.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:

     
If to the Company:
  Xenonics Holdings, Inc.
2236 Rutherford Road, Suite 123
Carlsbad, CA 92008
Attn: Chief Financial Officer
Facsimile: (760) 438-1184
 
   
With a copy to:
  Troy & Gould Professional Corporation
1801 Century Park East, 26th Floor
Los Angeles, CA 90067
Attn: William Gould, Esq.

Facsimile: (310) 201-4746

If to the Selling Stockholder: To the address set forth on its signature page
hereof;

If to an Investor: To the address set forth under such Investor’s name

on the signature pages hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

6.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Investors holding a majority of the
Securities, and signed, in the case of an amendment, by the Company. In
addition, Sections 3.3, 4.7(b) and Article VI may not be waived or amended
except in a written instrument signed by the Investors holding a majority of the
Securities, the Company and each of the Selling Stockholders. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

6.5 Termination. This Agreement may be terminated prior to Closing:

(a) by written agreement of the Investors and the Company; and

(b) by the Company, a Selling Stockholder (as to itself but no other Selling
Stockholder) or an Investor (as to itself but no other Investor) upon written
notice to the other, if the Closing shall not have taken place by 6:30 p.m.
Eastern time on the Outside Date; provided, that the right to terminate this
Agreement under this Section 6.5(b) shall not be available to any Person whose
failure to comply with its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before such time.

In the event of a termination pursuant to this Section, the Company shall
promptly notify all non-terminating Investors. Upon a termination in accordance
with this Section 6.5, the Company, terminating Selling Stockholder(s) or
terminating Investor(s), as applicable, shall not have any further obligation or
liability (including as arising from such termination) to any other party and no
Investor will have any liability to any other Investor under the Transaction
Documents as a result therefrom and no Selling Stockholder will have any
liability to any other Selling Stockholder under the Transaction Documents as a
result therefrom.

6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

6.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. Neither
the Company nor the Selling Stockholders may assign this Agreement or any rights
or obligations hereunder without the prior written consent of the Investors. Any
Investor may assign any or all of its rights under this Agreement to any Person
to whom such Investor assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Investors.”

6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7 (as to each Investor
Party).

6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) may be commenced in the state and federal
courts sitting in the City of San Diego, California (the “California Courts”).
Each party hereto hereby irrevocably submits to the jurisdiction of the
California Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction of
any such California Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its attorney’s fees
and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Shares.

6.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature were an
original thereof.

6.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor exercises a right, election, demand or option
under a Transaction Document and the Company or the Selling Stockholders do not
timely perform their related obligations within the periods therein provided,
then such Investor may rescind or withdraw, in its sole discretion from time to
time upon written notice to the Company and the Selling Stockholders, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

6.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

6.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

6.16 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.

6.17 Limitation of Liability. Notwithstanding anything herein to the contrary,
each of the Company and the Selling Stockholders acknowledge and agree that the
liability of any Investor arising directly or indirectly, under any Transaction
Document of any and every nature whatsoever shall be satisfied solely out of the
assets of such Investor, and that no trustee, officer, other investment vehicle
or any other Affiliate of such Investor or any investor, shareholder or holder
of shares of beneficial interest of such a Investor shall be personally liable
for any liabilities of such Investor.

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SIGNATURE PAGES FOLLOW]

1

IN WITNESS WHEREOF, the parties hereto have caused this Selling Stockholder and
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

XENONICS HOLDINGS, INC.

By:     

Name:

Title:

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SIGNATURE PAGES FOR SELLING STOCKHOLDERS FOLLOW]

2

IN WITNESS WHEREOF, the parties have executed this Selling Stockholder and
Securities Purchase Agreement as of the date first written above.

NAME OF SELLING STOCKHOLDER

By:     
Name:
Title:

Tax ID No.:

NUMBER OF SELLING STOCKHOLDER SHARES

     

ADDRESS FOR NOTICE

c/o:

Street:

City/State/Zip:

Attention:

Tel:

Fax:

Email:

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]

3

IN WITNESS WHEREOF, the parties have executed this Selling Stockholder and
Securities Purchase Agreement as of the date first written above.

NAME OF INVESTOR

     
By:
  Name:
 
  Title:

Investment Amount: $

Tax ID No.:

ADDRESS FOR NOTICE

c/o:

Street:

City/State/Zip:

Attention:

Tel:

Fax:

Email:

DELIVERY INSTRUCTIONS
(if different from above)

c/o:

Street:

City/State/Zip:

Attention:

Tel:

4