Document:

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EXHIBIT 10.2

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of
September 21, 2007, among Xenonics Holdings, Inc., a Nevada corporation (the “Company”),
and Gemini Master Fund, Ltd. and any additional purchasers identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, between the Company and each Purchaser (the “Purchase Agreement”).

          The Company and each Purchaser hereby agree as follows:

     1. Definitions. Initially capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the following meanings:

          “Advice” shall have the meaning set forth in Section 6(d).

     “Effectiveness Deadline” means, with respect to the initial Registration
Statement required to be filed hereunder, the 120th calendar day following the
date hereof (or the 150th calendar day following the date hereof in the case of a
“full review” by the Commission) and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 90th calendar day following
the date on which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required hereunder; provided, however,
that in the event the Company is notified by the Commission that one of the above
Registration Statements will not be reviewed or is no longer subject to further review and
comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth
Trading Day following the date on which the Company is so notified if such date precedes the
dates required above.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Filing Deadline” means, with respect to the initial Registration Statement
required hereunder, the 90th calendar day following the date hereof and, with
respect to any additional Registration Statements which may be required pursuant to Section
3(c), the 30th calendar day following the date on which the Company first knows,
or reasonably should have known that such additional Registration Statement is required
hereunder.

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     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

     “Plan of Distribution” shall have the meaning set forth in Section 2(a).

     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such Prospectus.

     “Registrable Securities” means all of (i) the Shares (including without
limitation any Additional Shares), (ii) the Warrant Shares (including without limitation any
Additional Warrant Shares), (iii) the Placement Agent Shares, (iv) the Placement Agent
Warrant Shares, (iv) any additional shares issuable in connection with any anti-dilution
provisions in the Warrants (without giving effect to any limitations on exercise set forth
in the Warrant), and (v) any shares of Common Stock issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect to the
foregoing; provided that (i) such Placement Agent Shares and Placement Agent Warrant Shares
shall not be included in the definition of Registrable Securities unless the
Placement Agent requests in writing to the Company that such shares be so included, and (ii)
notwithstanding any such inclusion in such definition, the Placement Agent shall not have
any rights, and such warrants and shares shall not contain any rights, under the Transaction
Documents to the extent such rights would or may cause such warrants, shares or rights to
constitute unfair or unreasonable compensation, individually or in the aggregate, to the
Placement Agent under Rule 2710.

     “Registration Statement” means the registration statements required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.

     “Rule 415” means Rule 415 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 purpose and
effect as such Rule.

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     “Rule 424” means Rule 424 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 purpose and
effect as such Rule.

     “Rule 429” means Rule 429 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 purpose and
effect as such Rule.

     2. Shelf Registration. On or prior to each Filing Deadline, the Company shall prepare
and file with the Commission a “Shelf” Registration Statement covering the resale of 100% of the
Registrable Securities on the filing date of such Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if the Company is not then eligible to register for resale the Registrable Securities on
Form S-3, in which case such registration shall be on another appropriate form in accordance
herewith) and shall contain a “Plan of Distribution” reasonably acceptable to the Holders.
Subject to the terms of this Agreement, the Company shall use its best efforts to cause a
Registration Statement to be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event prior to the applicable Effectiveness Deadline, and
shall use its best efforts to keep such Registration Statement continuously effective under the
Securities Act until all Registrable Securities covered by such Registration Statement have been
sold, or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company pursuant to a written opinion letter to such effect, addressed and
reasonably acceptable to the Company’s transfer agent and the affected Holders (the
“Effectiveness Period”). The Company shall telephonically request effectiveness of a
Registration Statement as of 5:00 p.m. New York City time on a Trading Day. The Company shall
promptly notify the Holders via facsimile or electronic mail of the effectiveness of a Registration
Statement on the same Trading Day that the Company telephonically confirms effectiveness with the
Commission, which shall be the date requested for effectiveness of a Registration Statement. The
Company shall, by 9:30 a.m. New York City time on the Trading Day after the Effective Date (as
defined in the Purchase Agreement), file a final Prospectus with the Commission if required by Rule
424 or reasonably requested by the Holders.

     3. Registration Procedures

          In connection with the Company’s registration obligations hereunder, the Company shall:

     (a) Not less than five Trading Days prior to the filing of each Registration Statement
and not less than 1 Trading Day prior to the filing of any related Prospectus or any
amendment or supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall, (i) furnish to each Holder
copies of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the review of
such Holders, and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be

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necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities shall reasonably
object in good faith, provided that the Company is notified of such objection in writing no
later than 5 Trading Days after the Holders have been so furnished copies of a Registration
Statement or 1 Trading Day after the Holders have been so furnished copies of any related
Prospectus or amendments or supplements thereto.

     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period, and prepare and file with
the Commission such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement (subject to the terms of
this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and provide as promptly as
reasonably possible to the Holders true and complete copies of all correspondence from and
to the Commission relating to a Registration Statement (provided that the Company may excise
any information contained therein which would constitute material non-public information as
to any Holder which has not executed a confidentiality agreement with the Company); and (iv)
comply in all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented.

     (c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file, as soon as reasonably practicable but in any case
prior to the applicable Filing Deadline, an additional Registration Statement covering the
resale by the Holders of not less than 100% of the number of such Registrable Securities.

     (d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than 1 Trading Day prior to
such filing) and (if requested by any such Person) confirm such notice in writing no later
than two Trading Days following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to a Registration Statement or any

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post-effective amendment, when the same has become effective; (ii) of any request by
the Commission or any other federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of
the receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose;
(v) of the occurrence of any event or passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any statement made
in a Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires any
revisions to a Registration Statement, Prospectus or other documents so that, in the case of
a Registration Statement or the Prospectus, as the case may be, it 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, in light of the circumstances under
which they were made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may be material
and that, in the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of a Registration Statement or Prospectus, provided
that any and all of such information shall remain confidential to each Holder until such
information otherwise becomes public, unless disclosure by a Holder is required by law;
provided, further, that notwithstanding each Holder’s agreement to keep such
information confidential, the Holders make no acknowledgement that any such information is
material, non-public information.

     (e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

     (f) Furnish to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.

     (g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

     (h) If NASD manual Rule 2710 requires any broker-dealer to make a filing prior to
executing a sale by a Holder, the Company shall (i) make an Issuer Filing with

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the NASD Corporate Financing Department pursuant to proposed Rule 2710(b)(10)(A)(i),
(ii) respond within five Trading Days to any comments received from NASD in connection
therewith, and (iii) pay the filing fee required in connection therewith.

     (i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.

     (j) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall be free, to
the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such names as any
such Holders may request.

     (k) Upon the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to
suspend the use of any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this Section 3(k) to
suspend the availability of a Registration Statement and Prospectus for a period not to
exceed 60 calendar days (which need not be consecutive days) in any 12 month period.

     (l) Comply with all applicable rules and regulations of the Commission.

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     (m) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the natural persons thereof that have voting and dispositive
control over the Shares.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses) (A) with respect to filings required
to be made with any Trading Market on which the Common Stock is then listed for trading, (B) in
compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect to any filing that
may be required to be made by any broker through which a Holder intends to make sales of
Registrable Securities with the NASD pursuant to the NASD Rule 2710, so long as the broker is
receiving no more than a customary brokerage commission in connection with such sale, (ii) printing
expenses (including, without limitation, expenses of printing certificates for Registrable
Securities, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties), the expense of any
annual audit and the fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions of any Holder or, except to the extent provided
for in the Transaction Documents, any legal fees or other costs of the Holders.

     5. Indemnification.

     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and 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 each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and 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 each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without

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limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”),
as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a
material fact contained in a Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, or (2) any violation or alleged violation by the
Company of the Securities Act, Exchange Act or any state securities law, or any rule or
regulation thereunder, in connection with the performance of its obligations under this
Agreement, except to the extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder expressly for
use in a Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has approved Annex A
hereto for this purpose) or (ii) in the case of an occurrence of an event of the type
specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d). The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions contemplated
by this Agreement of which the Company is aware.

     (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all
Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any
untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that such information relates to such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration Statement (it being understood
that the Holder has approved Annex A hereto for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an
occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or

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defective and prior to the receipt by such Holder of the Advice contemplated in Section
6(d). In no event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and the reasonable fees and expenses
of no more than one separate counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party, provided that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.

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     (d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, except in the case of fraud by such Holder.

     The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous.

     (a) Remedies. In the event of a breach by the Company or by a Holder of any of
their respective obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, shall be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall not assert or shall
waive the defense that a remedy at law would be adequate. Notwithstanding anything herein
to the contrary, each Holder hereby waives any right to make a claim for monetary damages
arising from the failure of a Registration Statement

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to be declared and remain effective so long as the Company has fulfilled its obligation
to use its best efforts to cause such effectiveness in accordance herewith (provided that
nothing contained herein shall limit such Holder’s right to seek and obtain any and all
remedies in the event of a breach of this Agreement, including without limitation specific
performance and monetary damages).

     (b) Piggyback on Registrations. Except for the security holders selling the
amount of shares indicated on Schedule 6(b) attached hereto, if any, neither the
Company nor any of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the initial Registration Statement other
than the Registrable Securities, provided that (1) such shares of other security holders may
not be included to the extent the total number of shares registered on a Registration
Statement would then exceed 30% of the number of shares of Common Stock then held by the
Company’s non-affiliates, and (2) pursuant to Rule 429, the Company may file a single,
combined Prospectus as part of the Registration Statement (after consultation with Purchaser
counsel) which combines the prospectus contained in Form S-3 registration statement number
333-141055 filed by the Company on March 5, 2007 and declared effective July 23, 2007 with
the Prospectus contained in the Registration Statement. The Company shall not file any
other registration statements (other than on Form S-8) until the initial Registration
Statement required hereunder is declared effective by the Commission, provided that this
Section 6(b) shall not prohibit the Company from filing amendments to registration
statements filed prior to the date of this Agreement.

     (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to a Registration Statement.

     (d) Discontinued Disposition. By its acquisition of Registrable Securities,
each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(d), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is
advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus (as it may have been supplemented or amended) may be resumed. The Company will
use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as
it practicable.

     (e) Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with the stock option or other employee benefit
plans, then the Company shall send to each Holder a written notice of such determination
and, if within fifteen days after the date of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any part of

11

 

such Registrable Securities such Holder requests to be registered; provided,
however, that, the Company shall not be required to register any Registrable
Securities pursuant to this Section 6(e) that are eligible for resale pursuant to Rule
144(k) promulgated under the Securities Act or that are the subject of a then effective
Registration Statement.

     (f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the same shall be
in writing and signed by the Company and Holders of at least 50.1% of the then outstanding
Registrable Securities provided, however, that no such amendment or waiver that adversely
changes the specifically enumerated rights hereunder of a Purchaser in a manner adversely
different (other than differences that are de minimus or inconsequential) from the manner in
which such specifically enumerated rights of any other Purchaser are being adversely changed
by such amendment or waiver may be effected without the consent of such Purchaser.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by Holders of all of
the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately preceding sentence.

     (g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be delivered as set forth in
the Purchase Agreement.

     (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to
the benefit of each Holder. The Company may not assign its rights (except by merger) or
obligations hereunder without the prior written consent of all of the Holders of the
then-outstanding Registrable Securities. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

     (i) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries
has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or
after the date of this Agreement, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. Except as set forth on Schedule
6(i), if any, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its securities to
any Person that have not been satisfied in full.

     (j) Execution and Counterparts. 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

12

 

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.

     (k) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in accordance with the
provisions of the Purchase Agreement.

     (l) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any other remedies provided by law.

     (m) 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.

     (n) Headings. The headings in this Agreement 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.

     (o) Independent Nature of Holders’ Obligations and Rights. The obligations of
each Holder hereunder are several and not joint with the obligations of any other Holder
hereunder, and no Holder shall be responsible in any way for the performance of the
obligations of any other Holder hereunder. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action taken by any Holder pursuant
hereto or thereto, shall be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Holders are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Holder to be joined as an additional party in
any proceeding for such purpose.

13

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	COMPANY: 

XENONICS HOLDINGS, INC. 

 	 
	 	By:  	/s/ RICHARD S. KAY
 	 
	 	Print Name: 	Richard S. Kay                 	 
	 	Print Title: 	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	PURCHASERS:

TAPESTRY INVESTMENT PARTNERS, LP

 	 
	 	By:  	/s/ GARY S. SIPERSTEN
 	 
	 	Name: 	Gary S. Sipersten 	 
	 	Title: 	GP 	 
	 

	 	 	 	 	 
	 	CALM WATERS PARTNERSHIP

 	 
	 	By: 	/s/ RICHARD S. STRONG
 	 
	 	Name: 	Richard S. Strong 	 
	 	Title: 	Managing Partner 	 
	 

	 	 	 	 	 
	 	MEADOWBROOK OPPORTUNITY FUND, LLC

 	 
	 	By:  	/s/ MICHAEL RAGINS
 	 
	 	Name: 	Michael Ragins 	 
	 	Title: 	Manager 	 
	 

	 	 	 	 	 
	 	 	 
	 	                                       /s/ JAMES SCHOENIKE
 	 
	 	James Schoenike 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	                                       /s/ MARK D. WESTMAN
 	 
	 	Mark D. Westman 	 
	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	                                       /s/ HARVEY BLITZ
 	 
	 	Harvey Blitz 	 
	 	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	 	 
	 	                                       /s/ STEPHEN J. POSNER
 	 
	 	Stephen J. Posner 	 
	 	 	 
	 

	 	 	 	 	 
	 	GEMINI MASTER FUND, LTD.

 	 
	 	By:  	/s/ STEVEN WINTERS
 	 
	 	Name: 	Steven Winters 	 
	 	Title: 	President 	 
	 

15exv10w3

 

EXHIBIT 10.3

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.

1

 

     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.

2

 

     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

4

 

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

5

 

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

6

 

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

7

 

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

11

 

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)

13

 

          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:
	 	 

 

 

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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