Exhibit 10.1

SECURITIES PURCHASE AND EXCHANGE AGREEMENT

This Securities Purchase and Exchange Agreement (this “Agreement”) is dated as
of March 16, 2012 among Phototron Holdings, Inc., a Delaware corporation (the
“Company”), Europa International, Inc. (“Europa”), W-Net Fund I, L.P. (“W-Net”
and together with Europa, collectively, the “Investors”), each purchaser that
executes a counterpart signature page hereto from time to time (together with
the Investors, each, including its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”), and W-Net, which will serve as the
representative of the Purchasers, and is referred to herein from time to time as
the “Purchaser Representative”.

RECITALS

WHEREAS, the Company previously issued (a) that certain Senior Secured
Promissory Note, dated October 8, 2011, to Europa in the original principal
amount of $100,000 and (b) that certain Senior Secured Promissory Note, dated
October 12, 2011, to W-Net in the original principal amount of $349,790.68
(collectively, the “October Existing Notes”, and together with any other
promissory note issued by the Company, or evidencing debt assumed by the
Company, collectively, the “Existing Notes”); and

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to the exemptions from registration provided by the Securities Act of
1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder,
(a) the Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, 6% Senior
Secured Convertible Notes, in the form of Exhibit A attached hereto (the
“Notes”), in the principal amount equal to such Purchaser’s Subscription Amount
(as defined herein), and (b) the Company and the applicable Purchasers desire to
cancel the Existing Notes and exchange the Existing Notes for the Notes, as more
fully described in this Agreement.

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 and each Purchaser agree
as follows:

ARTICLE I. 

DEFINITIONS

1.1              Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Notes, and (b) the following terms have the
meanings set forth in this Section 1.1:

“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 405 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.

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

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.

“Company Counsel” means Stubbs Alderton & Markiles, LLP, with offices located at
15260 Ventura Boulevard, 20th Floor, Sherman Oaks, California 91403, Attention:
Greg Akselrud, fax: (818) 444-6303.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Existing Security Agreements” means, collectively, (a) that certain Security
Agreement, dated as of October 8, 2011, by and among the Company, Europa and the
other parties signatory thereto, (b) that certain Security Agreement, dated as
of October 12, 2011, by and among the Company, W-Net and the other parties
signatory thereto, (c) that certain Intellectual Property Security Agreement,
dated as of October 8, 2011, by and among the Company, Europa and the other
parties signatory thereto, and (d) that certain Intellectual Property Security
Agreement, dated as of October 12, 2011, by and among the Company, W-Net and the
other parties signatory thereto.

 

“IP Security Agreement” means the Intellectual Property Security Agreement,
dated the date hereof, by the Company in favor of the Purchasers, in the form of
Exhibit C attached hereto, securing the obligations of the Company under the
Notes and other Transaction Documents.

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“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.

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

“Securities” means the Notes and the Underlying Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Security Agreement” means the Security Agreement, dated the date hereof, by the
Company in favor of the Purchasers, in the form of Exhibit B attached hereto,
securing the obligations of the Company under the Notes and other Transaction
Documents.

“Security Documents” means any and all means any and all security agreements,
pledge agreements, hypothecation agreements, collateral assignments, mortgages,
deeds of trust, control agreements and similar such agreements, executed and
delivered by the Company, any of its subsidiaries and/or any third party in
favor of the Purchasers pursuant to the Transaction Documents which secures the
Company’s obligations under the Notes and the Transaction Documents, and other
documents executed, delivered and/or filed by the Company, any of its
subsidiaries, any third party and/or the Purchasers as permitted or required
under any of the foregoing, including, without limitation, the Security
Agreement and the IP Security Agreement.

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for the Notes purchased hereunder as specified below such Purchaser’s name
on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds. Except for
the Notes delivered in exchange for the Existing Notes, the initial principal
amount of each Purchaser’s Note shall be equal to such Purchaser’s Subscription
Amount.

“Transaction Documents” means this Agreement, the Notes, the Security Documents,
and all exhibits and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Notes and issued and issuable in lieu of the
cash payment of interest on the Notes in accordance with the terms of the Notes.

ARTICLE II. 

PURCHASE AND SALE

2.1              Closing.

(a)                The purchase and sale of the Notes shall take place in one or
more closings. The first closing (the “Initial Closing”) shall take place on the
date of this Agreement, at 10:00 a.m., Pacific Time (the date of the Initial
Closing and each Additional Closing, a “Closing Date”), at the offices of
Company Counsel or at such other location or time or on such other date mutually
agreed upon by the Company and all of the Purchasers participating therein,
subject to the conditions precedent for a Closing as set forth in Section 2.3
hereof, and to each party’s obligations hereunder having been satisfied or
waived. The Initial Closing and each Additional Closing shall constitute a
“Closing” for purposes of this Agreement. At the Initial Closing, upon the terms
and subject to the conditions set forth herein, the Company agrees to sell, and
the Purchasers participating therein, severally and not jointly, agree to
purchase, in the aggregate, up to $2,000,000 in principal amount of the Notes.

(b)               After the Initial Closing, the Company shall sell, and the
Purchasers participating therein shall purchase, up to a principal amount of the
Notes equal to $2,000,000 less the principal amount of the Notes issued at the
Initial Closing (the “Additional Notes”) as described in this Section 2.1(b) on
the same terms and conditions as those contained in this Agreement. As used
herein, the term “Notes” shall include the Additional Notes. The date of each
purchase and sale of the Additional Notes is referred to in this Agreement as an
“Additional Closing.” All Additional Closings shall take place subject to the
conditions precedent for a Closing as set forth in Section 2.3 hereof, and to
each party’s obligations hereunder having been satisfied or waived.

(c)    Purchaser Representative.

(i)                 By virtue of the execution of this Agreement by each
Purchaser, each of the Purchasers shall be deemed to have agreed to appoint
W-Net as its agent and attorney-in-fact, as the Purchaser Representative for and
on behalf of the Purchasers to give and receive notices and communications, to
agree to, negotiate, enter into settlements and compromises of, and comply with
orders of courts with respect to any indemnification claims, to assert,
negotiate, enter into settlements and compromises of, and comply with orders of
courts with respect to, any other claim by the Company against any Purchaser or
by any such Purchaser against the Company, in each case relating to this
Agreement or the transactions contemplated hereby, and to take all other actions
that are either (A) necessary or appropriate in the judgment of the Purchaser
Representative for the accomplishment of the foregoing or (B) specifically
mandated by the terms of this Agreement. Such agency may be changed by the
Purchasers from time to time upon not less than thirty (30) days’ prior written
notice to the Company; provided, however, that the Purchaser Representative may
not be removed unless Purchasers holding at least two-thirds (2/3) of the
outstanding principal amount of the Notes agree to such removal and to the
identity of the substituted agent. A vacancy in the position of Purchaser
Representative, whether due to the resignation, removal or dissolution of the
Purchaser Representative or for any other reason, may be filled by the
recipients of a majority in interest of the outstanding principal amount of the
Notes. No bond shall be required of the Purchaser Representative, and the
Purchaser Representative shall not receive any compensation for its services.
Notices or communications to or from the Purchaser Representative shall
constitute notice to or from the Purchasers.

(ii)               The Purchaser Representative shall not be liable for any act
done or omitted hereunder as Purchaser Representative while acting (A) in good
faith or (B) with the consent of the holders of a majority in interest of the
outstanding principal amount of the Notes. The Purchasers shall indemnify the
Purchaser Representative and hold the Purchaser Representative harmless against
any loss, liability or expense incurred without willful misconduct or bad faith
on the part of the Purchaser Representative and arising out of, or in connection
with, the acceptance or administration of the Purchaser Representative’s duties
hereunder, including the reasonable fees and expenses of any legal counsel,
accountant or other professional advisor retained by the Purchaser
Representative. The Purchaser Representative will be entitled to the advancement
and reimbursement by the Purchasers of costs and expenses incurred by, or on
behalf of, the Purchaser Representative in the performance of its duties
hereunder, including the reasonable fees and expenses of any legal counsel. A
decision, act, consent or instruction of the Purchaser Representative,
including, but not limited to, an amendment, extension or waiver of this
Agreement, shall constitute a decision of the Purchasers and shall be final,
binding and conclusive upon the Purchasers; and the Company may rely upon any
such decision, act, consent or instruction of the Purchaser Representative as
being the decision, act, consent or instruction of the Purchasers.

2.2              Deliveries.

(a)                On a Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser participating therein the following:

(i)                 this Agreement duly executed by the Company;

(ii)               a Note registered in the name of such Purchaser with a
principal amount equal to (A) such Purchaser’s Subscription Amount, and/or (B)
the amount owed to such Purchaser under such Purchaser’s Existing Note as of
such Closing Date, as applicable; and

(iii)             the Security Documents, including, without limitation, the
Security Agreement and the IP Security Agreement, duly executed by the Company.

(b)               On a Closing Date, each Purchaser participating therein shall
deliver or cause to be delivered to the Company the following:

(i)                 this Agreement duly executed by such Purchaser;

(ii)               such Purchaser’s (A) Subscription Amount by wire transfer of
immediately available funds to the account as specified in writing by the
Company and/or (B) Existing Note for cancellation, as applicable; and

(iii)             the Security Documents to which each Purchaser is a party and
required by law to be signed by such party in order to be binding.

2.3              Closing Conditions.

(a)                The obligations of the Company hereunder in connection with a
Closing are subject to the following conditions being met:

(i)                 the accuracy in all material respects on the Closing Date of
the representations and warranties of the Purchasers participating therein
contained herein;

(ii)               all obligations, covenants and agreements of each Purchaser
participating therein required to be performed at or prior to the Closing Date
shall have been performed; and

(iii)             the delivery by each Purchaser participating therein of the
items set forth in Section 2.2(b) hereof.

(b)                  The respective obligations of the Purchasers hereunder in
connection with a Closing are subject to the following conditions being met:

(i)                 the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company contained
herein;

(ii)               all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed; and

(iii)             the delivery by the Company of the items set forth in Section
2.2(a) hereof.

ARTICLE III. 

REPRESENTATIONS AND WARRANTIES

3.1              Representations and Warranties of the Company. The Company
hereby represents and warrants as of the Closing Date to each of the Purchasers
as follows:

(a)                Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is not in violation or default of any of the provisions of its
Certificate of Incorporation, Bylaws or other organizational or charter
documents. The Company is duly qualified to conduct business and is in good
standing as a foreign corporation 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 have, or reasonably be expected to result in, a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company (a “Material
Adverse Effect”), and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

(b)               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 hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals (as defined herein). 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 and
thereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

(c)                No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions contemplated hereby and thereby do not and will not: (i)
conflict with or violate any provision of the Company’s Certificate of
Incorporation, Bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, loan or credit facility, debt
or other instrument (evidencing a Company debt or otherwise) or other
understanding to which the Company is a party or by which any property or asset
of the Company is bound or affected (other than Liens in favor of the
Purchasers), or (iii) subject to the Required Approvals, conflict with or 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
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.

(d)               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,
other than (i) the filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws, and (ii) filings
required under the terms of the Security Documents (collectively, the “Required
Approvals”).

(e)                Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares.

(f)                Title to Assets. The Company has good, clear and marketable
title to all the tangible properties and tangible assets reflected in its latest
balance sheet as being owned by it or acquired after the date thereof which are,
individually or in the aggregate, material to the Company’s business (except
properties sold or otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of all Liens. All equipment and other items
of tangible personal property and assets of the Company (i) are in good
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, and (ii) are usable in the regular and ordinary course of the
Company’s business. The Company does not own any real property. The Company has
a valid leasehold interest in such leased real property, and such leases are in
full force and effect. The improvements and fixtures on such real property
leased by the Company are in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted.

(g)               No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities by any
form of general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

 

(h)               Acknowledgment Regarding Purchasers’ Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of, or exchange for, the
Securities. The Company further represents to each Purchaser that the Company’s
decision to enter into this Agreement and the other Transaction Documents has
been based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

3.2              Representations and Warranties of the Purchasers. Each
Purchaser, for itself and for no other Purchaser, hereby represents and warrants
as of the applicable Closing Date to the Company as follows:

(a)                Organization; Authority. If such Purchaser is an individual,
such Purchaser has the full power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and otherwise to
carry out his or her obligations hereunder and thereunder. If such Purchaser is
an entity, such Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder, and the execution and delivery of
the Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

(b)               Own Account. Such Purchaser understands that the Securities
are “restricted securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing
any of such Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable state securities
law. Such Purchaser is acquiring the Securities hereunder in the ordinary course
of its business.

(c)                Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
or its permitted assignee converts any Notes it or such permitted assignee, as
the case may be, will be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act.

(d)               Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.

(e)                General Solicitation. Such Purchaser 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.

ARTICLE IV. 

OTHER AGREEMENTS OF THE PARTIES

4.1              Transfer Restrictions.

(a)                The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, to the Company or to
an Affiliate of a Purchaser, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, 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. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement.

(b)               The Purchasers agree to the imprinting, so long as is required
by this Section 4.1, of a legend on any of the Securities in the following form:

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAS 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.

4.2              Reservation of Common Stock. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.

4.3              Form D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at a Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions upon
request of any Purchaser.

4.4              Security. The Company’s obligations under the Notes and other
Transaction Documents shall be secured by all the assets of the Company and its
subsidiaries. As of any Closing, the Purchasers participating therein shall be
granted a security interest in all the assets of the Company and its
subsidiaries to be memorialized in the Security Documents. The Company shall
execute, and cause its subsidiaries to execute, such other agreements, documents
and financing statements reasonably requested by the Purchasers, which will be
filed at the Company’s expense with the applicable jurisdictions and
authorities. The Company shall also execute, and cause its subsidiaries to
execute, all such documents reasonably necessary in the opinion of the
Purchasers to memorialize and further protect the security interests described
herein. The Purchasers may appoint a collateral agent to represent them
collectively in connection with the security interests being granted to the
Purchasers.

4.5              Termination of Existing Security Agreements. The Company and
each Investor hereby agree that upon the exchange of such Investor’s October
Existing Note for the applicable Note, (a) each Existing Security Agreement that
such Investor is a party to shall terminate, (b) all security interests and
liens granted to such Investor pursuant to such Existing Security Agreement in
all property of the Company and its subsidiaries shall terminate, (c) such
Investor authorizes the Company to prepare and file any and all documents and
instruments, including UCC termination statements, reasonably necessary or
required to discharge any and all security registrations previously filed by
such Investor with respect to such Existing Security Agreement, and (d) such
Investor shall execute and deliver to the Company any lien releases, mortgage
releases, discharges of security interests, and other similar discharge or
release documents (in recordable form if applicable) as are necessary to
effectuate the termination and release of the security interests and liens
granted to such Investor pursuant to such Existing Security Agreement. Each
Investor further agrees to do such further acts and things and to execute and
deliver to the Company such additional releases, powers, instruments, documents
or agreements, as the Company may reasonably require or deem advisable to carry
into effect the release of such liens and security interests.

ARTICLE V. 

MISCELLANEOUS

5.1              Fees and Expenses. 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 this Agreement. The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

5.2              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.

5.3              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 or delivery, if such notice or communication is delivered via
facsimile at the facsimile number, or delivered by a U.S. nationally recognized
overnight courier service to the address, set forth on the signature pages
attached hereto prior to 5:30p.m. (Los Angeles time) on a Business Day, (b) the
next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number, or delivered
by such courier service to the address, set forth on the signature pages
attached hereto on a day that is not a Business Day or later than 5:30 p.m. (Los
Angeles time) on any Business Day, or (c) 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 set forth on the signature pages attached hereto.

5.4              Amendments; Waivers. Except as specified in Section 2.1(b)
hereof with respect to the addition of additional Purchasers in an Additional
Closing, no provision of this Agreement may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers of at least a majority in interest of the
Securities then held by the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought. 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 any party to exercise any
right hereunder in any manner impair the exercise of any such right.

5.5              Headings. 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.

5.6              Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser (other than by
merger). Subject to the restrictions set forth in Section 4.1 hereof, any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”

5.7              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.

5.8              Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents 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 legal 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, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the County of Los Angeles. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the County of Los Angeles 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 any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or 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 other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

5.9              Survival. The representations and warranties shall survive the
Closings and the delivery of the Securities for the applicable statue of
limitations.

5.10          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 or by e-mail delivery of a “.pdf” or other
document image format data file, 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 or “.pdf” or other
document image format data file signature page were an original thereof.

5.11          Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

5.12          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 (in the case of mutilation), 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. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

5.13          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

5.14          Usury. It is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser’s election.

5.15          Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.

5.16          Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

5.17          Waiver of Jury Trial. In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each
knowingly and intentionally, to the greatest extent permitted by applicable law,
hereby absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.

 

 
 

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

COMPANY:

PHOTOTRON Holdings, Inc.

 

Address for Notice:

 

717 E. Gardena Blvd.

Gardena, CA 90248

By: __/s/ Craig Ellins___________________________

Name: Craig Ellins

Title: Chief Executive Officer

 

Fax: (818) 992-0202

With a copy to (which shall not constitute notice):

 

Stubbs Alderton & Markiles, LLP

15260 Ventura Boulevard, 20th Floor

Sherman Oaks, California 91403

Attention: Greg Akselrud, Esq.

Fax: (818) 444-6303

 

PURCHASER REPRESENTATIVE:

 

 

W-net Fund I, L.P.

 

Address for Notice:

 

12400 Ventura Blvd. Suite 327

Studio City, California 91604

By: __/s/ David Weiner________________________

Name: David Weiner

Title: Manager of the General Partner

 

 

Fax:  (818) 474-7589

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOWS]

 
 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT]

 

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

If an Entity:

(Print Entity Name)

 

By (Sign):

Name (Print):

Title (Print):

 

If an Individual:

(Sign)

Name (Print):

 

Email Address of Purchaser: ________________________________________________

Facsimile Number of Purchaser: _____________________________________________

Address for Notice of Purchaser:

 

________________________________________________

 

________________________________________________

 

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

 

________________________________________________

 

________________________________________________

 

 

Subscription Amount: $____________________________

 

 

Amount Owed by the Company Under an Existing Note: $____________________________

 

 
 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase and
Exchange Agreement to be duly executed by their respective authorized
signatories as of ____________________________ ___, 20___ with respect to an
Additional Closing pursuant to Section 2.1(b) hereof.

If an Entity:

(Print Entity Name)

 

By (Sign):

Name (Print):

Title (Print):

 

If an Individual:

(Sign)

Name (Print):

Email Address of Purchaser: ________________________________________________

Facsimile Number of Purchaser: _____________________________________________

Address for Notice of Purchaser:

 

________________________________________________

 

________________________________________________

 

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

 

________________________________________________

 

________________________________________________

 

 

Subscription Amount: $____________________________

 

 

Amount Owed by the Company Under an Existing Note: $____________________________

 
 

EXHIBIT A

 

NOTES

 

(See attached)

 
 

EXHIBIT B

 

SECURITY AGREEMENT

 

(See attached)

 

 
 

EXHIBIT C

 

IP SECURITY AGREEMENT

 

(See attached)