exv10w1






Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of April 20, 2010,
between Xenonics Holdings, Inc., a Nevada corporation (the “Company”), and each purchaser
identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).



     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an
effective registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, desires to purchase from the Company, securities of the Company 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 and each Purchaser 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 have the meanings set forth in this Section
1.1:




     “Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.




     “Action” shall have the meaning ascribed to such term in Section 3.1(j).




     “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.




     “Board of Directors” means the board of directors of the Company.




     “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 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 Section 2.1.




     “Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been satisfied or
waived, but in no event later than the third Trading Day following the date hereof.



 









 






     “Commission” means the United States Securities and Exchange Commission.




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




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




     “Company Counsel” means TroyGould, PC, with offices located at 1801 Century
Park East, Suite 1600, Los Angeles, CA 90067.




     “Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.




     “Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).




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




     “Exempt Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the disinterested directors
of the Company, provided that any such issuance shall only be to a Person (or to the
equityholders of a Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is investing in
securities.




     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).




     “Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).




     “Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).



 









 






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




     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).




     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).




     “Participation Maximum” shall have the meaning ascribed to such term in Section
4.11(a).




     “Per Share Purchase Price” equals $0.50, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.




     “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.




     “Pre-Notice” shall have the meaning ascribed to such term in Section 4.11(b).




     “Previous Securities Purchase Agreement” means that certain securities purchase
agreement dated April 1, 2010, among the Company and the investor signatories thereto.




     “Pro Rata Portion” shall have the meaning ascribed to such term in Section
4.11(e).




     “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.




     “Prospectus” means the final prospectus filed for the Registration Statement.




     “Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser at the Closing.




     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.




     “Registration Statement” means the effective registration statement with
Commission file No. 333-165577 which registers the sale of the Shares, the Warrants and the
Warrant Shares to the Purchasers.




     “Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).



 









 






     “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.




     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.




     “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).




     “Securities” means the Shares, the Warrants and the Warrant Shares.




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




     “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.




     “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock).




     “Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants 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.




     “Subsequent Financing” shall have the meaning ascribed to such term in Section
4.11(a).




     “Subsequent Financing Notice” shall have the meaning ascribed to such term in
Section 4.11(b).




     “Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a), and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.




     “Trading Day” means a day on which the principal Trading Market is open for
trading.




     “Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).



 









 






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




     “Transfer Agent” means Interwest Transfer Co., the current transfer agent of
the Company, with a mailing address of 1981 East 4800 South, Suite 100, Salt Lake City, UT
84117 and a facsimile number of 801-277-3147, and any successor transfer agent of the
Company.




     “Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.12(b).




     “Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable on the six month anniversary of the Closing Date and have a term of exercise
equal to 5 years, in the form of Exhibit A attached hereto.




     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.




     “WS” means Weinstein Smith LLP with offices located at 420 Lexington Avenue,
Suite 2620, New York, New York 10170-0002.



ARTICLE II.

PURCHASE AND SALE




     2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, up to an aggregate of $550,000 of Shares and Warrants. Each Purchaser shall deliver
to the Company, via wire transfer or a certified check, immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such
Purchaser and the Company shall deliver to each Purchaser its respective Shares and a Warrant as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of WS or such
other location as the parties shall mutually agree.



     2.2 Deliveries.




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




     (i) this Agreement duly executed by the Company;




     (ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit B attached hereto;



 









 






     (iii) a copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name
of such Purchaser;




     (iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price, with an exercise price equal to
$0.65, subject to adjustment therein (such Warrant certificate may be delivered
within three Trading Days of the Closing Date); and




     (v) the Prospectus and Prospectus Supplement (which may be delivered in
accordance with Rule 172 under the Securities Act).




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




     (i) this Agreement duly executed by such Purchaser; and




     (ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.



     2.3 Closing Conditions.




     (a) The obligations of the Company hereunder in connection with the 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 contained herein (unless as of a
specific date therein);




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




     (iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.




(b) The respective obligations of the Purchasers hereunder in connection with the
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 (unless as of a
specific date therein);




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



 









 






     (iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;




     (iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and




     (v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Securities at the Closing.




ARTICLE III.


REPRESENTATIONS AND WARRANTIES



     3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify
any representation or otherwise made herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:




     (a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set
forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any Liens, and all of
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 to subscribe for or
purchase securities. If the Company has no subsidiaries, all other references to the
Subsidiaries or any of them in the Transaction Documents shall be disregarded.




     (b) Organization and Qualification. The Company and each of the Subsidiaries
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, 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 nor default 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 the Subsidiaries 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 have or reasonably be expected to result in: (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a timely basis
its obligations under any Transaction Document (any of (i), (ii) or (iii), 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.




     (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 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, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction Document
to which it is a party 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.




     (d) No Conflicts. The execution, delivery and performance by the Company of
the Transaction Documents, the issuance and sale of the Securities and the consummation by
it of the transactions contemplated hereby and thereby to which it is a party do not and
will not (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, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, 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) 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 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), such as could not 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, other than: (i) the filings required pursuant to Section 4.4 of
this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of the Securities for
trading thereon in the time and manner required thereby and (iv) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).




     (f) Issuance of the Securities; Registration. 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. The Warrant Shares, when issued in accordance with the
terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants. The Company has prepared and filed the Registration Statement in
conformity with the requirements of the Securities Act, which became effective on March 30,
2010 (the “Effective Date”), including the Prospectus, and such amendments and
supplements thereto as may have been required to the date of this Agreement. The
Registration Statement is effective under the Securities Act and no stop order preventing or
suspending the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued by the Commission and no proceedings for that purpose
have been instituted or, to the knowledge of the Company, are threatened by the Commission.
The Company, if required by the rules and regulations of the Commission, proposes to file
the Prospectus, with the Commission pursuant to Rule 424(b). At the time the Registration
Statement and any amendments thereto became effective, at the date of this Agreement and at
the Closing Date, the Registration Statement and any amendments thereto conformed and will
conform in all material respects to the requirements of the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading;
and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any
amendment or supplement thereto was issued and at the Closing Date, conformed and will
conform in all material respects to the requirements of the Securities Act and did not and
will not contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.



 









 






     (g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the Previous
Securities Purchase Agreement or pursuant to the exercise of employee stock options under
the Company’s stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently
filed periodic report under the Exchange Act. 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 a result of the purchase
and sale of the Securities and the issuance and sale of securities pursuant to the Previous
Securities Purchase Agreement, 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 exercisable 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 Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, 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
securities. No further approval or authorization of any stockholder, the Board of Directors
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 Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, together with the
Prospectus and the Prospectus Supplement, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, 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 the light of the circumstances under which they were made, not misleading. The
Company has never been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports



 









 







comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or the
notes thereto and except that unaudited financial statements may not contain all footnotes
required by GAAP, 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, immaterial, year-end audit adjustments.




     (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (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 and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (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. The Company does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(i), no event,
liability, fact, circumstance, occurrence or development has occurred or exists or is
reasonably expected to occur or exist with respect to the Company or its Subsidiaries or
their respective business, prospects, properties, operations, assets or financial condition
that would be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.




     (j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has been 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.




     (k) 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, which could
reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s relationship
with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant in
favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.




     (l) 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 judgment, decree or order of any court, arbitrator or governmental body or (iii) is or
has been in violation of any statute, rule, ordinance 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 have or reasonably
be expected to result in a Material Adverse Effect.




     (m) 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 Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.



 









 






     (n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for 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 and Liens
for the payment of federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance.




     (o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of, the Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from
the date of this Agreement. Neither the Company nor any Subsidiary has received, since the
date of the latest audited financial statements included within the SEC Reports, a written
notice of a claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have a Material
Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.




     (p) 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, including, but not limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any
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.




     (q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, 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, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $120,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock option agreements under
any stock option plan of the Company.




     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date hereof and as of
the Closing Date. 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 GAAP
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-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure controls and procedures as of the
end of the period covered by the Company’s most recently filed periodic report under the
Exchange Act (such date, the “Evaluation Date”). The Company presented in its most
recently filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no
changes in the Company’s internal control over financial reporting (as such term is defined
in the Exchange Act) that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.




     (s) Certain Fees. Except as set forth in the Prospectus Supplement, 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 the Transaction Documents.
The Purchasers shall have no obligation with respect to any fees or with respect to any
claims 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 the Transaction
Documents.



 









 






     (t) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an
“investment company” subject to registration under the Investment Company Act of 1940, as
amended.




     (u) Registration Rights. Except as set forth on Schedule 3.1(u), no
Person has any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.




     (v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge 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. The
Company has not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance
requirements.




     (w) Application of Takeover Protections. The Company and the Board of
Directors have 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
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.




     (x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the
Prospectus Supplement. The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the Company. All
of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, is true and correct and does 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. The press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a



 









 







whole do not contain any untrue statement of a material fact or omit 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 and when made, not
misleading. The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.




     (y) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval provisions of
any Trading Market on which any of the securities of the Company are listed or designated.




     (z) Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder, (i) the fair saleable value of the Company’s 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 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 liabilities 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). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(z) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of
business; and (z) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.



 









 






     (aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary (i) has made or filed all United States federal and state income
and all foreign income and franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations and (iii) has set aside on its books provision reasonably
adequate for the payment of all material taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company or of any Subsidiary know of no basis for any such claim.




     (bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.




     (cc) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(cc) of the Disclosure Schedules. To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the Exchange Act
and (ii) shall express its opinion with respect to the financial statements to be included
in the Company’s Annual Report for the year ending September 30, 2010.




     (dd) 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 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.




     (ee) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e)
and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company,



 









 







or “derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) past or future open market or other transactions by
any Purchaser, specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities; (iii)
any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser
is a party, directly or indirectly, presently may have a “short” position in the Common
Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Warrant Shares
deliverable with respect to Securities are being determined, and (z) such hedging activities
(if any) could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute a breach of any
of the Transaction Documents.




     (ff) Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the Securities.




     (gg) [RESERVED]




     (hh) Office of Foreign Assets Control. Neither the Company nor, to the
Company’s knowledge, any director, officer, agent, employee or affiliate of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department (“OFAC”).




     (ii) U.S. Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.




     (jj) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five percent or more of the
total equity of a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve. Neither the



 









 







Company nor any of its Subsidiaries or Affiliates exercises a controlling influence
over the management or policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.




     (kk) Money Laundering. The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
applicable money laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator involving the
Company with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.



     3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date therein):




     (a) Organization; Authority. Such Purchaser is either an individual or an entity
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 this Agreement and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this Agreement and
performance by such Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate, partnership, limited liability company or similar
action, as applicable, 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) [RESERVED]




     (c) Purchaser Status. At the time such Purchaser was offered the Securities, it
was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it
will be an “accredited investor” as defined in Rule 501(a) 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) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed
any purchases or sales, including Short Sales, of the securities of the Company during the
period commencing as of the time that such Purchaser first received a term sheet (written or
oral) as of the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution
hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets,
the representation set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser
has maintained the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or similar
transactions in the future.


The Company acknowledges and agrees that the representations contained in Section 3.2 shall not
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby.




ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Warrant Shares. If all or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the issuance or resale of the Warrant Shares
or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any
such exercise shall be issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the sale or resale of
the Warrant Shares) is not effective or is not otherwise available for the sale or resale of the
Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing that
such registration statement is not then effective and thereafter shall promptly notify such holders
when the registration statement is effective again and available for the sale or resale of the
Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of
the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance with
applicable federal and state securities laws). The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the issuance or resale of
the Warrant Shares effective during the term of the Warrants.



 









 





     4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser
owns Securities or (ii) the Warrants have expired, 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 even if the Company is
not then subject to the reporting requirements of the Exchange Act. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities, including without
limitation, under Rule 144. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, to the extent required from time to time to enable
such Person to sell such Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption provided by Rule 144.



     4.3 Integration. The Company shall not 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 for purposes of the rules and
regulations of any Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before the closing of
such subsequent transaction.



     4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by 8:30 a.m. (New
York City time) on the Trading Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby, and (b) issue a Current
Report on Form 8-K, and including the Transaction Documents as exhibits thereto, within the time
required by the Exchange Act. From and after the issuance of such press release, the Company shall
have publicly disclosed all material, non-public information delivered to any of the Purchasers by
the Company or any of its subsidiaries, or any of their respective officers, directors, employees
or agents in connection with the transactions contemplated by the Transaction Documents. The
Company and each Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall
issue any such press release nor otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior written consent of such Purchaser,
except (a) as required by federal securities law in connection with the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (b) to the extent such
disclosure is required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure permitted under this clause (b).



     4.5 Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person”



 









 




under any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions
of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers.




     4.6 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents
or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.



     4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company
shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds for: (a) the satisfaction of any portion of the Company’s debt
(other than payment of trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents, (c) the settlement
of any outstanding litigation or (d) in violation of the FCPA or OFAC regulations.



     4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing



 









 




reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any Purchaser Party under this
Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such Purchaser Party in
this Agreement or in the other Transaction Documents. The indemnification required by this Section
4.8 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any Purchaser Party against
the Company or others, and (y) any liabilities the Company may be subject to pursuant to law.




     4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares
pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.



     4.10 Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company shall apply to list or quote all
of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of
the Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market
as promptly as possible. The Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and will comply in all respects
with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading
Market.



     4.11 Participation in Future Financing.




     (a) From the date hereof until the date that is the 12 month anniversary of the Closing
Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents for cash consideration, Indebtedness or a combination of units hereof (a
“Subsequent Financing”), each Purchaser (together with any investor party to the
Previous Securities Purchase Agreement), shall have the right to participate in up to an
amount of the Subsequent Financing equal to 100% of the



 









 







Subsequent Financing (the “Participation Maximum”) on the same terms,
conditions and price provided for in the Subsequent Financing, unless the Subsequent
Financing is a registered public offering, in which case the Company shall offer each
Purchaser the right to participate in such public offering when it is lawful for the Company
to do so, but no Purchaser shall be entitled to purchase any particular amount of such
public offering.




     (b) At least five (5) Trading Days prior to the closing of the Subsequent Financing,
the Company shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it
wants to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”). Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than
one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder
and the Person or Persons through or with whom such Subsequent Financing is proposed to be
effected and shall include a term sheet or similar document relating thereto as an
attachment.




     (c) Any Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time) on the fifth
(5th) Trading Day after all of the Purchasers have received the Pre-Notice that
the Purchaser is willing to participate in the Subsequent Financing, the amount of the
Purchaser’s participation, and representing and warranting that the Purchaser has such funds
ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth
(5th) Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate.




     (d) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day
after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of
their willingness to participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent Financing,
then the Company may effect the remaining portion of such Subsequent Financing on the terms
and with the Persons set forth in the Subsequent Financing Notice.




     (e) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day
after all of the Purchasers have received the Pre-Notice, the Company receives responses to
a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate
amount of the Participation Maximum, each such Purchaser shall have the right to purchase
its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata
Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.11 and (y) the sum of the
aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers
participating under this Section 4.11.



 









 






     (f) The Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in this
Section 4.11, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice
within 30 Trading Days after the date of the initial Subsequent Financing Notice.




     (g) Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of (i)
an Exempt Issuance or (ii) an underwritten public offering of Common Stock.




4.12 Subsequent Equity Sales.




     (a) From the date hereof until 90 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or
proposed issuance of any shares of Common Stock or Common Stock Equivalents;
provided, however, that the 90 day period set forth in this Section 4.12
shall be extended for the number of Trading Days during such period in which (i) trading in
the Common Stock is suspended by any Trading Market, or (ii) the Registration Statement is
not effective or the prospectus included in the Registration Statement may not be used by
the Purchasers for the resale of the Shares and Warrant Shares.




     (b) From the date hereof until such time as no Purchaser holds any of the Securities,
the Company shall be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration (or a combination of units hereof) involving a Variable
Rate Transaction. “Variable Rate Transaction” means a transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity securities, or
(B) with a conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Stock or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.




     (c) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.



     4.13 Equal Treatment of Purchasers. No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the same




 











 




consideration is also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to each Purchaser by
the Company and negotiated separately by each Purchaser, and is intended for the Company to treat
the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert
or as a group with respect to the purchase, disposition or voting of Securities or otherwise.




     4.14 Certain Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf
or pursuant to any understanding with it will execute any purchases or sales, including Short Sales
of any of the Company’s securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section 4.4. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the information included in the
Disclosure Schedules. Notwithstanding the foregoing and notwithstanding anything contained in this
Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws from and after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of
confidentiality to the Company or its Subsidiaries after the issuance of the initial press release
as described in Section 4.4. Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage separate portions of
such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.



     4.15 Delivery of Warrants After Closing. The Company shall deliver, or cause to be
delivered, the respective Warrant certificates purchased by each Purchaser to such Purchaser within
3 Trading Days of the Closing Date.



     4.16 Capital Changes. Until the one year anniversary of the Closing Date, the Company
shall not undertake a reverse or forward stock split or reclassification of the Common Stock
without the prior written consent of the Purchasers holding a majority in interest of the Shares.



 









 





ARTICLE V.

MISCELLANEOUS




     5.1 Termination. This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before April 27, 2010; provided, however, that no such termination will
affect the right of any party to sue for any breach by the other party (or parties).



     5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, 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.



     5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, the Prospectus and the Prospectus Supplement, 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.



     5.4 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 set forth on the signature pages attached hereto prior to 5:30
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
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) 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 set forth on the signature pages attached hereto.



     5.5 Amendments; Waivers. 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 holding at least 67% in interest of the Shares based on the initial
Subscription Amounts hereunder 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.



     5.6 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.



 









 





     5.7 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). 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.”



     5.8 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 4.8.



     5.9 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 New York, 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 City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan 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, in addition to the obligations of the Company under Section 4.8, 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.



     5.10 Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Securities.



     5.11 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 or by e-mail delivery of a “.pdf” 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”
signature page were an original thereof.




     5.12 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.



     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, that in the case of a
rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any
shares of Common Stock subject to any such rescinded exercise notice concurrently with the return
to such Purchaser of the aggregate exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such restored right).



     5.14 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 (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.



     5.15 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 agree 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.



     5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser 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.




     5.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser 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
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, each Purchaser and its
respective counsel have chosen to communicate with the Company through WS. WS does not represent
any of the Purchasers and only represents EarlyBirdCapital, Inc., the placement agent. The Company
has elected to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so by any of the
Purchasers. It is expressly understood and agreed that each provision contained in this Agreement
and in each other Transaction Document is between the Company and a Purchaser, solely, and not
between the Company and the Purchasers collectively and not between and among the Purchasers.



     5.18 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.



     5.19 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. In addition, each and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.



 









 





     5.20 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.



(Signature Pages Follow)






 









 








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



	 	 	 	 	 

	XENONICS HOLDINGS, INC.
	 	Address for Notice:

3186 Lionshead Avenue

Carlsbad, CA 92010
	 
	 	 	 	 
	By:

	 	/s/ Richard S. Kay
 

Name: Richard S. Kay

Title: Chief Financial Officer
	 	Email: rkay@xenonics.com

Fax: 760.477.8896





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




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]






 









 








[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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


Name of Purchaser: Southridge Partners II LP



Signature of Authorized Signatory of Purchaser: /s/ Stephen M. Hicks



Name of Authorized Signatory: Stephen M. Hicks



Title of Authorized Signatory: Managing Director of General Partner



Email Address of Authorized Signatory:
 




Facsimile Number of Authorized Signatory:
 




Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



o Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]






 









 








[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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


Name of Purchaser: Lipman Capital Group Inc. Retirement Plan



Signature of Authorized Signatory of Purchaser: /s/ John Lipman



Name of Authorized Signatory: John Lipman



Title of Authorized Signatory:
 




Email Address of Authorized Signatory:
 




Facsimile Number of Authorized Signatory:
 




Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 





EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



o Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]






 









 








[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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


Name of Purchaser: Warrant Strategies Fund LLC



Signature of Authorized Signatory of Purchaser: /s/ J. Mitchell Hull



Name of Authorized Signatory: J. Mitchell Hull



Title of Authorized Signatory: Managing Member



Email Address of Authorized Signatory:
 




Facsimile Number of Authorized Signatory:
 




Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



o Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]






 









 








[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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


Name of Purchaser: Warberg Opportunistic Trading Fund LP



Signature of Authorized Signatory of Purchaser: /s/ Daniel I. Warsh



Name of Authorized Signatory: Daniel I. Warsh



Title of Authorized Signatory: Managing Member



Email Address of Authorized Signatory:
 




Facsimile Number of Authorized Signatory:
 




Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



þ Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]





 











 





[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Brio Capital LP




Signature of Authorized Signatory of Purchaser: /s/ Shaye Hirsch




Name of Authorized Signatory: Shaye Hirsch




Title of Authorized Signatory: Managing Partner




Email Address of Authorized Signatory:

 





Facsimile Number of Authorized Signatory:

 





Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



o Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]



 









 





[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Cranshire Capital LP




Signature of Authorized Signatory of Purchaser: /s/ Keith A. Goodman




Name of Authorized Signatory: Keith A. Goodman




Title of Authorized Signatory: COO — Downsview Capital, Inc., The General Partner




Email Address of Authorized Signatory:

 





Facsimile Number of Authorized Signatory:

 





Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



þ Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]






 









 








[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Freestone Advantage Partners LP




Signature of Authorized Signatory of Purchaser: /s/ Keith Goodman




Name of Authorized Signatory: Keith Goodman




Title of Authorized Signatory: Manager




Email Address of Authorized Signatory:

 





Facsimile Number of Authorized Signatory:

 





Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



þ Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.




[SIGNATURE PAGES CONTINUE]



 









 





[PURCHASER SIGNATURE PAGES TO XNN SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Poseidon Capital LLC




Signature of Authorized Signatory of Purchaser: /s/ Yoel Altman




Name of Authorized Signatory: Yoel Altman




Title of Authorized Signatory: President




Email Address of Authorized Signatory:

 





Facsimile Number of Authorized Signatory:

 





Address for Notice of Purchaser:



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




	 	 	 	 	 	 	 	 	 

	Subscription Amount:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Shares:
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Warrant Shares:	 	 	 	 	 	 
	 	 	 	 	 	 	 




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



o Notwithstanding anything contained in this Agreement to the contrary, by checking
this box (i) the obligations of the above-signed to purchase the securities set forth in this
Agreement to be purchased from the Company by the above-signed, and the obligations of the Company
to sell such securities to the above-signed, shall be unconditional and all conditions to Closing
shall be disregarded, (ii) the Closing shall occur on the third (3rd) Trading Day
following the date of this Agreement and (iii) any condition to Closing contemplated by this
Agreement (but prior to being disregarded by clause (i) above) that required delivery by the
Company or the above-signed of any agreement, instrument, certificate or the like or purchase price
(as applicable) shall no longer be a condition and shall instead be an unconditional obligation of
the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate
or the like or purchase price (as applicable) to such other party on the Closing Date.








40