exv10w4



 





EXHIBIT 10.4



NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.




COMMON STOCK PURCHASE WARRANT




XENONICS HOLDINGS, INC.




[A WARRANT] [B WARRANT]




	 	 	 
	Warrant Shares: ___

	 	Issue Date: ___, 2007






          THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
[_____________________] (the “Holder”), is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set forth, at any time on or after the
[A Warrant: issuance of this Warrant] [B Warrant: date on which the A Warrant issued to the Holder
on or about the date hereof has been exercised in full or otherwise terminated] (the “Initial
Exercise Date”) and on or prior to the close of business on the 5 year anniversary of the
Closing Date (the “Termination Date”) but not thereafter, to subscribe for and purchase
from Xenonics Holdings, Inc., a Nevada corporation (the “Company”), up to [___]
shares (the “Warrant Shares”) of common stock, par value $0.001 per share, of the Company
(the “Common Stock”). The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).




     Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated September ___, among the Company and the purchasers signatory
thereto.



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     Section 2. Exercise.




     a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing to the registered Holder
at the address of such Holder appearing on the books of the Company); and, within 3 Trading
Days of the date said Notice of Exercise is delivered to the Company, the Company shall have
received payment of the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender this Warrant to
the Company until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within 7 Trading Days of the date the final Notice
of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares purchased and the date
of such purchases. The Company shall deliver any objection to any Notice of Exercise within
2 Business Days of receipt of such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the amount stated
on the face hereof.




     b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be [A Warrant: $2.75] [B Warrant: $3.25], subject to adjustment hereunder (the
“Exercise Price”).




     c) Cashless Exercise. If at any time after one year from the date of issuance
of this Warrant there is no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant
may also be exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:




	 	(A)	 	= the VWAP on the Trading Day immediately preceding the date of
such election;
	 
	 	(B)	 	= the Exercise Price of this Warrant, as adjusted; and
	 
	 	(X)	 	= the number of Warrant Shares for which this Warrant is being
exercised.




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     d) Exercise Limitations. The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, such Holder
(together with such Holder’s Affiliates, and any other person or entity acting as a group
together with such Holder or any of such Holder’s Affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by such Holder and its Affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by such Holder or any of its Affiliates and (B) exercise,
conversion or exchange of the unexercised, unconverted or non-exchanged portion of any
other securities of the Company (including without limitation any other Warrants) subject
to a limitation on conversion, exercise or exchange analogous to the limitation contained
herein beneficially owned by such Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by such Holder together with any Affiliates) and of which a
portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the
submission of a Notice of Exercise shall be deemed to be each Holder’s determination of
whether this Warrant is exercisable (in relation to other securities owned by such Holder
together with any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(d), in determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as
reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be,
(y) a more recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company shall within one
Trading Day confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the
Company, including this Warrant, by such Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 9.9% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of
this Section 2(d) may be waived by such Holder, at the election



3









 







of such Holder, upon not less than 61 days’ prior notice to the Company to change the
Beneficial Ownership Limitation. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this Section
2(d) to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of this
Warrant.




	 	 	 
	e)	 	Mechanics of Exercise.







	 	 	 
	 	 	     i. Authorization of Warrant Shares. The Company covenants that
all Warrant Shares which may be issued upon the exercise of the purchase
rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).






	 	 	 
	 	 	     ii. Delivery of Certificates Upon Exercise. Certificates for
shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit/Withdrawal at
Custodian (“DWAC”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within 7 Trading Days from the delivery to
the Company of the Notice of Exercise Form, surrender of this Warrant (if
required) and payment of the aggregate Exercise Price as set forth above
(“Warrant Share Delivery Date”). This Warrant shall be deemed to
have been exercised on the date the Notice of Exercise Form is received by
the Company. The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised.






	 	 	 
	 	 	     iii. Delivery of New Warrants Upon Exercise. If this Warrant
shall have been exercised in part, the Company shall, at the request of a
Holder and upon surrender of this Warrant certificate, at the time of
delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase
the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.







	 	 	 
	 	 	     iv. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the





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	 	 	Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share
Delivery Date, then the Holder will have the right to rescind such exercise.








	 	 	 
	 	 	     v. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the
next whole share.








	 	 	 
	 	 	     vi. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; provided,
however, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.








	 	 	 
	 	 	     vii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.








	 	 	 
	f)	 	No Net Cash Settlement Upon Exercise. Notwithstanding
anything to the contrary in this Warrant or any other Transaction Document,
under no circumstances will the Company be required to net cash settle this
Warrant upon exercise (provided that nothing contained herein shall limit the
Holder’s right to seek and obtain any and all remedies in the event of a breach
of this Warrant, including without limitation specific performance and monetary
damages).








	 	 	 
	g)	 	[A Warrant only:] Forced Exercise.









	 	 	 
	 	 	     i. Subject to the Purchase Agreement and subject to the terms set forth
herein (including without limitation subsection 2(d) above and subsection
(f)(ii) below), in the event that the daily VWAP of the Company’s Common
Stock (as reported by the Eligible Trading Market on which the Common Stock
is traded) is greater than $3.75 (as appropriately and equitably adjusted
for stock splits, reverse stock splits, stock dividends and the similar
events) for twenty (20) Trading Days during any period of thirty (30)
consecutive Trading Days (“Pricing Period”), the Company shall have
the right, upon prior written notice to






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the Holder (“Forced Exercise Notice”), to compel all or a
portion of this Warrant to be exercised on or prior the date (“Forced
Exercise Date”) specified in the Forced Exercise Notice, provided that
such Forced Exercise Date may not occur until at least ten (10) Trading Days
following the date on which the Holder receives the Forced Exercise Notice.
The Company may not deliver any Forced Exercise Notice until after the
completion of the Pricing Period, and must deliver any Forced Exercise
Notice within five (5) Trading Days following the last day of any Pricing
Period. The period from the date of the Forced Exercise Notice to the
Forced Exercise Date shall be referred to herein as the “Post-Notice
Period”. If the Company intends to force exercise of less than all of
the then outstanding A Warrants issued under the Purchase Agreement, it
shall do so on a pro rata basis among such holders in accordance with this
Section.




     ii. Notwithstanding anything to the contrary herein, the Company shall
be prohibited from exercising its right to force exercise of this Warrant
pursuant to this Section if at any time during the Post-Notice Period or
during the thirty-five (35) consecutive Trading Days immediately preceding
such Post-Notice Period there fails to exist “Effective Registration”.
“Effective Registration” shall mean (i) the resale of all Registrable
Securities (as defined in the Registration Rights Agreement) is covered by
an effective registration statement in accordance with the terms of the
Registration Rights Agreement which registration statement is not subject to
any suspension or stop orders; (ii) the resale of such Registrable
Securities may be effected pursuant to a current and deliverable prospectus
that is not subject at the time to any blackout or similar circumstance;
(iii) the Common Stock is listed or quoted on an Eligible Trading Market,
such Registrable Securities are listed, or approved for listing prior to
issuance, on such Eligible Trading Market, the Common Stock is not subject
to any trading suspension (nor shall trading generally have been suspended
on such exchange or market), and the Company shall not have been notified of
any pending or threatened proceeding or other action to delist or suspend
the Common Stock on such Eligible Trading Market on which the Common Stock
is then traded or listed; (iv) the requisite number of shares of Common
Stock shall have been duly authorized and reserved for issuance as required
by the terms of the Transaction Documents; and (v) none of the Company or
any direct or indirect subsidiary of the Company is (1) subject to any
bankruptcy or insolvency proceeding or (2) in breach of this Warrant, the
Purchase Agreement or any other Transaction Document.



     Section 3. Certain Adjustments.




     a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent



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securities payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B)
subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issues by reclassification of shares of the Common Stock any shares
of capital stock of the Company, then in each case the Exercise Price shall be multiplied by
a fraction of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding immediately after such
event and the number of shares issuable upon exercise of this Warrant shall be inversely
proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.




     b) [Intentionally Deleted].




     c) Subsequent Rights Offerings. If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and
not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the VWAP at the record date mentioned below, then the Exercise
Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming receipt by the
Company in full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or warrants.




     d) Pro Rata Distributions. If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security other than the Common Stock (which shall be subject
to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying
the Exercise Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then per share fair market value
at such record date of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a statement
provided to the Holder of the portion of assets or evidences of



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indebtedness so distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.




     e) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its assets in one or
a series of related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to
receive, for each Warrant Share that would have been issuable upon such exercise immediately
prior to the occurrence of such Fundamental Transaction, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such event. For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the provisions of this
Section 3(e) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is
(1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under
the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving
a person or entity not traded on a national securities exchange, the Nasdaq Global Select
Market, the Nasdaq Global Market or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder’s option, exercisable at any time concurrently with or within
30 days after the consummation of the Fundamental Transaction, an amount of cash equal to
the value of this Warrant as determined in accordance with the Black-Scholes option pricing
formula



8









 







using an expected volatility equal to the 100 day historical price volatility obtained
from the HVT function on Bloomberg Financial Markets as of the trading day immediately prior
to the public announcement of the Fundamental Transaction.




     f) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.




     g) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for any period of
time deemed appropriate by the Board of Directors of the Company.




     h) Notice to Holder.




     i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.




     ii. Notice to Allow Exercise by Holder. If (A) the Company
shall declare a dividend (or any other distribution in whatever form) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of
the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall be entitled to



9









 







exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
The Holder is entitled to exercise this Warrant during the 20-day period
commencing on the date of such notice to the effective date of the event
triggering such notice.



     Section 4. Transfer of Warrant.




     a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of
the Purchase Agreement, this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.




     b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.




     c) Warrant Register. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.




     d) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as a condition
of allowing such transfer, that (i) the Holder or transferee of this Warrant, as the case
may be, furnish to the Company a written opinion of counsel (which opinion



10









 







shall be in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such transfer may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, and (ii) the Holder
or transferee execute and deliver to the Company an investment letter in form and substance
acceptable to the Company, and (iii) the transferee be an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or
a “qualified institutional buyer” as defined in Rule 144A(a) promulgated under the
Securities Act.



     Section 5. Miscellaneous.




     a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(ii).




     b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.




     c) 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.




     d) Authorized Shares.




     The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.




     Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its



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certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will (a)
not increase the par value of any Warrant Shares above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.




     Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.




     e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.




     f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.




     g) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that
all rights hereunder terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.




     h) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.




     i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no



12









 







enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of the Company.




     j) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of
its rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.




     k) Successors and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.




     l) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.




     m) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.




     n) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.



(Signature Page Follows)




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          IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the date first above indicated.




	 	 	 
	 

	 	XENONICS HOLDINGS, INC .
	 

	 	 
	 

	 	By:
	 

	 	 
	 

	 	Print Name:
	 

	 	Print Title:







14









 








NOTICE OF EXERCISE




TO: XENONICS HOLDINGS, INC.




          (1) The undersigned hereby elects to purchase _________Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.




          (2) Payment shall take the form of (check applicable box):





     [ ] in lawful money of the United States; or




     [ ] [if permitted] the cancellation of such number of Warrant Shares as is
applicable to exercise this Warrant pursuant to the “cashless exercise”
procedure set forth in subsection 2(c).



          (3) Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:



 



The Warrant Shares shall be delivered to the following DWAC/DTC Account Number or by physical
delivery of a certificate to:



 



 



 




          (4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.




[SIGNATURE OF HOLDER]




Name of Investing Entity: ________________________________________________________________________




Signature of Authorized Signatory of Investing Entity: ______________________________________________________




Name of Authorized Signatory: ________________________________________________________________________




Title of Authorized Signatory: ________________________________________________________________________




Date: __________________________________________________________________________________________




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ASSIGNMENT FORM




(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)




          FOR VALUE RECEIVED, [all the] [___] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to




___________________________ whose address is __________________________________________________________________




__________________________________________________________________________________________________________.




Dated: _________, ___




Holder’s Signature: __________________




Holder’s Address: __________________





________________________





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