EXHIBIT 10.3

AIR TERMINATION AGREEMENT

This AIR Termination Agreement (“Agreement”) is entered into as of January 23,
2013 by and between Gemini Master Fund, Ltd., a Cayman Islands corporation
(“Gemini”), and Visualant, Incorporated, a Nevada corporation (“Company”, and
together with Gemini, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Company and Gemini, together with Ascendiant Capital Partners, LLC
(“Ascendiant”, and together with Gemini, the “Purchasers”), are parties to that
certain Securities Purchase Agreement dated as of May 19, 2011 (“Purchase
Agreement”); initially capitalized terms used herein and not otherwise defined
shall have the meanings ascribed thereto in the Purchase Agreement;

WHEREAS, pursuant to Section 2.4 of the Purchase Agreement (as amended through
the date hereof), the Purchasers are entitled to purchase additional Debentures
and Warrants from the Company on the terms and conditions set forth therein
(“Additional Investment Right”);

WHEREAS, immediately prior hereto pursuant to a separate agreement, Gemini has
purchased from Ascendiant all of Ascendiant’s right, title and interest in and
to the Additional Investment Right; and

WHEREAS, the Company wishes to terminate the Additional Investment Right, and
Gemini is willing to accept such termination on the terms and conditions set
forth herein;

NOW THEREFORE, in consideration of the foregoing premises and the covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.         Termination.  The Parties hereby agree that the Additional Investment
Right shall be terminated in consideration for $850,000 from the Company, which
shall be payable by the Company issuing to Gemini a promissory note in the form
of Exhibit A attached hereto (“Term Note”).  Effective upon Gemini’s receipt of
the original Term Note, the Additional Investment Right shall be terminated such
that Section 2.4 of the Purchase Agreement shall be of no further force or
effect and Section 4.13 of the Purchase Agreement shall be of no further force
or effect (notwithstanding any continued holding of Securities by Gemini).  The
original Term Note shall be delivered to Gemini within three (3) business days
following the date hereof; if such original Term Note is not delivered to Gemini
within five (5) business days following the date hereof, this Agreement shall be
null and void and of no further force or effect as if this Agreement were never
entered into.  The Term Note shall constitute a Transaction Document under the
Purchase Agreement.

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2.         Miscellaneous.

 

(a)

Applicable Law.  This Agreement shall be deemed to have been executed and
delivered within the State of New York, and the laws of the State of New York
shall apply to the interpretation and enforcement of this Agreement.

 

 

 

 

(b)

Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.  This Agreement may be executed and
delivered by facsimile transmission or by email of a digital image format file.

[Signature Page Follows]

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IN WITNESS WHEREOF, as of the date first written above, the parties hereto have
duly executed, or caused their authorized officers to duly execute, this
Agreement.

VISUALANT, INCORPORATED

GEMINI MASTER FUND, LTD.

 

By:  GEMINI STRATEGIES LLC, INC.,
as investment manager

 

 

By: /s/ Ronald P. Erickson

By: /s/ Steven Winters

Name: Ronald Erickson

Name: Steven Winters

Title: CEO

Title:   President

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EXHIBIT A

Term Note

(see attached)

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