Document:

EX-10.1

EXHIBIT 10.1

SELLING STOCKHOLDER AND SECURITIES PURCHASE AGREEMENT

This Selling Stockholder and Securities Purchase Agreement (this “Agreement") is dated as of
January 17, 2005, by and among Xenonics Holdings, Inc., a Nevada corporation (the “Company"), the
selling stockholders identified on the signature pages hereto (each, a “Selling Stockholder” and
collectively, the “Selling Stockholders"), and the investors identified on the signature pages
hereto (each, an “Investor” and collectively, the “Investors").

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
exemptions from registration under the Securities Act (as defined below), the Company and the
Selling Stockholders each desire to issue and sell to each Investor, and each Investor, severally
and not jointly, desires to purchase from the Company and the Selling Stockholders, shares of the
Company’s Common Stock, as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company, the Selling Stockholders and the Investors agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:

“Action” means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened in writing against
or affecting the Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency, regulatory authority (federal, state,
county, local or foreign), stock market, stock exchange or trading facility.

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144.

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

“Closing” means the closing of the purchase and sale of the Securities pursuant to Article II.

“Closing Date” means the Business Day immediately following the date on which all the
conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the
parties may agree.

“Commission” means the Securities and Exchange Commission.

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

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

“Company Counsel” means Troy & Gould Professional Corporation.

“Disclosure Materials” means the SEC Disclosure Documents and the Company’s Schedules to this
Agreement, collectively.

“Effective Date” means the date that the initial Registration Statement required by Section
2(a) of the Registration Rights Agreement is first declared effective by the Commission.

“Escrow Agent” means the Escrow Agent under the Escrow Agreement.

“Escrow Agreement” means the Escrow Agreement, dated as of December 15, 2004, among the
Company (as Escrow Agent) and the Selling Stockholders.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means U.S. generally accepted accounting principles.

“Intellectual Property Rights” means the ownership or right to use patents, patent
applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses
and other similar rights in connection with the respective businesses of the Company and the
Subsidiaries as described in the SEC Disclosure Documents.

“Investment Amount” means, with respect to each Investor, the investment amount indicated
below such Investor’s name on its signature page to this Agreement.

“Investor Party” shall have the meaning set forth in Section 4.7.

“Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other
restrictions of any kind.

“Losses” means any loss, liability, obligation, claim, contingency, damage, cost or expense,
including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees
and costs of investigation related thereto.

“Material Adverse Effect” means any of (a) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (b) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (c) an adverse impairment to the Company’s
ability to perform on a timely basis its obligations under any Transaction Document.

“Outside Date” means January 28, 2005.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

“Per Share Purchase Price” equals $5.00.

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

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date
of this Agreement, among the Company and the Investors, in the form of Exhibit A hereto.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

“SEC Disclosure Documents” has the meaning set forth in Section 3.1(h).

“Securities” means the Shares and Selling Stockholder Shares.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Stockholder Shares” means the shares of Common Stock being offered and sold by the
Selling Stockholders to the Investors hereunder in such number as is set forth below each Selling
Stockholders signature to this Agreement.

“Shares” means the shares of Common Stock being offered and sold to the Investors by the
Company hereunder.

“Short Sales” include, without limitation, all “short sales” as defined in Rule 3b-3 of the
Exchange Act and Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps
and similar arrangements (including on a total return basis), and sales and other transactions
through non-US broker dealers or foreign regulated brokers.

“Subsidiary” means any subsidiary of the Company that is required to be listed in Schedule
3.1(a).

“Trading Day” means (i) a day on which the Common Stock is quoted or traded on a Trading
Market, or (ii) if the Common Stock is not quoted or traded on a Trading Market, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions of reporting
prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in
(i) or (ii) hereof, then Trading Day shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.

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

ARTICLE II.

PURCHASE AND SALE

2.1 Purchase of Shares; Closing.

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing: (i) the
Company shall sell to each Investor, and each Investor shall, severally and not jointly, purchase
from the Company, Shares in such number as equals the quotient (rounded down to the nearest whole
share) obtained by dividing (1) 60.92% of such Investor’s Investment Amount by (2) the Per Share
Purchase Price; and (ii) the Selling Stockholders shall sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Selling Stockholders, Selling Stockholder
Shares in such number as equals the quotient (rounded down to the nearest whole share) obtained by
dividing (1) 39.08% of such Investor’s Investment Amount by (2) the Per Share Purchase Price. The
Closing shall take place at the offices of Bryan Cave LLP, 1290 Avenue of the Americas, New York,
NY 10104 or at such other location as the parties may agree.

(b) The Company and the Selling Stockholders will cooperate with one another, and will
otherwise use their respective reasonable best efforts, to cause the Selling Stockholder Shares to
be issued to the Investors as part of a single stock certificate from the Company to each Investor
that will include all Shares and Selling Stockholder Shares being acquired by such Investor under
this Agreement. In furtherance of such efforts, and in accordance with the Escrow Agreement, each
Selling Stockholder will (i) deliver to the Company the Selling Stockholder Shares they will be
selling at the Closing, together with such other documents as the Company may require to effect the
transfer of such shares to the name of the Investors at the Closing, including executed stock
powers and directions for the Company to effect the transfer of such shares on its books as of the
Closing and (ii) instruct the Company to hold the Selling Stockholder Shares and deliver the
Selling Stockholder Shares at Closing in accordance with Section 2.2.

2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be
delivered to each Investor the following (collectively, the “Company Deliverables”):

(i) a single certificate representing that number of Shares and Selling Stockholder Shares to
be issued and sold at Closing to such Investor, determined under Section 2.1(a), registered in the
name of such Investor;

(ii) the legal opinion of Company Counsel, in agreed form, addressed to the Investors; and

(iii) the Registration Rights Agreement duly executed by the Company.

(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company (for
further redistribution to the Selling Stockholders to reflect the Selling Stockholder Shares being
hereby offered and sold consistent with Section 2.1(a)) the following (collectively, the “Investors
Deliverables"):

(i) the Registration Rights Agreement duly executed by each Investor; and

(ii) such Investor’s Investment Amount, in United States dollars and in immediately available
funds, by wire transfer to the account designated for such purpose by the Company.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those
listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and
all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and similar rights.

(b) Organization and Qualification. Each of the Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and each Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.

(c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

(d) No Conflicts. Neither the execution, delivery and performance of the Transaction
Documents by the Company, the consummation by the Company of the transactions contemplated thereby,
nor the sale of the Selling Stockholder Shares hereunder, (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse
of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), for such conflicts, defaults or violations as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the Transaction Documents
or by reason of the sale of the Selling Stockholder Shares hereunder, other than (i) the filing
with the Commission of one or more Registration Statements in accordance with the requirements of
the Registration Rights Agreement, (ii) filings under state securities laws in accordance with the
requirements of the Registration Rights Agreement, which will be made prior to the Effectiveness
Date (as such term is defined in the Registration Rights Agreement), (iii) the filings required in
accordance with Section 4.5, (iv) the filing of a Form D with the Commission and under applicable
state securities statutes pertaining to the purchase and sale contemplated by this Agreement, and
(v) those that have been made or obtained prior to the date of this Agreement. To the knowledge of
the Company, the Selling Stockholders are not required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or any other Person in connection with the
execution, delivery and performance by them of the Transaction Documents or by reason of the sale
of the Selling Stockholder Shares hereunder, except for such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect.

(f) Issuance of the Securities. The shares of Common Stock to be issued to the
Investors in accordance with Section 2.2(a)(i) have been duly authorized and, when issued and paid
for in accordance with Section 2.2(b)(ii), will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved from its duly authorized
capital stock such shares of Common Stock. When issued, the Selling Stockholder Shares were duly
authorized and were validly issued, fully paid and nonassessable. Each Selling Stockholder is the
sole record owner of its Selling Stockholder Shares to be sold hereunder.

(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance
under the Company’s various option and incentive plans, is as set forth in Schedule 3.1(g).
No securities of the Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents. Except as disclosed in
Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. The issue and sale
of the Shares and the Selling Stockholder Shares hereunder will not, immediately or with the
passage of time, obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under such securities.
Except as disclosed in Schedule 3.1(g), all of the outstanding shares of capital stock of
the Company are validly issued, fully paid and non-assessable, have been issued in compliance with
all federal and state securities laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the
Company. No further approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements, or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.

(h) SEC Disclosure Documents; Financial Statements. The Company has filed all reports
required to be filed by the Company under the Exchange Act for the twelve months preceding the date
of this Agreement (the “SEC Disclosure Documents"). The Company has filed all SEC Disclosure
Documents on a timely basis or has timely filed a valid extension of such time of filing and has
filed any such SEC Disclosure Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Disclosure Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Disclosure Documents, when filed, contained
any untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of the date hereof, no filing needs to be made with the
Commission to update any SEC Disclosure Document or any prior disclosure made therein. The
financial statements of the Company included in the SEC Disclosure Documents were prepared in
accordance with GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, year-end audit adjustments.
Notwithstanding the foregoing, the Company restated its net loss per share for the fiscal year
ended September 30, 2003 as set forth in Schedule 3.1(h).

(i) Press Releases. The press releases disseminated by the Company during the one (1)
year preceding the date of this Agreement taken as a whole do not contain any untrue statement of a
material fact.

(j) Material Changes. Except as set forth in Schedule 3.1(j) and disclosed in
the SEC Disclosure Documents, since the date of the latest audited financial statements included
within the SEC Disclosure Documents, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with past practice, (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission and (C) other liabilities that would
not, individually or in the aggregate, have a Material Adverse Effect, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or Affiliate, except pursuant
to existing Company stock option plans or executive and director compensation arrangements. The
Company does not have pending before the Commission any request for confidential treatment of
information.

(k) Litigation. There is no Action that (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)
except as set forth in the SEC Disclosure Documents, could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Except as set forth in the SEC Disclosure Documents, neither the Company nor any
Subsidiary, nor any presently serving director or officer thereof, is or has been during the
ten-year period prior to the Closing Date the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former director or officer
of the Company. The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

(l) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company.

(m) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such default or violation
has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body,
or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance
with the applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, except where such noncompliance could not have or reasonably be expected to
result in a Material Adverse Effect.

(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Disclosure
Documents, except where the failure to possess such permits would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such permits.

(o) Title to Assets. The Company and the Subsidiaries do not own any real property.
The Company and the Subsidiaries have good and marketable title in all personal property owned by
them that is material to their respective businesses, in each case free and clear of all Liens,
except for Liens described in the SEC Disclosure Documents and Liens as do not materially affect
the value of such property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance, except as could
not, individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.

(p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to
use, all Intellectual Property Rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Disclosure Documents and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Except as set forth in the SEC Disclosure Documents, neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person. Except as set forth
in the SEC Disclosure Documents, all such Intellectual Property Rights are enforceable and do not
violate or infringe upon the Intellectual Property Rights of others in any respect that would,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect
and, to the knowledge of the Company, there is no existing infringement by another Person of any of
the Intellectual Property Rights.

(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses in which the Company and the Subsidiaries are engaged. The Company has
no reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Disclosure Documents, none of the officers or directors of the Company and none of the employees of
the Company is presently a party to any transaction with the Company or any Subsidiary (other than
for services as employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any officer, director or
such employee or any entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14)
for the Company and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in which the Company’s
Form 10-KSB or 10-QSB, as the case may be, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company’s most recently ended fiscal quarter
or fiscal year-end (such date, the “Evaluation Date"). Since the Evaluation Date, there have been
no significant changes in the Company’s internal controls (as such term is defined in Item 308(c)
of Regulation S-K under the Exchange Act), or in other factors that could significantly affect the
Company’s internal controls.

(t) Solvency. Based on the financial condition of the Company as of the Closing Date
(and assuming that the Closing shall have occurred), (i) the Company’s fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they mature; (ii)
the Company’s assets do not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii) the current cash
flow of the Company, together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would be sufficient to
pay all amounts on or in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in respect of its debt).

(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investors shall have no obligation with respect
to any fees or with respect to any claims (other than such fees or commissions owed by an Investor
pursuant to written agreements executed by such Investor which fees or commissions shall be the
sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by
this Agreement.

(v) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration under the
Securities Act is required for the offer and sale of the Securities by the Company and the Selling
Stockholders (as applicable) to the Investors under the Transaction Documents. Except as described
in Schedule 3.1(v), the Company has not granted or agreed to grant to any Person any rights
(including “piggy-back” registration rights) to have any securities of the Company registered with
the Commission or any other governmental authority that have not been satisfied. The Company is
eligible to register the resale of the Shares by the Investors under Form SB-2 promulgated under
the Securities Act and the Company hereby covenants and agrees to use its best efforts to maintain
its eligibility to use Form SB-2 until the Registration Statement covering the resale of Shares
shall have been filed with, and declared effective by, the Commission.

(w) Listing and Maintenance Requirements. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which is
likely to have the effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. Except as specified in the SEC Disclosure Documents, the Company has not, in
the two years preceding the date hereof, received notice from any Trading Market to the effect that
the Company is not in compliance with the listing or maintenance requirements thereof. The Company
is, and has no reason to believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued listing of the Common Stock
on the Trading Market. The issuance and sale of the Securities under the Transaction Documents
does not contravene the rules and regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the shareholders of the Company thereunder is
required for the Company to issue and deliver to the Investors the Securities contemplated by the
Transaction Documents.

(x) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after the Closing will not be, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

(y) Application of Takeover Protections. The Company has taken all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Articles of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of the Securities and
the Investors’ ownership of the Securities.

(z) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.

(aa) Taxes. Except for matters that could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect, the Company and each of its
Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which as been asserted or threatened against the Company or any Subsidiary.

(bb) Disclosure. The Company confirms that neither it nor any Person acting on its
behalf has provided any of the Investors or their agents or counsel with any information that the
Company believes constitutes material, non-public information except insofar as the existence and
terms of the proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. To the knowledge of the Company,
the representations and warranties of the Selling Stockholders are true and accurate in all
material respects. All disclosure provided to the Investors regarding the Company, its business
and the transactions contemplated hereby, furnished by or on behalf of the Company (including the
Company’s representations and warranties set forth in this Agreement) are true and correct and do
not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under which they were
made, not misleading.

(cc) Key Employees; Company’s Knowledge. Each Key Employee (as defined below) is
currently serving the Company or a subsidiary of the Company in the capacity disclosed in the SEC
Disclosure Documents. No Key Employee, to the best of the knowledge of the Company and its
subsidiaries, is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its subsidiaries to any
liability with respect to any of the foregoing matters. No Key Employee has, to the best of the
knowledge of the Company and its subsidiaries, any intention to terminate or limit his employment
with, or services to, the Company or any of its subsidiaries, nor is any such Key Employee subject
to any constraints (e.g., litigation) that would cause such employee to be unable to devote his
full time and attention to such employment or services. “Key Employee” means each of Alan P.
Magerman and Jeffery P. Kennedy. For purposes hereof, the term “knowledge of the Company” shall
mean the knowledge of each of the Key Employees.

(dd) Foreign Corrupt Practices. Neither the Company nor any director, officer, agent,
employee or other person acting on behalf of the Company has, in the course of its actions for, or
on behalf of, the Company, (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds, (ii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended, or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or employee.

(ee) No Disagreements with Accountants and Lawyers. There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise that has had or could
reasonably be expected to result in a Material Adverse Effect, between the accountants and lawyers
formerly or presently employed by the Company and the Company.

(ff) No General Solicitation. Neither the Company nor any person acting on behalf of
the Company has conducted any “general solicitation,” as described in Rule 502(c) under Regulation
D, with respect to any of the Securities being offered hereby.

(gg) Compliance with Patriot Act. The Company (i) is not and will not become a Person
whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224
of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (ii) does not knowingly
engage and will not knowingly engage in any dealings or transactions, or be otherwise knowingly
associated, with any such person. The Company is not and will not be in violation of the Uniting
and Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct
Terrorism (USA Patriot Act of 2001).

3.2 Representations and Warranties of the Investors. Each Investor hereby, for itself
and for no other Investor, represents and warrants to the Company as follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such Investor of the
transactions contemplated by this Agreement has been duly authorized by all necessary corporate or,
if such Investor is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Investor. Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in
accordance with terms hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(b) Investment Intent. Such Investor is acquiring the Securities as principal for its
own account for investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such Investor’s right at all
times to sell or otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Subject to the immediately preceding sentence,
nothing contained herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time or shall limit such Investors’ right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with applicable federal and state
securities laws. Such Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.

(c) Investor Status. Such Investor is an “accredited investor” as defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer under Section 15
of the Exchange Act. Such Investor acknowledges that it can bear the economic risk and complete
loss of its investment in the Securities and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the investment
contemplated hereby.

(d) General Solicitation. Such Investor is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.

(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect to the investment.
Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or
its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and
warranties contained in the Transaction Documents.

(f) Independent Investment Decision. Such Investor has independently evaluated the
merits of its decision to purchase Securities pursuant to this Agreement, such decision has been
independently made by such Investor and such Investor confirms that it has only relied on the
advice of its own business and/or legal counsel (which such Investor acknowledges is not Bryan Cave
LLP) and not on the advice of any other Investor’s business or legal counsel nor upon the counsel
of any investment banker, placement agent, or their respective counsel in making such decision.

(g) Certain Trading Activities. Such Investor has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any
transactions in the securities of the Company (including, without limitations, any Short Sales
involving the Company’s securities) since the earlier to occur of (1) the time that such Investor
was first contacted by the Company or Roth Capital Partners, LLC or Bryant Park Capital, Inc.
regarding an investment in the Company and (2) the 30th day prior to the date of this
Agreement. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant
to any understanding with it will engage in any transactions in the securities of the Company
(including Short Sales) prior to the time that the transactions contemplated by this Agreement are
publicly disclosed.

Each of the Company and each Selling Stockholder acknowledge and agree that no Investor makes or
has made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in this Section 3.2.

3.3 Representations and Warranties of the Selling Stockholders. Each Selling
Stockholder hereby makes the following representations and warranties to each Investor:

(a) Organization. If an entity, such Selling Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization, with the
requisite power and authority to own and use its properties and assets and to carry on its business
as currently conducted.

(b) Authorization; Enforcement. If applicable, such Selling Stockholder has the
requisite corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder. The execution and
delivery of this Agreement by such Selling Stockholder and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary action on the part of
such Selling Stockholder and no further action is required by it or its stockholders in connection
therewith. This Agreement has been duly executed and delivered by such Selling Stockholder and
constitutes the valid and binding obligation of such Selling Stockholder enforceable against it in
accordance with its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other equitable principles of
general application.

(c) No Consents. No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body or other Person is required in
connection with the consummation by such Selling Stockholder of the transactions on its part
contemplated by the Transaction Documents, except (i) filings as may be required under Sections
13(d) and 16(a) of the Exchange Act, and (ii) those that have been made or obtained prior to the
date of this Agreement.

(d) No Conflicts. The execution, delivery and performance by such Selling Stockholder
of the Transaction Documents to which it is a party and the consummation of the transactions
contemplated thereby do not and will not result in a breach or violation of, or constitute a
default under (with or without notice or lapse of time), any stockholders agreement, voting trust
agreement, pledge registration rights agreement or other agreement or instrument to which such
Selling Stockholder or any of its properties are bound or affected, and will not violate or
conflict with any judgment, decree or order of any court or other governmental agency or any law,
rule or regulation applicable to such Selling Stockholder, in each case such as could not have or
result in a Material Adverse Effect.

(e) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(d), no registration under the
Securities Act is required for the purchase and sale of the Selling Stockholder Shares to the
Investors hereunder.

(f) Good and Marketable Title. Such Selling Stockholder is the sole lawful record and
sole beneficial owner of all of the Selling Stockholder Shares to be sold by it hereunder. Such
Selling Stockholder has good and marketable title to the Selling Stockholder Shares to be sold by
it hereunder, free and clear of any Liens, except for restrictions on subsequent transfer imposed
by the securities laws. Upon consummation of the Closing, the Investors will have good and
marketable title to the Selling Stockholder’s Selling Stockholder Shares purchased by them, free
and clear of all Liens created by or through such Selling Stockholder.

(g) Certain Fees. Except as described in Schedule 3.3(g), no brokerage or
finder’s fees or commissions are or will be payable by such Selling Stockholder to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The Investors shall have no
obligation with respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by such Investor which fees
or commissions shall be the sole responsibility of such Investor) made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.

(h) No Additional Agreements. Such Selling Stockholder does not have any agreement or
understanding with any Investor or with the Company with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction Documents.

(i) Non-Public Information. Such Selling Stockholder does not possess any material,
non-public information concerning the Company.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Legend. (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other than pursuant to
an effective registration statement, to the Company, to an Affiliate of an Investor or in
connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the Securities Act.

(b) Certificates evidencing the Securities will contain the following legend, until such time
as they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT 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. THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.

The Company acknowledges and agrees that an Investor may from time to time pledge, and/or
grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement
in connection with a bona fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the pledgees or secured
parties. The Company may not require its consent or approval to any such pledge or transfer, nor
will the Company request a legal opinion of legal counsel to the pledgee, secured party or pledgor
in connection with the pledge, but such legal opinion may be required in connection with a
subsequent transfer following default by the Investor transferee of the pledge. No notice shall be
required by the Company of such pledge. At the appropriate Investor’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities including the
preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities
Act or other applicable provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

(c) The Company may not require certificates evidencing the Securities to contain any legend
(including the legend set forth in Section 4.1(b)): (i) following a sale of such Securities
pursuant to an effective registration statement (including the Registration Statement), or (ii)
following a sale of such Securities pursuant to Rule 144 (assuming the transferor is not an
Affiliate of the Company), or (iii) while such Securities are eligible for sale under Rule 144(k).
The Company may not make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section. Notwithstanding
the foregoing, at the election of each Investor, the Company shall remove all legends (including
the legend set forth in Section 4.1(b)) from certificates evidencing the Securities if and when (i)
a registration statement (including the Registration Statement) covering the resale of such
Securities is effective, and (ii) the Company receives the Investor’s written confirmation that
such Securities will not be disposed of except in compliance with the prospectus delivery
requirements of the Securities Act. If (1) an Investor elects to have the Company remove all
legends from such Investor’s certificates evidencing the Securities in accordance with the
immediately preceding sentence or (2) the Company does not require certificates evidencing the
Securities to contain any legend as contemplated above in this Section 4.1(c) and an Investor
requests that all legends be removed from such Investor’s certificates evidencing such Securities,
in each case, the Company shall deliver to such Investor new certificates evidencing such
Securities which bear no legends within the time period required by applicable securities laws or
market rules and regulations (whichever is shorter).

4.2 Furnishing of Information. As long as any Investor owns the Securities that are
not eligible for resale under Rule 144(k) promulgated under the Securities Act, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities that are not eligible for resale under Rule
144(k) promulgated under the Securities Act, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Investors and make publicly
available in accordance with Rule 144(c) such information as is required for the Investors to sell
the Shares under Rule 144. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required from time to time to
enable such Person to sell such Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

4.3 Integration. The Company shall not, and shall use its best efforts to ensure that
no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.

4.4 Subsequent Registrations. Other than pursuant to the Registration Statement,
prior to the Effective Date, the Company may not file any registration statement (other than on
Form S-8) with the Commission with respect to any securities of the Company. Nothing herein shall,
however, prevent the Company from amending or otherwise maintaining the registration statement on
Form SB-2 that was filed by the Company on May 10, 2004 (other than to add additional selling
stockholders).

4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the
Trading Day following the execution of this Agreement, and by 9:00 a.m. (New York time) on the
Trading Day following the Closing Date, the Company shall issue press releases disclosing the
transactions contemplated hereby and the Closing. On the Trading Day following the execution of
this Agreement the Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction Documents), and on the
Closing Date the Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in the manner and time
required by the Commission and the Trading Market on which the Common Stock is listed.
Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the Commission (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of such Investor, except to the extent such disclosure is
required by law or Trading Market regulations.

4.6 Limitation on Issuance of Future Priced Securities. During the six months
following the Closing Date, the Company shall not issue any security that would be a “Future Priced
Securities” as such term is described by NASD IM-4350-1.

4.7 Indemnification of Investors. In addition to the indemnity provided in the
Registration Rights Agreement, the Company and each Selling Stockholder hereby agree to the
following indemnification of the Investors:

(a) The Company will indemnify and hold the Investors and their respective directors,
officers, shareholders, partners, employees and agents (each, an “Investor Party") harmless from
any and all Losses that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement
made by the Company in any Transaction Document. In addition to the indemnity contained herein,
the Company will reimburse each Investor Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.

(b) The Selling Stockholders will indemnify and hold each of the Company and each Investor
Party harmless from any and all Losses that the Company or any such Investor Party may suffer or
incur as a result of or relating to any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Selling Stockholders in any Transaction
Document. In addition, the Selling Stockholders will reimburse each of the Company and each
Investor Party for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in connection therewith, as
such expenses are incurred.

4.8 Non-Public Information. The Company and each Selling Stockholder covenant and
agree that neither it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company and each Selling Stockholder
understand and confirm that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.

4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Shares hereunder for working capital purposes and not to redeem any debt, Common Stock or Common
Stock Equivalents or to settle any outstanding Action.

ARTICLE V.

CONDITIONS PRECEDENT

5.1 Conditions Precedent to the Obligations of the Investors to Purchase Securities.
The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction
or waiver by such Investor, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the Company
and the Selling Stockholders contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such date;

(b) Performance. Each of the Company and the Selling Stockholders shall have
performed, satisfied and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or complied with by
them at or prior to the Closing;

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

(d) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would be expected to have or result in a (i)
an adverse effect on the legality, validity or enforceability of any Transaction Document, or (ii)
a material and adverse effect on the results of operations, assets, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole;

(e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the Commission or any Trading Market (except for any suspensions
of trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this Agreement, and the Common
Stock shall have been at all times since such date listed for trading on a Trading Market; and

(f) Company Deliverables. The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a).

5.2 Conditions Precedent to the Obligations of the Company and Selling Stockholders to
sell Securities. The obligation of the Company and Selling Stockholders to sell Securities at
the Closing is subject to the satisfaction or waiver by the Company or Selling Stockholders (as the
case may be), at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date;

(b) Performance. Each Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and

(d) Investors Deliverables. Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b).

ARTICLE VI.

MISCELLANEOUS

6.1 Fees and Expenses. At the Closing, the Company shall pay to Bryan Cave LLP
$25,000 as partial reimbursement of Roth Capital Partners, LLC for its legal fees in connection
with the preparation of the Transaction Documents, it being understood that Bryan Cave LLP has only
rendered legal advice to Roth Capital Partners, LLC, and not to the Company, any Investor, or any
other Person in connection with the transactions contemplated hereby, and that each of the Company
and each Investor has relied for such matters on the advice of its own respective counsel. At the
Closing, the Company shall pay to Greenberg Traurig, LLP up to $15,000 as partial reimbursement of
Bryant Park Capital, Inc. for its legal fees in connection with the preparation of the Transaction
Documents, it being understood that Greenberg Traurig LLP has only rendered legal advice to Bryant
Park Capital, Inc., and not to the Company, any Investor, or any other Person in connection with
the transactions contemplated hereby, and that each of the Company and each Investor has relied for
such matters on the advice of its own respective counsel. Except as specified in the immediately
preceding sentences, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of the Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection with the sale of
the Securities.

6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.

6.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

	 	 	 
	If to the Company:

	 	Xenonics Holdings, Inc.

2236 Rutherford Road, Suite 123

Carlsbad, CA 92008

Attn: Chief Financial Officer

Facsimile: (760) 438-1184
	 
	 	 
	With a copy to:

	 	Troy & Gould Professional Corporation

1801 Century Park East, 26th Floor

Los Angeles, CA 90067

Attn: William Gould, Esq.

Facsimile: (310) 201-4746

If to the Selling Stockholder: To the address set forth on its signature page hereof;

If to an Investor: To the address set forth under such Investor’s name

on the signature pages hereof;

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

6.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Investors holding a majority of the Securities, and
signed, in the case of an amendment, by the Company. In addition, Sections 3.3, 4.7(b) and Article
VI may not be waived or amended except in a written instrument signed by the Investors holding a
majority of the Securities, the Company and each of the Selling Stockholders. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such right.

6.5 Termination. This Agreement may be terminated prior to Closing:

(a) by written agreement of the Investors and the Company; and

(b) by the Company, a Selling Stockholder (as to itself but no other Selling Stockholder) or
an Investor (as to itself but no other Investor) upon written notice to the other, if the Closing
shall not have taken place by 6:30 p.m. Eastern time on the Outside Date; provided, that
the right to terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such time.

In the event of a termination pursuant to this Section, the Company shall promptly notify all
non-terminating Investors. Upon a termination in accordance with this Section 6.5, the Company,
terminating Selling Stockholder(s) or terminating Investor(s), as applicable, shall not have any
further obligation or liability (including as arising from such termination) to any other party and
no Investor will have any liability to any other Investor under the Transaction Documents as a
result therefrom and no Selling Stockholder will have any liability to any other Selling
Stockholder under the Transaction Documents as a result therefrom.

6.6 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
This Agreement shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or any of the Transaction Documents.

6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. Neither the Company nor the
Selling Stockholders may assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Investors. Any Investor may assign any or all of its rights under this
Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Investors.”

6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.7 (as to each Investor Party).

6.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) may be
commenced in the state and federal courts sitting in the City of San Diego, California (the
“California Courts”). Each party hereto hereby irrevocably submits to the jurisdiction of the
California Courts for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect to the enforcement
of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such
California Court, or that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and consents to process
being served in any such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of a
Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney’s fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

6.10 Survival. The representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Shares.

6.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, 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 signature were an original thereof.

6.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option under a Transaction Document and the
Company or the Selling Stockholders do not timely perform their related obligations within the
periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company and the Selling Stockholders, any relevant notice,
demand or election in whole or in part without prejudice to its future actions and rights.

6.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or instrument evidencing any Securities is
requested due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a replacement.

6.15 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

6.16 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. Nothing contained herein or in any Transaction Document, and no action taken
by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other Transaction Documents, and
it shall not be necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors has been provided
with the same Transaction Documents for the purpose of closing a transaction with multiple
Investors and not because it was required or requested to do so by any Investor.

6.17 Limitation of Liability. Notwithstanding anything herein to the contrary, each
of the Company and the Selling Stockholders acknowledge and agree that the liability of any
Investor arising directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee,
officer, other investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall be personally
liable for any liabilities of such Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

1

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

XENONICS HOLDINGS, INC.

By:     

Name:

Title:

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR SELLING STOCKHOLDERS FOLLOW]

2

IN WITNESS WHEREOF, the parties have executed this Selling Stockholder and Securities Purchase
Agreement as of the date first written above.

NAME OF SELLING STOCKHOLDER

By:     

Name:

Title:

Tax ID No.:

NUMBER OF SELLING STOCKHOLDER SHARES

     

ADDRESS FOR NOTICE

c/o:

Street:

City/State/Zip:

Attention:

Tel:

Fax:

Email:

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

3

IN WITNESS WHEREOF, the parties have executed this Selling Stockholder and Securities Purchase
Agreement as of the date first written above.

NAME OF INVESTOR

	 	 	 
	By:

	 	Name:
	
 
	 	Title:

Investment Amount: $

Tax ID No.:

ADDRESS FOR NOTICE

c/o:

Street:

City/State/Zip:

Attention:

Tel:

Fax:

Email:

DELIVERY INSTRUCTIONS

(if different from above)

c/o:

Street:

City/State/Zip:

Attention:

Tel:

4EX-10.2

EXHIBIT 10.2

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of January
17, 2005, by and among Xenonics Holdings, Inc., a Nevada corporation (the “Company”), and the
investors signatory hereto (each a “Investor” and collectively, the “Investors”).

This Agreement is made pursuant to the Selling Stockholder and Securities Purchase Agreement,
dated as of the date hereof among the Company and the Investors (the “Purchase Agreement”).

The Company and the Investors hereby agree as follows:

1. Definitions. Capitalized terms used and not otherwise defined herein that are defined
in the Purchase Agreement will have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms have the respective meanings set forth in this Section
1:

"Advice” has the meaning set forth in Section 6(d).

"Effective Date” means, as to a Registration Statement, the date on which such Registration
Statement is first declared effective by the Commission.

"Effectiveness Date” means (a) with respect to the initial Registration Statement required to
be filed under Section 2(a), the earlier of: (a)(i) the 120th day following the Closing Date, and
(ii) the fifth Trading Day following the date on which the Company is notified by the Commission
that the initial Registration Statement will not be reviewed or is no longer subject to further
review and comments; and (b) with respect to any additional Registration Statements that may be
required pursuant to Section 2(b), the earlier of (i) the 120th day following (x) if such
Registration Statement is required because the Commission shall have notified the Company in
writing that certain Registrable Securities were not eligible for inclusion on a previously filed
Registration Statement, the date or time on which the Commission shall indicate as being the first
date or time that such Registrable Securities may then be included in a Registration Statement, or
(y) if such Registration Statement is required for a reason other than as described in (x) above,
the date on which the Company first knows that such additional Registration Statement(s) is
required, and (ii) the fifth Trading Day following the date on which the Company is notified by the
Commission that such additional Registration Statement will not be reviewed or is no longer subject
to further review and comments.

"Effectiveness Period” has the meaning set forth in Section 2(a).

"Exchange Act” means the Securities Exchange Act of 1934, as amended.

"Filing Date” means (a) with respect to the initial Registration Statement required to be
filed under Section 2(a), the 45th day following the Closing Date; and (b) with respect to any
additional Registration Statements that may be required pursuant to Section 2(b), the 45th day
following (x) if such Registration Statement is required because the Commission shall have notified
the Company in writing that certain Registrable Securities were not eligible for inclusion on a
previously filed Registration Statement, the date or time on which the Commission shall indicate as
being the first date or time that such Registrable Securities may then be included in a
Registration Statement, or (y) if such Registration Statement is required for a reason other than
as described in (x) above, the date on which the Company first knows that such additional
Registration Statement(s) is required.

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

"Indemnified Party” has the meaning set forth in Section 5(c).

"Indemnifying Party” has the meaning set forth in Section 5(c).

"Losses” has the meaning set forth in Section 5(a).

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

"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 (i) the shares of Common Stock issued and sold to the Investors
by either the Company or the Selling Stockholders pursuant to Section 2.2 of the Purchase
Agreement, (ii) any shares of Common Stock issuable upon the exercise of warrants issued to any
placement agent as compensation in connection with the financing subject of the Purchase Agreement
and (iii) any securities issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event.

"Registration Statement” means the initial registration statement required to be filed in
accordance with Section 2(a) and any additional registration statement(s) required to be filed
under Section 2(b) and 2(c), including (in each case) the Prospectus, amendments and supplements to
such registration statements or Prospectus, including pre and post effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be incorporated by
reference therein.

"Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

"Rule 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 effect as such Rule.

"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 effect as such Rule.

"Securities Act” means the Securities Act of 1933, as amended.

"Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to the
Purchase Agreement.

2. Registration.

(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a
Registration Statement covering the resale of all Registrable Securities not already covered by an
existing and effective Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415, on Form SB-2 (or on such other form appropriate for such purpose). Such
Registration Statement shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement) the “Plan of
Distribution” attached hereto as Annex A. The Company shall cause such Registration
Statement to be declared effective under the Securities Act as soon as possible but, in any event,
no later than its Effectiveness Date, and shall use its reasonable best efforts to keep the
Registration Statement (and any other Registration Statement) continuously effective under the
Securities Act until the date which is the earlier of (i) five years after its Effective Date, (ii)
such time as all of the Registrable Securities covered by such Registration Statement have been
publicly sold by the Holders, or (iii) such time as all of the Registrable Securities covered by
such Registration Statement may be sold by the Holders pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).

(b) If for any reason the Commission does not permit all of the Registrable Securities to be
included in the Registration Statement filed pursuant to Section 2(a), or for any other reason any
outstanding Registrable Securities are not then covered by an effective Registration Statement,
then the Company shall prepare and file by the Filing Date for such Registration Statement, an
additional Registration Statement covering the resale of all Registrable Securities not already
covered by an existing and effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415, on Form SB-2 (or on such other form appropriate for such
purpose). Each such Registration Statement shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a review of such Registration Statement) the
“Plan of Distribution” attached hereto as Annex A. The Company shall cause each such
Registration Statement to be declared effective under the Securities Act as soon as possible but,
in any event, by its Effectiveness Date, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act during the entire
Effectiveness Period.

(c) Promptly following any date on which the Company becomes eligible to use a registration
statement on Form S-3 to register the Registrable Securities for resale, the Company shall file a
registration statement on Form S-3 covering the Registrable Securities (or a post-effective
amendment on Form S-3 to the then effective Registration Statement) and shall cause such
Registration Statement to be declared effective as soon as possible thereafter. Such Registration
Statement shall contain (except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement) the “Plan of Distribution” attached
hereto as Annex A. The Company shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act during the entire
Effectiveness Period.

(d) If: (i) a Registration Statement required to be filed under Section 2(a) or 2(b) is not
filed on or prior to its Filing Date (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the same as required by Section 3(a)
hereof, the Company shall not be deemed to have satisfied this clause (i)), or (ii) a Registration
Statement is not declared effective by the Commission on or prior to its required Effectiveness
Date, or (iii) after its Effective Date, without regard for the reason thereunder or efforts
therefore, any Registration Statement (including its predecessors in the case of a Registration
Statement filed under Section 2(c)) ceases for any reason to be effective and available to the
Holders as to all Registrable Securities to which it is required to cover at any time prior to the
expiration of its Effectiveness Period for more than an aggregate of 30 Trading Days (which need
not be consecutive) (any such failure or breach being referred to as an “Event,” and for purposes
of clauses (i) or (ii) the date on which such Event occurs, or for purposes of clause (iii) the
date which such 30 Trading Day-period is exceeded, being referred to as “Event Date”), then in
addition to any other rights the Holders may have hereunder or under applicable law, the Company
shall pay as partial liquidated damages for such failure or breach and not as a penalty, to each
Holder an amount in cash equal to (A) one percent (1%) of the Investment Amount paid by such Holder
for Shares pursuant to the Purchase Agreement on the Event Date for an Event under subsection (i)
and for each thirty (30) day period, or portion thereof, during which any Event described in
subsection (i) above occurs and is continuing, and (B) two percent (2%) of the Investment Amount
paid by such Holder for those Shares that are still owned by Holder on the Event Date for each
subsequent thirty (30) day period during which any Event described in subsection (ii) or (iii)
above occurs and is continuing, pro rated for any period less than thirty (30) days, until the
applicable Event has been cured. The payment required to be made under subsection (i) above shall
be paid on the Event Date and on each monthly anniversary thereafter, and the payment due under
subsections (ii) and (iii) above shall be paid in cash at the end of each thirty (30) day period
following the Event Date or, if earlier, on the date that the applicable Event has been cured.
Notwithstanding the other provisions of this Section 2, in no event shall the Company be liable for
liquidated damages under this Section 2(d) to a Holder for an Event which occurs after the
Registrable Securities may be sold by such Holder pursuant to Rule 144, as determined by counsel
(other than the Company’s counsel) pursuant to a written opinion letter to such effect, addressed
and acceptable to such Holder (it being understood and agreed that such counsel’s fees and expenses
incurred in connection with rendering such opinion shall be paid for by the Company), provided that
the immediately preceding clause shall not apply (1) (A) with respect to any Event which occurs
prior to a Holder being able to sell the Registrable Securities pursuant to Rule 144 (as determined
in accordance with the foregoing) or (B) which occurs prior to a Holder being able to sell the
Registrable Securities pursuant to Rule 144 (as determined in accordance with the foregoing) and
which continues after such Holder may sell such Registrable Securities pursuant to Rule 144 (as
determined in accordance with the foregoing) or (2) if during the continuance of an Event which
occurs after the Registrable Securities may be sold by such Holder pursuant to Rule 144 (as
determined in accordance with the foregoing) the Holder may no longer sell such Registrable
Securities under Rule 144 (as determined in accordance with the foregoing), in which case partial
damages pursuant to this Section 2(d) shall be calculated as if the Registrable Securities were
never eligible for resale by such Holder under Rule 144.

(e) Each Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Holder Questionnaire”). The Company
shall not be required to include the Registrable Securities of a Holder in a Registration Statement
and shall not be required to pay any liquidated or other damages under Section 2(d) to any Holder
who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least two
Trading Days prior to the Filing Date (subject to the requirements set forth in Section 3(a)).

3. Registration Procedures.

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

(a) Not less than four Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall furnish to each Holder
copies of the “Selling Stockholders” section of such document, the “Plan of Distribution” and any
risk factor contained in such document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed which documents will be subject to the review of such Holder.
The Company shall not file a Registration Statement, any Prospectus or any amendments or
supplements thereto in which the “Selling Stockholder” section thereof differs from the disclosure
received from a Holder in its Selling Holder Questionnaire (as amended or supplemented).

(b) (i) Prepare and file with the Commission such amendments, including post effective
amendments, to each Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep such Registration Statement continuously effective as to the applicable
Registrable Securities for its 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, 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 each Registration Statement or any amendment thereto and (if requested by any such
Person), as promptly as reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration Statement that would not
result in the disclosure to the Holders of material and non-public information concerning the
Company; and (iv) comply in all material respects with the provisions of the Securities Act and the
Exchange Act with respect to the Registration Statements and the disposition of all Registrable
Securities covered by each Registration Statement.

(c) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below,
not less than three Trading Days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one Trading Day 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 (the Company shall provide true and complete copies thereof and all written responses
thereto to each of the Holders that pertain to the Holders as a Selling Stockholder or to the Plan
of Distribution, but not information which the Company believes would constitute material and
non-public information); and (C) with respect to each Registration Statement or any 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 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; and (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 such 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 such Registration Statement, Prospectus or other
documents so that, in the case of such 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.

(d) Use its reasonable 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.

(e) Furnish to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by such Person
(including those previously furnished) promptly after the filing of such documents with the
Commission.

(f) Promptly deliver to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. 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.

(g) Prior to any public offering of Registrable Securities, to register or qualify or
cooperate with the selling Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of all jurisdictions within the United States, to keep
each such registration or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the Registration Statements.

(h) Cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to the
Registration Statements, 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.

(i) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a post effective amendment, to
the affected Registration Statements 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, no Registration Statement nor any 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.

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, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority
of the Registrable Securities included in the Registration Statement), (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. The company shall not be responsible for the payment of any
commissions or other expenses incurred by the Holder in connection with their sales of Registrable
Securities or for the fees of any counsel retained by any Holder.

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,
agents, investment advisors, partners, members and employees 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, agents and employees 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 limitation, reasonable costs of preparation
and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of
or relating to 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 (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, except to the extent, but only to the
extent, that (1) 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 the 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 (2) in the case of an occurrence of an event of the
type specified in Section 3(c)(ii)-(v), 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 an Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the Advice or the amended
or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been
corrected. The Company shall notify the Holders promptly of the institution, threat or assertion
of any Proceeding of which the Company is aware in connection with the transactions contemplated by
this Agreement.

(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, arising
solely 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 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 arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent that, (1) 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 the 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 (2) in the case
of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), 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 an Advice or an
amended or supplemented Prospectus, but only if and to the extent that following the receipt of the
Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such
Loss would have been corrected. 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 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 proximately and materially adversely 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 such Indemnified Party shall have been advised by counsel that a 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 such 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.
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.

All 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 (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, 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 Section 5(c), any reasonable attorneys’ or other reasonable 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 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.

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
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, will be entitled to specific performance of its rights under this Agreement (without
any requirement to post any bond). 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 waive the defense that a remedy at law
would be adequate.

(b) No Piggyback on Registrations. Except as and to the extent specified in
Schedule 3.1(v) to the Purchase Agreement, 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 a Registration Statement other than the Registrable Securities, and the Company shall
not during the Registration Period enter into any agreement providing any such right to any of its
security holders.

(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 the Registration Statement.

(d) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised
in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed,
and, in either case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the provisions of this
paragraph. Without implication that the contrary would otherwise be true, the Company agrees and
acknowledges that any periods during which the Holder is required to discontinue the disposition of
Registrable Securities hereunder shall be subject to the provisions of Section 2(d).

(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 stock
option or other employee benefit plans, then the Company shall send to each Holder written notice
of such determination and, if within fifteen days after receipt of such notice, any such Holder
shall so request in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights.

(f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this Section 6(f), 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 the Holders of no less than a majority in interest of the
then outstanding Registrable Securities. 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 certain Holders and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority of the Registrable Securities to which such waiver or
consent relates.

(g) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

If to the Company: Xenonics Holdings, Inc.

	 	 	 
	2236 Rutherford Road, Suite 123

	 
	 	 
	Carlsbad, CA 92008

Attn: Chief Financial Officer

Facsimile: (760) 438-1184

With a copy to:

	 	

Troy & Gould Professional Corporation

1801 Century Park East, 26th Floor

Los Angeles, CA 90067

Attn: William Gould, Esq.

Facsimile: (310) 201-4746

	 	 	 	If to a Investor: To the address set forth under such Investor’s name on the
signature pages hereto.

If to any other Person who is then the registered Holder:

To the address of such Holder as it appears in the stock transfer
books of the Company

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

(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 or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign their respective rights hereunder in
the manner and to the Persons as permitted under the Purchase Agreement.

(i) Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

(j) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought against a party
hereto or its respective Affiliates, employees or agents) may be commenced in the California
Courts. Each party hereto hereby irrevocably submits to the jurisdiction of the California Courts
for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction of any California
Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to process being served
in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury in any Proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of this Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

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

(l) 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 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.

(m) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

(n) Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under this Agreement are several and not joint with the obligations of each other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under this Agreement. Nothing contained herein or in any Transaction Document,
and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors
as a partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement or any other Transaction Document.
Each Investor acknowledges that no other Investor will be acting as agent of such Investor in
enforcing its rights under this Agreement. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Investor to be joined as an additional party
in any Proceeding for such purpose. The Company acknowledges that each of the Investors has been
provided with the same Registration Rights Agreement for the purpose of closing a transaction with
multiple Investors and not because it was required or requested to do so by any Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

1

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

XENONICS HOLDINGS, INC.

By:

Name:

Title:

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF INVESTORS TO FOLLOW]

2

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

NAME OF INVESTING ENTITY

By:

Name:

Title:

ADDRESS FOR NOTICE

c/o:

Street:

City/State/Zip:

Attention:

Tel:

Fax:

Email:

3

Annex A

Plan of Distribution

The Selling Stockholders and any of their pledgees, donees, transferees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on
any stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling Stockholders may use
any one or more of the following methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker dealer solicits Investors;

	 	•	 	block trades in which the broker dealer will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction;

	 	•	 	purchases by a broker dealer as principal and resale by the broker dealer for its account;

	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;

	 	•	 	privately negotiated transactions;

	 	•	 	to cover short sales made after the date that this Registration Statement is declared effective by the Commission;

	 	•	 	broker dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated
price per share;

	 	•	 	a combination of any such methods of sale; and

	 	•	 	any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.

Broker dealers engaged by the Selling Stockholders may arrange for other brokers dealers to
participate in sales. Broker dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved.

The Selling Stockholders may from time to time pledge or grant a security interest in some or
all of the Shares owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell shares of Common Stock from time to
time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this
prospectus.

Upon the Company being notified in writing by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block
trade, special offering, exchange distribution or secondary distribution or a purchase by a broker
or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b)
under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such
the shares of Common Stock were sold, (iv)the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in this prospectus,
and (vi) other facts material to the transaction. In addition, upon the Company being notified in
writing by a Selling Stockholder that a donee or pledgee intends to sell more than 500 shares of
Common Stock, a supplement to this prospectus will be filed if then required in accordance with
applicable securities law.

The Selling Stockholders also may transfer the shares of Common Stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

The Selling Stockholders and any broker dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, that can be attributed to the sale of Securities will be paid by the Selling
Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the
Company that it acquired the securities subject to this registration statement in the ordinary
course of such Selling Stockholder’s business and, at the time of its purchase of such securities
such Selling Stockholder had no agreements or understandings, directly or indirectly, with any
person to distribute any such securities.

The Company has advised each Selling Stockholder that it may not use shares registered on this
Registration Statement to cover short sales of Common Stock made prior to the date on which this
Registration Statement shall have been declared effective by the Commission. If a Selling
Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders will be
responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and
the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as
applicable to such Selling Stockholders in connection with resales of their respective shares under
this Registration Statement.

The Company is required to pay all fees and expenses incident to the registration of the
shares, but the Company will not receive any proceeds from the sale of the Common Stock. The
Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.

4

Annex B

XENONICS HOLDINGS, INC.

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Common Stock”), of Xenonics Holdings, Inc.
(the “Company”) understands that the Company has filed or intends to file with the Securities and
Exchange Commission (the “Commission”) a Registration Statement for the registration and resale of
the Registrable Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of January 17, 2005 (the “Registration Rights Agreement”), among the Company and the
Investors named therein. A copy of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

1. Name:

(a) Full Legal Name of Selling Securityholder

	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:

	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

2. Address for Notices to Selling Securityholder:

Telephone:

Fax:

Contact Person:

3. Beneficial Ownership of Registrable Securities:

Type and Principal Amount of Registrable Securities beneficially owned:

4. Broker-Dealer Status:

(a) Are you a broker-dealer?

Yes No

	 	 	 	Note: If yes, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration Statement.

(b) Are you an affiliate of a broker-dealer?

Yes No

	 	(c)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes No

	 	 	 	Note: If no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.

Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

6. Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof and prior to the Effective
Date for the Registration Statement.

By signing below, the undersigned consents to the disclosure of the information contained herein in
its answers to Items 1 through 6 and the inclusion of such information in the Registration
Statement and the related prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 
	Dated:	 	Beneficial Owner:
	
 
	 	By:
	
 
	 	 
	
 
	 	Name:
	
 
	 	Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

Troy & Gould Professional Corporation

1801 Century Park East, 26th Floor

Los Angeles, CA 90067

Attn: William Gould, Esq.

Facsimile: (310) 201-4746

5

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