Exhibit 10.1


 


REDACTED VERSION


 


SECURITIES PURCHASE AGREEMENT


 


LAURUS MASTER FUND, LTD.


 


and


 


APOGEE TECHNOLOGY, INC.


 


 


Dated: August 9, 2005


 


 


Portions of this Exhibit have been redacted, as
indicated by ******** these portions have been provided to the Securities and
Exchange Commission pursuant to a request for confidential treatment.


 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  Agreement to Sell and
  Purchase

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Fees
  and Warrant

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Closing, Delivery and
  Payment

  	
   

  
	
   

  	
  3.1

  	
  Closing

  	
   

  
	
   

  	
  3.2

  	
  Delivery

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Representations
  and Warranties of the Company

  	
   

  
	
   

  	
  4.1

  	
  Organization,
  Good Standing and Qualification

  	
   

  
	
   

  	
  4.2

  	
  Subsidiaries

  	
   

  
	
   

  	
  4.3

  	
  Capitalization; Voting
  Rights

  	
   

  
	
   

  	
  4.4

  	
  Authorization;
  Binding Obligations

  	
   

  
	
   

  	
  4.5

  	
  Liabilities

  	
   

  
	
   

  	
  4.6

  	
  Agreements; Action

  	
   

  
	
   

  	
  4.7

  	
  Obligations to Related
  Parties

  	
   

  
	
   

  	
  4.8

  	
  Changes

  	
   

  
	
   

  	
  4.9

  	
  Title to
  Properties and Assets; Liens, Etc

  	
   

  
	
   

  	
  4.10

  	
  Intellectual Property

  	
   

  
	
   

  	
  4.11

  	
  Compliance with Other
  Instruments

  	
   

  
	
   

  	
  4.12

  	
  Litigation

  	
   

  
	
   

  	
  4.13

  	
  Tax Returns and Payments

  	
   

  
	
   

  	
  4.14

  	
  Employees

  	
   

  
	
   

  	
  4.15

  	
  Registration
  Rights and Voting Rights

  	
   

  
	
   

  	
  4.16

  	
  Compliance with Laws;
  Permits

  	
   

  
	
   

  	
  4.17

  	
  Environmental and Safety
  Laws

  	
   

  
	
   

  	
  4.18

  	
  Valid
  Offering

  	
   

  
	
   

  	
  4.19

  	
  Full
  Disclosure

  	
   

  
	
   

  	
  4.20

  	
  Insurance

  	
   

  
	
   

  	
  4.21

  	
  Selected SEC Reports

  	
   

  
	
   

  	
  4.22

  	
  Listing

  	
   

  
	
   

  	
  4.23

  	
  No Integrated Offering

  	
   

  
	
   

  	
  4.24

  	
  Stop
  Transfer

  	
   

  
	
   

  	
  4.25

  	
  Dilution

  	
   

  
	
   

  	
  4.26

  	
  Patriot Act

  	
   

  
	
   

  	
  4.27

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Representations
  and Warranties of the Purchaser

  	
   

  
	
   

  	
  5.1

  	
  No
  Shorting

  	
   

  
	
   

  	
  5.2

  	
  Requisite Power and
  Authority

  	
   

  
	
   

  	
  5.3

  	
  Investment Representations

  	
   

  
	
   

  	
  5.4

  	
  The Purchaser Bears
  Economic Risk

  	
   

  
	
   

  	
  5.5

  	
  Acquisition for Own Account

  	
   

  
	
   

  	
  5.6

  	
  The Purchaser
  Can Protect Its Interest

  	
   

  



 


i





















 


	
   

  	
  5.7

  	
  Accredited Investor

  	
   

  
	
   

  	
  5.8

  	
  Legends

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Covenants of the Company

  	
   

  
	
   

  	
  6.1

  	
  Stop-Orders

  	
   

  
	
   

  	
  6.2

  	
  Listing

  	
   

  
	
   

  	
  6.3

  	
  Market
  Regulations

  	
   

  
	
   

  	
  6.4

  	
  Reporting
  Requirements

  	
   

  
	
   

  	
  6.5

  	
  Use of Funds

  	
   

  
	
   

  	
  6.6

  	
  Access to
  Facilities

  	
   

  
	
   

  	
  6.7

  	
  Taxes

  	
   

  
	
   

  	
  6.8

  	
  Insurance

  	
   

  
	
   

  	
  6.9

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  6.10

  	
  Properties

  	
   

  
	
   

  	
  6.11

  	
  Confidentiality

  	
   

  
	
   

  	
  6.12

  	
  Required
  Approvals

  	
   

  
	
   

  	
  6.13

  	
  Reissuance
  of Securities

  	
   

  
	
   

  	
  6.14

  	
  Opinion

  	
   

  
	
   

  	
  6.15

  	
  Margin Stock

  	
   

  
	
   

  	
  6.16

  	
  Authorization
  and Reservation of Shares

  	
   

  
	
   

  	
  6.17

  	
  ****************************

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Covenants of the Purchaser

  	
   

  
	
   

  	
  7.1

  	
  Confidentiality

  	
   

  
	
   

  	
  7.2

  	
  Non-Public
  Information

  	
   

  
	
   

  	
  7.3

  	
  Limitation
  on Acquisition of Common Stock of the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Covenants
  of the Company and the Purchaser Regarding Indemnification

  	
   

  
	
   

  	
  8.1

  	
  Company
  Indemnification

  	
   

  
	
   

  	
  8.2

  	
  Purchaser’s Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Conversion of
  Convertible Note

  	
   

  
	
   

  	
  9.1

  	
  Mechanics
  of Conversion

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Registration Rights

  	
   

  
	
   

  	
  10.1

  	
  Registration
  Rights Granted

  	
   

  
	
   

  	
  10.2

  	
  Offering Restrictions

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Miscellaneous

  	
   

  
	
   

  	
  11.1

  	
  Governing
  Law, Jurisdiction and Waiver of Jury Trial

  	
   

  
	
   

  	
  11.2

  	
  Severability

  	
   

  
	
   

  	
  11.3

  	
  Survival

  	
   

  
	
   

  	
  11.4

  	
  Successors

  	
   

  
	
   

  	
  11.5

  	
  Entire Agreement;
  Maximum Interest

  	
   

  
	
   

  	
  11.6

  	
  Amendment
  and Waiver

  	
   

  
	
   

  	
  11.7

  	
  Delays or
  Omissions

  	
   

  
	
   

  	
  11.8

  	
  Notices

  	
   

  



 


ii





















 


	
   

  	
  11.9

  	
  Attorneys’
  Fees

  	
   

  
	
   

  	
  11.10

  	
  Titles
  and Subtitles

  	
   

  
	
   

  	
  11.11

  	
  Facsimile
  Signatures; Counterparts

  	
   

  
	
   

  	
  11.12

  	
  Broker’s
  Fees

  	
   

  
	
   

  	
  11.13

  	
  Construction

  	
   

  



 


iii





















 


LIST OF EXHIBITS


 


	
  Form of Convertible
  Term Note

  	
   

  	
  Exhibit A

  
	
  Form of
  Warrant

  	
   

  	
  Exhibit B

  
	
  Form of
  Opinion

  	
   

  	
  Exhibit C

  
	
  Form of Escrow
  Agreement

  	
   

  	
  Exhibit D

  



 


iv





















 


SECURITIES
PURCHASE AGREEMENT


 


THIS SECURITIES
PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of August 9,
2005, by and between APOGEE TECHNOLOGY, INC., a Delaware corporation (the “Company”),
and LAURUS MASTER FUND, LTD., a Cayman Islands company (the “Purchaser”).


 


RECITALS


 


WHEREAS, the
Company has authorized the sale to the Purchaser of a Secured Convertible Term
Note in the aggregate principal amount of Two Million Dollars ($2,000,000) in
the form of Exhibit A hereto (as amended, modified and/or supplemented
from time to time, the “Note”), which Note is convertible into shares of the
Company’s common stock, $0.01 par value per share (the “Common Stock”), in
accordance with the terms and conditions set forth in the Note, at an initial
fixed conversion price of $1.05 per share of Common Stock (“Fixed Conversion
Price”);


 


WHEREAS, the
Company wishes to issue to the Purchaser a warrant in the form of Exhibit B
hereto (as amended, modified and/or supplemented from time to time, the “Warrant”)
in connection with the Purchaser’s purchase of the Note;


 


WHEREAS, the
Purchaser desires to purchase the Note and the Warrant on the terms and
conditions set forth herein; and


 


WHEREAS, the
Company desires to issue and sell the Note and Warrant to the Purchaser on the
terms and conditions set forth herein.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


 


1.             Agreement to
Sell and Purchase.  Pursuant to
the terms and conditions set forth in this Agreement, on the Closing Date (as
defined in Section 3), the Company shall sell to the Purchaser, and the
Purchaser shall purchase from the Company, the Note.  The sale of the Note on the Closing Date
shall be known as the “Offering.”  The
Note will mature on the Maturity Date (as defined in the Note).  Collectively, the Note and Warrant and Common
Stock issuable upon conversion of the Note and upon exercise of the Warrant are
referred to as the “Securities.”


 


2.             Fees and Warrant.  On the Closing Date:


 


(a)           The
Company will issue and deliver to the Purchaser the Warrant in connection with
the Offering, pursuant to Section 1 hereof.  All the representations,


 





















 


covenants, warranties, undertakings, and indemnification, and other
rights made or granted to or for the benefit of the Purchaser by the Company
are hereby also made and granted for the benefit of the holder of the Warrant
and shares of the Company’s Common Stock issuable upon exercise of the Warrant
(the “Warrant Shares”).


 


(b)           Subject
to the terms of Section 2(d) below, the Company shall pay to Laurus
Capital Management, LLC, the manager of the Purchaser, a closing payment in an
amount equal to three and nine-tenths percent (3.90%) of the aggregate
principal amount of the Note, which equals $78,000.  The foregoing fee is referred to herein as
the “Closing Payment.”


 


(c)           The
Company shall reimburse the Purchaser for its reasonable expenses (including
legal fees and expenses) incurred in connection with the preparation and
negotiation of this Agreement and the Related Agreements (as hereinafter
defined), and expenses incurred in connection with the Purchaser’s due
diligence review of the Company and its Subsidiaries (as defined in Section 4.2)
and all related matters.  Amounts
required to be paid under this Section 2(c) will be paid on the
Closing Date and shall be $44,500 for such expenses referred to in this Section 2(c).


 


(d)           The
Closing Payment and the expenses referred to in the preceding clause (c) (net
of the $15,000 deposit previously paid by the Company, for a net total of
$29,500) shall be paid at closing out of funds held pursuant to the Escrow
Agreement (as defined below) and a disbursement letter (the “Disbursement
Letter”).


 


3.             Closing, Delivery
and Payment.


 


3.1           Closing.  Subject to
the terms and conditions herein, the closing of the transactions contemplated
hereby (the “Closing”), shall take place on the date hereof, at such time or
place as the Company and the Purchaser may mutually agree (such date is
hereinafter referred to as the “Closing Date”).


 


3.2           Delivery.  Pursuant to
the Escrow Agreement, at the Closing on the Closing Date, the Company will
deliver to the Purchaser, among other things, the Note and the Warrant and the
Purchaser will deliver to the Company, among other things, the amounts set
forth in the Disbursement Letter  by
certified funds or wire transfer.


 


4.             Representations
and Warranties of the Company. 
The Company hereby represents and warrants to the Purchaser as follows


 


4.1           Organization, Good Standing and
Qualification.  Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.  Each of the Company and each of its
Subsidiaries has the corporate, limited liability company or partnership, as
the case may be, power and authority to own and operate its properties and
assets and, insofar as it is or shall be a party thereto, to (1) execute
and deliver (i) this Agreement, (ii) the Note and the Warrant to be
issued in connection with this Agreement,


 


2





















 


(iii) the
Master Security Agreement dated as of the date hereof between the Company,
certain Subsidiaries of the Company and the Purchaser (as amended, modified
and/or supplemented from time to time, the “Master Security Agreement”), (iv) the
Registration Rights Agreement relating to the Securities dated as of the date
hereof between the Company and the Purchaser (as amended, modified and/or
supplemented from time to time, the “Registration Rights Agreement”), (v) the
Funds Escrow Agreement dated as of the date hereof among the Company, the
Purchaser and the escrow agent referred to therein, substantially in the form
of Exhibit D hereto (as amended, modified and/or supplemented from time to
time, the “Escrow Agreement”) and (vi) all other documents, instruments
and agreements entered into in connection with the transactions contemplated
hereby and thereby (the preceding clauses (ii) through (vi), collectively,
the “Related Agreements”); (2) issue and sell the Note and the shares of
Common Stock issuable upon conversion of the Note (the “Note Shares”); (3) issue
and sell the Warrant and the Warrant Shares; and (4) carry out the
provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted.  Each of
the Company and each of its Subsidiaries is duly qualified and is authorized to
do business and is in good standing as a foreign corporation, partnership or
limited liability company, as the case may be, in all jurisdictions in which
the nature or location of its activities and of its properties (both owned and leased)
makes such qualification necessary, except for those jurisdictions in which
failure to do so has not, or could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise), properties, operations
or prospects of the Company and its Subsidiaries, taken individually and as a
whole (a “Material Adverse Effect”).


 


4.2           Subsidiaries. 
Each direct and indirect Subsidiary of the Company, the direct owner of
such Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2,
Dubla, Inc., a Delaware corporation and a Subsidiary
of the Company, does not own any assets (other than immaterial assets) or have
any significant operations. For the purpose of this Agreement, a “Subsidiary” of
any person or entity means (i) a corporation or other entity whose shares
of stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity
or (ii) a corporation or other entity in which such person or entity owns,
directly or indirectly, more than 50% of the equity interests at such time.


 


4.3           Capitalization; Voting Rights.


 


(a)           The
authorized capital stock of the Company, as of the date hereof consists of
20,010,000 shares, of which 20,000,000 are shares of Common Stock, par value
$0.01 per share, as of April 15, 2005, the Company had 11,838,332 shares
of common stock outstanding, and 10,000 are shares of preferred stock, par
value $100.00 per share of which no shares of preferred stock are issued and
outstanding.  The authorized, issued and
outstanding capital stock of each Subsidiary of the Company is set forth on Schedule 4.3.


 


3





















 


(b)           Except
as disclosed on Schedule 4.3, or in the SEC Reports (as defined below),
other than:  (i) the shares reserved
for issuance under the Company’s stock option plans; and (ii) shares which
may be granted pursuant to this Agreement and the Related Agreements, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or
arrangements or agreements of any kind for the purchase or acquisition from the
Company of any of its securities.  Except
as disclosed on Schedule 4.3, or in the SEC Reports, neither the offer,
issuance or sale of any of the Note or the Warrant, or the issuance of any of
the Note Shares or Warrant Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.


 


(c)           All
issued and outstanding shares of the Company’s Common Stock:  (i) have been duly authorized and
validly issued and are fully paid and nonassessable; and (ii) were issued
in compliance with all applicable state and federal laws concerning the
issuance of securities.


 


(d)           The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company’s Certificate of Incorporation (the “Charter”).  The Note Shares and Warrant Shares have been
duly and validly reserved for issuance. 
When issued in compliance with the provisions of this Agreement and the
Company’s Charter, the Securities will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Securities may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.


 


4.4           Authorization; Binding Obligations.  All corporate, partnership or limited
liability company, as the case may be, action on the part of the Company and
each of its Subsidiaries (including their respective officers and directors)
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company and its Subsidiaries hereunder
and under the other Related Agreements at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing.  This
Agreement and the Related Agreements, when executed and delivered and to the
extent it is a party thereto, will be valid and binding obligations of each of
the Company and each of its Subsidiaries, enforceable against each such person
or entity in accordance with their terms, except:


 


(a)           as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and


 


(b)           general
principles of equity that restrict the availability of equitable or legal
remedies.


 


4





















 


The sale of the Note and the subsequent conversion of
the Note into Note Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or
complied with.  The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.


 


4.5           Liabilities. 
Neither the Company nor any of its Subsidiaries has any liabilities in
excess of $200,000 in the aggregate, except as set forth on Schedules to this
Agreement and except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any of the Company’s filings under the
Securities Exchange Act of 1934, as amended (“Exchange Act”) or the Securities
Act of 1933, as amended (“Securities Act”) made prior to the date of this
Agreement (collectively, the “SEC Reports”), copies of which have been provided
to the Purchaser.


 


4.6           Agreements; Action. 
Except as set forth on Schedule 4.6 or as disclosed in any SEC
Reports:


 


(a)           there
are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company or any
of its Subsidiaries is a party or by which it is bound which may involve: (i) obligations
(contingent or otherwise) of, or payments to, the Company or any of its
Subsidiaries in excess of $150,000 (other than obligations of, or payments to,
the Company or any of its Subsidiaries arising from purchase or sale agreements
entered into in the ordinary course of business); or (ii) the transfer or
license of any patent, copyright, trade secret or other proprietary right to or
from the Company or any of its Subsidiaries (other than licenses arising from
the purchase of “off the shelf” or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of the Company’s or
any of its Subsidiaries products or services; or (iv) indemnification by
the Company or any of its Subsidiaries with respect to infringements of
proprietary rights.


 


(b)           Since
December 31, 2004 (the “Balance Sheet Date”), neither the Company nor any
of its Subsidiaries has:  (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock; (ii) incurred any
indebtedness for money borrowed or any other liabilities (other than ordinary
course obligations) individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess of
$300,000 in the aggregate; (iii) made any loans or advances to any person
or entity not in excess, individually or in the aggregate, of $100,000, other
than ordinary course advances for travel expenses; or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than the sale of
its inventory in the ordinary course of business.


 


(c)           For
the purposes of subsections (a) and (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company or any Subsidiary of the Company has reason to believe are
affiliated therewith) shall be


 


5





















 


aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.


 


(d)           The
Company maintains disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Company in
its SEC Reports that it files or submits and the SEC Reports are recorded,
processed, summarized, and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission (“SEC”).


 


(e)           The
Company makes and keep books, records, and accounts, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
Company’s assets.  The Company maintains
internal control over financial reporting (“Financial Reporting Controls”)
designed by, or under the supervision of, the Company’s principal executive and
principal financial officers, and effected by the Company’s board of directors,
management, and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (“GAAP”), including that:


 


(i)            transactions
are executed in accordance with management’s general or specific authorization;


 


(ii)           unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements are prevented or timely detected;


 


(iii)          transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that the Company’s receipts and expenditures are
being made only in accordance with authorizations of the Company’s management and
board of directors;


 


(iv)          transactions
are recorded as necessary to maintain accountability for assets; and


 


(v)           the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.


 


(f)            There
is no weakness in any of the Company’s Disclosure Controls or Financial
Reporting Controls that is required to be disclosed in any of the SEC Reports,
except as so disclosed.


 


6





















 


4.7           Obligations to Related Parties.  Except as set forth on Schedule 4.7,
there are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than:


 


(a)           for
payment of salary for services rendered and for bonus payments;


 


(b)           reimbursement
for reasonable expenses incurred on behalf of the Company and its Subsidiaries;


 


(c)           for
other standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company and each Subsidiary of the Company, as
applicable); and


 


(d)           obligations
listed in the Company’s and each of its Subsidiary’s financial statements or
disclosed in any of the Company’s SEC Reports.


 


Except as described above or set forth on Schedule 4.7,
none of the officers, directors or, to the best of the Company’s knowledge, key
employees or stockholders of the Company or any of its Subsidiaries or any
members of their immediate families, are indebted to the Company or any of its
Subsidiaries, individually or in the aggregate, in excess of $150,000 or have
any direct or indirect ownership interest in any firm or corporation with which
the Company or any of its Subsidiaries is affiliated or with which the Company
or any of its Subsidiaries has a business relationship, or any firm or
corporation which competes with the Company or any of its Subsidiaries, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company or any of
its Subsidiaries.  Except as described
above, no officer, director or stockholder of the Company or any of its
Subsidiaries, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company or any of its
Subsidiaries and no agreements, understandings or proposed transactions are
contemplated between the Company or any of its Subsidiaries and any such
person.  Except as set forth on Schedule 4.7,
neither the Company nor any of its Subsidiaries is a guarantor or indemnitor of
any indebtedness of any other person or entity.


 


4.8           Changes.  Since the
Balance Sheet Date, except as disclosed in any SEC Report or in any Schedule to
this Agreement or to any of the Related Agreements, there has not been:


 


(a)           any
change in the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company or any of its
Subsidiaries, which individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;


 


(b)           any
resignation or termination of any officer, key employee or group of employees
of the Company or any of its Subsidiaries;


 


7





















 


(c)           any
material change, except in the ordinary course of business, in the contingent
obligations of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;


 


(d)           any
damage, destruction or loss, whether or not covered by insurance, which has
had, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect;


 


(e)           any
waiver by the Company or any of its Subsidiaries of a valuable right or of a
material debt owed to it;


 


(f)            any
direct or indirect loans made by the Company or any of its Subsidiaries to any
stockholder, employee, officer or director of the Company or any of its
Subsidiaries, other than advances made in the ordinary course of business;


 


(g)           any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder of the Company or any of its Subsidiaries;


 


(h)           any
declaration or payment of any dividend or other distribution of the assets of
the Company or any of its Subsidiaries;


 


(i)            any
labor organization activity related to the Company or any of its Subsidiaries;


 


(j)            any
debt, obligation or liability incurred, assumed or guaranteed by the Company or
any of its Subsidiaries, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;


 


(k)           any
sale, assignment or transfer of any patents, trademarks, copyrights, trade
secrets or other intangible assets owned by the Company or any of its
Subsidiaries;


 


(l)            any
change in any material agreement to which the Company or any of its
Subsidiaries is a party or by which either the Company or any of its
Subsidiaries is bound which either individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;


 


(m)          any
other event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or


 


(n)           any
arrangement or commitment by the Company or any of its Subsidiaries to do any
of the acts described in subsection (a) through (m) above.


 


4.9           Title to Properties and Assets;
Liens, Etc.  Except as set
forth in the SEC Reports or on Schedule 4.9, each of the Company and each
of its Subsidiaries has good and


 


8





















 


marketable
title to its properties and assets, and good title to its leasehold interests,
in each case subject to no mortgage, pledge, lien, lease, encumbrance or
charge, other than:


 


(a)           those
resulting from taxes which have not yet become delinquent;


 


(b)           minor
liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company or
any of its Subsidiaries, so long as in each such case, such liens and
encumbrances have no effect on the lien priority of the Purchaser in such
property; and


 


(c)           those
that have otherwise arisen in the ordinary course of business, so long as they
have no effect on the lien priority of the Purchaser therein.


 


All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company and its
Subsidiaries are in good operating condition and repair and are reasonably fit
and usable for the purposes for which they are being used.  Except as set forth on Schedule 4.9, the
Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound.


 


4.10         Intellectual Property.


 


Except as
disclosed in the SEC Reports or on Schedule 4.10:


 


(a)           Each
of the Company and each of its Subsidiaries owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and, to the Company’s knowledge, as
presently proposed to be conducted (the “Intellectual Property”), without any
known infringement of the rights of others. 
There are no outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of “off the shelf” or standard products.


 


(b)           Neither
the Company nor any of its Subsidiaries has been a party to any judgment or
entered into any settlement to the effect that the Company or any of its
Subsidiaries has violated any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity, nor has the Company or any of its Subsidiaries been made
aware of any such violations that would cause a Material Adverse Effect.


 


(c)           The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to
their employment by the Company or any of its Subsidiaries, except for
inventions, trade


 


9





















 


secrets or proprietary information that have been rightfully assigned
to the Company or any of its Subsidiaries.


 


4.11         Compliance with Other Instruments.  Neither the Company nor any of its
Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws, or (y) any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or by which it is bound
or of any judgment, decree, order or writ, which violation or default, in the
case of this clause (y), has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.  The execution, delivery and performance of
and compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term
or provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or
any of its Subsidiaries or the suspension, revocation, impairment, forfeiture
or nonrenewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.


 


4.12         Litigation. 
Except as set forth in the SEC Reports or on Schedule 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company’s knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from entering
into this Agreement or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or any change in the current equity ownership of the
Company or any of its Subsidiaries, nor is the Company aware that there is any
basis to assert any of the foregoing. 
Neither the Company nor any of its Subsidiaries is a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. 
There is no action, suit, proceeding or investigation by the Company or
any of its Subsidiaries currently pending or which the Company or any of its
Subsidiaries intends to initiate.


 


4.13         Tax Returns and Payments.  Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it.  All taxes
shown to be due and payable on such returns, any assessments imposed, and all
other taxes due and payable by the Company or any of its Subsidiaries on or
before the Closing, have been paid or will be paid prior to the time they
become delinquent.  Except as set forth
in the SEC Reports or on Schedule 4.13, neither the Company nor any of its
Subsidiaries has been advised:


 


(a)           that
any of its returns, federal, state or other, have been or are being audited as
of the date hereof; or


 


(b)           of
any adjustment, deficiency, assessment or court decision in respect of its
federal, state or other taxes.


 


10





















 


The Company has no knowledge of any liability for any
tax to be imposed upon its properties or assets as of the date of this
Agreement that is not adequately provided for.


 


4.14         Employees.  Except as set
forth on Schedule 4.14, neither the Company nor any of its Subsidiaries
has any collective bargaining agreements with any of its employees.  There is no labor union organizing activity
pending or, to the Company’s knowledge, threatened with respect to the Company
or any of its Subsidiaries.  Except as
disclosed in the SEC Reports or on Schedule 4.14, neither the Company nor
any of its Subsidiaries is a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement.  To the Company’s
knowledge, no employee of the Company or any of its Subsidiaries, nor any
consultant with whom the Company or any of its Subsidiaries has contracted, is
in violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual
to be employed by, or to contract with, the Company or any of its Subsidiaries
because of the nature of the business to be conducted by the Company or any of
its Subsidiaries; and to the Company’s knowledge the continued employment by
the Company and its Subsidiaries of their present employees, and the
performance of the Company’s and its Subsidiaries’ contracts with its
independent contractors, will not result in any such violation.  Neither the Company nor any of its
Subsidiaries is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency that would interfere with their duties to the Company or
any of its Subsidiaries.  Neither the
Company nor any of its Subsidiaries has received any notice alleging that any
such violation has occurred.  Except for
employees who have a current effective employment agreement with the Company or
any of its Subsidiaries, no employee of the Company or any of its Subsidiaries
has been granted the right to continued employment by the Company or any of its
Subsidiaries or to any material compensation following termination of
employment with the Company or any of its Subsidiaries.  Except as set forth on Schedule 4.14,
the Company is not aware that any officer, key employee or group of employees
intends to terminate his, her or their employment with the Company or any of
its Subsidiaries, nor does the Company or any of its Subsidiaries have a
present intention to terminate the employment of any officer, key employee or
group of employees.


 


4.15         Registration Rights and Voting
Rights.  Except as set forth on Schedule 4.15 and
except as disclosed in SEC Reports, neither the Company nor any of its
Subsidiaries is presently under any obligation, and neither the Company nor any
of its Subsidiaries has granted any rights, to register any of the Company’s or
its Subsidiaries’ presently outstanding securities or any of its securities
that may hereafter be issued.  Except as
set forth on Schedule 4.15 or disclosed in the SEC Reports, to the Company’s
knowledge, no stockholder of the Company or any of its Subsidiaries has entered
into any agreement with respect to the voting of equity securities of the
Company or any of its Subsidiaries.


 


4.16         Compliance with Laws; Permits.  Except as set forth in the SEC Reports or on Schedule 4.16,
neither the Company nor any of its Subsidiaries is in violation of any
provision of the Sarbanes-Oxley Act of 2002 or any SEC related regulation or rule or
any rule of


 


11





















 


the
Principal Market (as hereafter defined) promulgated thereunder or any other
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect.  No
governmental orders, permissions, consents, approvals or authorizations are required
to be obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as
have been duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing, as will be filed in a timely manner.  Each of the Company and its Subsidiaries has
all material franchises, permits, licenses and any similar authority necessary
for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.


 


4.17         Environmental and Safety Laws.  Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation.  Except as set forth on Schedule 4.17, no
Hazardous Materials (as defined below) are used or have been used, stored, or
disposed of by the Company or any of its Subsidiaries or, to the Company’s
knowledge, by any other person or entity on any property owned, leased or used
by the Company or any of its Subsidiaries. 
For the purposes of the preceding sentence, “Hazardous Materials” shall
mean:


 


(a)           materials
which are listed or otherwise defined as “hazardous” or “toxic” under any
applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection
of the environment from contamination, the control of hazardous wastes, or
other activities involving hazardous substances, including building materials;
or


 


(b)           any
petroleum products or nuclear materials.


 


4.18         Valid Offering. 
Assuming the accuracy of the representations and warranties of the
Purchaser contained in this Agreement, the offer, sale and issuance of the
Securities will be exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Securities Act”), and will have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.


 


4.19         Full Disclosure. 
Each of the Company and each of its Subsidiaries has provided the
Purchaser with all information requested by the Purchaser in connection with
its decision to purchase the Note and Warrant, including all information the
Company and its Subsidiaries believe is reasonably necessary to make such
investment decision.  Neither this
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
nor any other document delivered by the Company or any of its Subsidiaries to
Purchaser or its attorneys or


 


12





















 


agents
in connection herewith or therewith or with the transactions contemplated
hereby or thereby, contain any untrue statement of a material fact nor omit to
state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.  Any financial projections
and other estimates provided to the Purchaser by the Company or any of its
Subsidiaries were based on the Company’s and its Subsidiaries’ experience in
the industry and on assumptions of fact and opinion as to future events which
the Company or any of its Subsidiaries, at the date of the issuance of such
projections or estimates, believed to be reasonable.


 


4.20         Insurance.  Each of the
Company and each of its Subsidiaries has general commercial, product liability,
fire and casualty insurance policies with coverages which the Company believes are
customary for companies similarly situated to the Company and its Subsidiaries
in the same or similar business.


 


4.21         Selected SEC Reports.  Except as set forth on Schedule 4.21,
the Company has filed all proxy statements, reports and other documents required
to be filed by it under the Exchange Act. 
By way of the public nature of the filing, the Company has furnished the
Purchaser copies of all of its SEC Reports. 
The Company’s partial Annual Report on Form 10-KSB for its fiscal
year ended December 31, 2004 and (ii) its Form 8-K filings that
it has made during the fiscal year 2005 to date are collectively (the “Selected
SEC Reports”).  A description regarding
the Selected SEC Reports is set forth on Schedule 4.21.


 


4.22         Listing.  The Company’s
Common Stock is listed or quoted, as applicable, on a Principal Market (as
hereafter defined) and satisfies and at all times hereafter will satisfy, all
requirements for the continuation of such listing or quotation, as applicable.  Except as disclosed in the Company’s SEC
Reports, the Company has not received any notice that its Common Stock will be
delisted from, or no longer quoted on, as applicable, the Principal Market or
that its Common Stock does not meet all requirements for such listing or
quotation, as applicable.  For purposes
hereof, the term “Principal Market” means the NASD Over The Counter Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Markets System, American Stock
Exchange or New York Stock Exchange (whichever of the foregoing is at the time
the principal trading exchange or market for the Common Stock).


 


4.23         No Integrated Offering.  Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the
offering of the Securities pursuant to this Agreement or any of the Related
Agreements to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any
of its affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.


 


4.24         Stop Transfer. 
The Securities are restricted securities as of the date of this
Agreement.  Neither the Company nor any
of its Subsidiaries will issue any stop transfer order or


 


13





















 


other
order impeding the sale and delivery of any of the Securities at such time as
the Securities are registered for public sale or an exemption from registration
is available, except if any material misrepresentation has occurred in
connection with the Purchaser’s representations and warranties in connection
with the investment in the Securities, as required by the Principal Market or
as required by state and federal securities laws.


 


4.25         Dilution.  Except as set
forth in paragraph 4.24, the Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.


 


4.26         Patriot Act. 
The Company certifies that, to the best of Company’s knowledge, neither
the Company nor any of its Subsidiaries has been designated, nor is or shall be
owned or controlled, by a “suspected terrorist” as defined in Executive Order
13224.  The Company hereby acknowledges
that the Purchaser seeks to comply with all applicable laws concerning money
laundering and related activities.  In
furtherance of those efforts, the Company hereby represents, warrants and
covenants that:  (i) none of the
cash or property that the Company or any of its Subsidiaries will pay or will
contribute to the Purchaser has been or shall be derived from, or related to,
any activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company’s and/or its Subsidiaries’
control shall cause the Purchaser to be in violation of the United States Bank
Secrecy Act, the United States International Money Laundering Control Act of
1986 or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001. 
The Company shall promptly notify the Purchaser if any of these
representations, warranties or covenants ceases to be true and accurate
regarding the Company or any of its Subsidiaries.  The Company shall provide the Purchaser all
additional information regarding the Company or any of its Subsidiaries that
the Purchaser deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities.  The Company understands and agrees that if at
any time it is discovered that any of the foregoing representations, warranties
or covenants are incorrect, or if otherwise required by applicable law or
regulation related to money laundering or similar activities, the Purchaser may
undertake appropriate actions to ensure compliance with applicable law or
regulation, including but not limited to segregation and/or redemption of the
Purchaser’s investment in the Company. 
The Company further understands that the Purchaser may release
confidential information about the Company and its Subsidiaries and, if
applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests
of the Purchaser in light of relevant rules and regulations under the laws
set forth in subsection (ii) above.


 


4.27         ERISA.  Based upon
the Employee Retirement Income Security Act of 1974 (“ERISA”), and the
regulations and published interpretations thereunder:  (i) neither the Company nor any of its Subsidiaries
has engaged in any Prohibited Transactions (as defined in Section 406 of
ERISA and Section 4975 of the  Internal Revenue Code of 1986, as
amended (the “Code”)); (ii) each of the Company and each of its
Subsidiaries has met all applicable minimum


 


14





















 


funding
requirements under Section 302 of ERISA in respect of its plans; (iii) neither
the Company nor any of its Subsidiaries has any knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) neither the Company nor any of its Subsidiaries has any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than the Company’s or such Subsidiary’s employees;
and (v) neither the Company nor any of its Subsidiaries has withdrawn,
completely or partially, from any multi-employer pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.


 


5.             Representations
and Warranties of the Purchaser.  The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):


 


5.1           No Shorting. 
The Purchaser or any of its affiliates and investment partners has not,
will not and will not cause any person or entity, to directly engage in “short
sales” of the Company’s Common Stock as long as the Note shall be outstanding.


 


5.2           Requisite Power and Authority.  The Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions.  All corporate action on the Purchaser’s part
required for the lawful execution and delivery of this Agreement and the
Related Agreements have been or will be effectively taken prior to the
Closing.  Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of the Purchaser, enforceable in accordance with their terms,
except:


 


(a)           as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and


 


(b)           as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.


 


5.3           Investment Representations.  The Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon the Purchaser’s representations
contained in this Agreement, including, without limitation, that the Purchaser
is an “accredited investor” within the meaning of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”).  The Purchaser confirms that it has received
or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the Note
and the Warrant to be purchased by it under this Agreement and the Note Shares
and the Warrant Shares acquired by it upon the conversion of the Note and the
exercise of the Warrant, respectively. 
The Purchaser further confirms that it has had an opportunity to ask
questions and receive answers from the Company regarding the Company’s and its
Subsidiaries’ business, management and financial affairs and the terms and
conditions of the Offering, the Note, the


 


15





















 


Warrant
and the Securities and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.


 


5.4           The Purchaser Bears Economic Risk.  The Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests.  The Purchaser must bear
the economic risk of this investment until the Securities are sold pursuant to:
(i) an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.


 


5.5           Acquisition for Own Account.  The Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for the Purchaser’s own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.


 


5.6           The Purchaser Can Protect Its
Interest.  The Purchaser
represents that by reason of its, or of its management’s, business and
financial experience, the Purchaser has the capacity to evaluate the merits and
risks of its investment in the Note, the Warrant and the Securities and to
protect its own interests in connection with the transactions contemplated in
this Agreement and the Related Agreements. 
Further, the Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the Agreement or the
Related Agreements.


 


5.7           Accredited Investor.  The Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.


 


5.8           Legends.


 


(a)           The
Note shall bear substantially the following legend:


 


“THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.  THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO APOGEE TECHNOLOGY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”


 


(b)           The
Note Shares and the Warrant Shares, if not issued by DWAC system (as
hereinafter defined), shall bear a legend which shall be in substantially the
following


 


16





















 


form until such shares are covered by an effective registration
statement filed with the SEC:


 


“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS.  THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO APOGEE TECHNOLOGY,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”


 


(c)           The
Warrant shall bear substantially the following legend:


 


“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO APOGEE TECHNOLOGY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”


 


6.             Covenants of the
Company.  The Company covenants and
agrees with the Purchaser as follows:


 


6.1           Stop-Orders. 
The Company will advise the Purchaser, promptly after it receives notice
of issuance by the SEC, any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.


 


6.2           Listing.  The Company
shall promptly secure the listing or quotation, as applicable, of the shares of
Common Stock issuable upon conversion of the Note and upon the exercise of the
Warrant on the Principal Market upon which shares of Common Stock are listed or
quoted for trading, as applicable (subject to official notice of issuance) and
shall maintain such listing or quotation, as applicable, so long as any other
shares of Common Stock shall be so listed or quoted, as applicable.  The Company will maintain the listing or
quotation, as applicable, of its Common Stock on the Principal Market, and will
comply in all material respects with the Company’s reporting, filing and other
obligations in accordance with the rules or regulations of the Principal
Market.


 


17





















 


6.3           Market Regulations.  The Company shall notify the SEC, the
Principal Market and applicable state authorities, in accordance with their
individual requirements, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may be required
and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Purchaser and promptly provide copies
thereof to the Purchaser.


 


6.4           Reporting
Requirements.  The Company will
deliver, or cause to be delivered by way of public filing, to the Purchaser
each of the following, which shall be in form and detail acceptable to the
Purchaser:


 


(a)           As
soon as available, and in any event within one hundred and five (105) days
after the end of each fiscal year of the Company, each of the Company’s and
each of its Subsidiaries’ audited financial statements with a report of
independent certified public accountants of recognized standing selected by the
Company and acceptable to the Purchaser (the “Accountants”), which
annual financial statements shall be without qualification and shall include
each of the Company’s and each of its Subsidiaries’ balance sheet as at the end
of such fiscal year and the related statements of each of the Company’s and
each of its Subsidiaries’ income, retained earnings and cash flows for the
fiscal year then ended, prepared on a consolidating and consolidated basis to
include the Company, each Subsidiary of the Company and each of their
respective affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) if and when available, copies of any management
letters prepared by the Accountants; and (ii) a certificate of the Company’s
President, Chief Executive Officer or Chief Financial Officer stating that such
financial statements have been prepared in accordance with GAAP and whether or
not such officer has knowledge of the occurrence of any Event of Default  (as defined in the Note) and, if so, stating
in reasonable detail the facts with respect thereto;


 


(b)           As
soon as available and in any event within fifty (50) days after the end of each
fiscal quarter of the Company, an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of the Company and each
of its Subsidiaries as at the end of and for such quarter and for the year to
date period then ended, prepared on a consolidating and consolidated basis to
include all the Company, each Subsidiary of the Company and each of their
respective affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end adjustments and
accompanied by a certificate of the Company’s President, Chief Executive
Officer or Chief Financial Officer, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end
audit adjustments, and (ii) whether or not such officer has knowledge of
the occurrence of any Event of Default (as defined in the Note) not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;


 


18





















 


(c)           As
soon as available and in any event within fifteen (15) days after the end of
each calendar month, an unaudited/internal balance sheet and statements of
income, retained earnings and cash flows of each of the Company and its
Subsidiaries as at the end of and for such month and for the year to date
period then ended, prepared on a consolidating and consolidated basis to
include the Company, each Subsidiary of the Company and each of their
respective affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end adjustments and
accompanied by a certificate of the Company’s President, Chief Executive
Officer or Chief Financial Officer, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end
audit adjustments, and (ii) whether or not such officer has knowledge of
the occurrence of any Event of Default (as defined in the Note) not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;


 


(d)           The Company
shall timely file with the SEC all reports required to be filed pursuant to the
Exchange Act and refrain from terminating its status as an issuer required by
the Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.  Promptly after (i) the
filing thereof, copies of the Company’s most recent registration statements and
annual, quarterly, monthly or other regular reports which the Company files
with the SEC, and (ii) the issuance thereof, copies of such financial
statements, reports and proxy statements as the Company shall send to its
stockholders;


 


(e)           The
Company shall deliver to the Purchaser, and file with the SEC, (i) its
restated Annual Report on Form 10-K for its fiscal years ended December 31,
2003 and December 31, 2004 and (ii) its restated Quarterly Reports on
Form 10-Q for the fiscal quarters ended [Company counsel to insert other
dates] March 31, 2005 and June 30, 2005 (collectively, the “Restated
SEC Reports”), in each case, no later than September 15, 2005.  Each Restated SEC Report will be, at the time
of its filing, in substantial compliance with the requirements of its
respective form and none of the Restated SEC Reports, nor the financial
statements (and the notes thereto) included in the Restated SEC Reports, as of
their respective filing dates, will contain any untrue statement of a material
fact or will 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. 
The financial statements of the Company to be included in the Restated
SEC Reports will comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect
thereto.  Such financial statements shall
be prepared in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed) and shall fairly present in all
material respects the financial condition, the results of


 


19





















 


operations and the cash flows of the Company and its Subsidiaries, on a
consolidated basis, as of, and for, the periods presented in each such Restated
SEC Report;


 


(f)            The
financial statements to be included in each Restated SEC Report shall be
approved, and declared final, by the auditors of the Company the audit
committee of the Board of Directors of the Company, in each by no later than August 16,
2005 and approved by the Board of Directors of the Company by no later than August 17,
2005.  Each such financial statement
shall be delivered to the Purchaser within two (2) business days of such
final approval and declaration, as the case may be; and


 


(g)           The
Company shall deliver, or cause the applicable Subsidiary of the Company to
deliver, such other information as the Purchaser shall reasonably request.


 


6.5           Use of Funds.  The Company shall use the proceeds of the
sale of the Note and the Warrant for general working capital purposes only.


 


6.6           Access to Facilities.  Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or
any successor of the Purchaser), upon reasonable notice and during normal
business hours, at such person’s expense and accompanied by a representative of
the Company or any Subsidiary (provided that no such prior notice shall be required
to be given and no such representative of the Company or any Subsidiary shall
be required to accompany the Purchaser in the event the Purchaser believes such
access is necessary to preserve or protect the Collateral (as defined in the
Master Security Agreement) or following the occurrence and during the
continuance of an Event of Default (as defined in the Note)), to:


 


(a)           visit
and inspect any of the properties of the Company or any of its Subsidiaries;


 


(b)           examine
the corporate and financial records of the Company or any of its Subsidiaries
(unless such examination is not permitted by federal, state or local law or by
contract) and make copies thereof or extracts therefrom; and


 


(c)           discuss
the affairs, finances and accounts of the Company or any of its Subsidiaries
with the directors, officers and independent accountants of the Company or any
of its Subsidiaries.


 


Notwithstanding the foregoing, neither the Company nor
any of its Subsidiaries will provide any material, non-public information to
the Purchaser unless the Purchaser signs a confidentiality agreement and
otherwise complies with Regulation FD, under the federal securities laws.


 


6.7           Taxes. 
Each of the Company and each of its Subsidiaries will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company and its Subsidiaries; provided,
however, that any such tax, assessment, charge or levy need not be paid
currently if (i) the validity thereof shall currently and diligently


 


20





















 


be
contested in good faith by appropriate proceedings, (ii) such tax,
assessment, charge or levy shall have no effect on the lien priority of the
Purchaser in any property of the Company or any of its Subsidiaries and (iii) if
the Company and/or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto in accordance with GAAP; and provided, further,
that the Company and its Subsidiaries will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien which may have attached as security therefor.


 


6.8           Insurance.  Each of the Company and its Subsidiaries will
keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, explosion and
other risks customarily insured against by companies in similar business
similarly situated as the Company and its Subsidiaries; and the Company and its
Subsidiaries will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner which the Company reasonably believes is
customary for companies in similar business similarly situated as the Company
and its Subsidiaries and to the extent available on commercially reasonable
terms.  The Company, and each of its
Subsidiaries, will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for their respective obligations hereunder and under the
Related Agreements.  At the Company’s and
each of its Subsidiaries’ joint and several cost and expense in amounts and
with carriers reasonably acceptable to the Purchaser, each of the Company and
each of its Subsidiaries shall (i) keep all its insurable properties and
properties in which it has an interest insured against the hazards of fire,
flood, sprinkler leakage, those hazards covered by extended coverage insurance
and such other hazards, and for such amounts, as is customary in the case of
companies engaged in businesses similar to the Company’s or the respective
Subsidiary’s including business interruption insurance; (ii) maintain a
bond in such amounts as is customary in the case of companies engaged in
businesses similar to the Company’s or the respective Subsidiary’s insuring
against larceny, embezzlement or other criminal misappropriation of insured’s
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of the Company or any of its Subsidiaries
either directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker’s compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which the Company or the respective Subsidiary is engaged in
business; and (v) furnish the Purchaser with (x) copies of all policies
and evidence of the maintenance of such policies at least thirty (30) days
before any expiration date, (y) excepting the Company’s workers’ compensation
policy, endorsements to such policies naming the Purchaser as “co-insured” or “additional
insured” and appropriate loss payable endorsements in form and substance
satisfactory to the Purchaser, naming the Purchaser as loss payee, and (z)
evidence that as to the Purchaser the insurance coverage shall not be impaired
or invalidated by any act or neglect of the Company or any Subsidiary and the
insurer will provide the Purchaser with at least thirty (30) days notice prior
to cancellation.  The Company and each
Subsidiary shall instruct the insurance carriers that in the event of any loss
thereunder, the carriers shall make payment for such loss to the Company and/or
the Subsidiary and the Purchaser jointly. 
In the event that as of the date of receipt of each


 


21





















 


loss
recovery upon any such insurance, the Purchaser has not declared an event of
default with respect to this Agreement or any of the Related Agreements, then
the Company and/or such Subsidiary shall be permitted to direct the application
of such loss recovery proceeds toward investment in property, plant and
equipment that would comprise “Collateral” secured by the Purchaser’s security
interest pursuant to the Master Security Agreement or such other security
agreement as shall be required by the Purchaser, with any surplus funds to be
applied toward payment of the obligations of the Company to the Purchaser.  In the event that the Purchaser has properly
declared an event of default with respect to this Agreement or any of the
Related Agreements, then all loss recoveries received by the Purchaser upon any
such insurance thereafter may be applied to the obligations of the Company
hereunder and under the Related Agreements, in such order as the Purchaser may
determine.  Any surplus (following
satisfaction of all Company obligations to the Purchaser) shall be paid by the
Purchaser to the Company or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by the
Company or the Subsidiary, as applicable, to the Purchaser, on demand.


 


6.9           Intellectual Property.  Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.


 


6.10         Properties.  Each of the Company and each of its
Subsidiaries will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and each of the Company and each of its Subsidiaries will at all times
comply with each provision of all leases to which it is a party or under which
it occupies property if the breach of such provision could, either individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.


 


6.11         Confidentiality.  The Company will not, and will not permit any
of its Subsidiaries to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.  Notwithstanding the foregoing, the Company
may disclose the Purchaser’s identity and the terms of this Agreement to its
current and prospective debt and equity financing sources.


 


6.12         Required Approvals.  (I) For so long as twenty-five percent (25%)
of the principal amount of the Note is outstanding, the Company, without the
prior written consent of the Purchaser, shall not, and shall not permit any of
its Subsidiaries to:


 


(a)           (i) directly
or indirectly declare or pay any dividends, other than dividends paid to the
Company or any of its wholly-owned Subsidiaries, (ii) issue any preferred
stock that is manditorily redeemable prior to the one year anniversary of the
Maturity Date (as defined in the Note) or (iii) redeem any of its
preferred stock or other equity interests;


 


22





















 


(b)           liquidate
or dissolve or effect a material reorganization (it being understood that in no
event shall the Company or any of its Subsidiaries dissolve, liquidate or merge
with any other person or entity (unless, in the case of such a merger, the
Company or, in the case of merger not involving the Company, such Subsidiary,
as applicable, is the surviving entity);


 


(c)           become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under
any circumstances) restrict the Company’s or any of its Subsidiaries, right to
perform the provisions of this Agreement, any Related Agreement or any of the
agreements contemplated hereby or thereby;


 


(d)           materially
alter or change the scope of the business of the Company and its Subsidiaries
taken as a whole;


 


(e)           (i) create,
incur, assume or suffer to exist any indebtedness (exclusive of trade debt and
debt incurred to finance the purchase of equipment (not in excess of ten
percent (10%) of the fair market value of the Company’s and its Subsidiaries’
assets)) whether secured or unsecured other than (x) the Company’s obligations
owed to the Purchaser, (y) indebtedness set forth on Schedule 6.12(e) attached
hereto and made a part hereof and any refinancings or replacements thereof on
terms no less favorable to the Purchaser than the indebtedness being refinanced
or replaced, and (z) any indebtedness incurred in connection with the purchase
of assets (other than equipment) in the ordinary course of business, or any
refinancings or replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or replaced, so long as any
lien relating thereto shall only encumber the fixed assets so purchased and no
other assets of the Company or any of its Subsidiaries; (ii) cancel any
indebtedness owing to it in excess of $150,000 in the aggregate during any 12
month period; (iii) assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other
person or entity, except the endorsement of negotiable instruments by the
Company or any Subsidiary thereof for deposit or collection or similar
transactions in the ordinary course of business or guarantees of indebtedness
otherwise permitted to be outstanding pursuant to this clause (e); and


 


(II) The Company, without the prior written consent of
the Purchaser shall not: (a) and shall not permit any of its Subsidiaries
to, create or acquire any Subsidiary after the date hereof unless (i) such
Subsidiary is a wholly-owned Subsidiary of the Company, (ii) (x) such
Subsidiary becomes a party to the Master Security Agreement, (y) each of the
Company and such Subsidiary enters into a stock pledge agreement pledging the
equity interests of such Subsidiary 
(together with all future equity interests owned by the Company or such
Subsidiary) for the benefit of the Purchaser to secure the Company’s
obligations under this Agreement and the Related Agreements and (z) such  Subsidiary enters into a subsidiary guaranty
for the benefit of the Purchaser guaranteeing the obligations of the Company
under this Agreement and the Related Agreements and (iii) to the extent
required by the Purchaser, satisfies each condition of this Agreement and the


 


23





















 


Related Agreements as if such Subsidiary were a Subsidiary on the
Closing Date; or (b) (i) make, or permit any of its Subsidiaries
(other than Dubla, Inc.) to make, any investments in, or any loans or
advances to, Dubla, Inc., other than, so long as no Event of Default (as
defined in the Note) has occurred and is continuing, immaterial investments,
loans and/or advances made in the ordinary course of business or (ii) transfer,
or permit any of its Subsidiaries (other than Dubla, Inc.) to transfer,
any of its assets to Dubla, Inc., other than, so long as no Event of
Default has occurred and is continuing, immaterial asset transfers made in the
ordinary course of business.


 


6.13         Reissuance of Securities.  The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.8
above at such time as:


 


(a)           the
holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k)
under the Securities Act; or


 


(b)           upon
resale subject to an effective registration statement after such Securities are
registered under the Securities Act.


 


The Company agrees to
cooperate with the Purchaser in connection with all resales pursuant to Rule 144(d) and
Rule 144(k), to the extent the request is valid and the exemptions are
available,  and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the Purchaser and broker if any.


 


6.14         Opinion. 
On the Closing Date, the Company will deliver to the Purchaser an
opinion acceptable to the Purchaser from the Company’s external legal
counsel.  The Company will provide, at
the Company’s expense, such other legal opinions in the future as are deemed
reasonably necessary by the Purchaser (and acceptable to the Purchaser) in
connection with the conversion of the Note and exercise of the Warrant.


 


6.15         Margin Stock.  The Company will not permit any of the
proceeds of the Note or the Warrant to be used directly or indirectly to “purchase”
or “carry” “margin stock” or to repay indebtedness incurred to “purchase” or “carry”
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.


 


6.16         Financing
Right of First Refusal.


 


(a)           The Company
hereby grants to the Purchaser a right of first refusal, while the Note remains
outstanding, to provide Additional Financing (as defined below) to be issued by
the Company and/or any of its Subsidiaries, subject to the following terms and
conditions.  From the date hereof until
the termination of the Note,  prior to
the incurrence of any additional convertible indebtedness, i.e. convertible to equity and/or the sale
or issuance of any convertible equity interests, i.e. convertible to debt, of the Company or any of its
Subsidiaries, understanding that any financing that involves pure equity or
pure debt, no conversion feature, is not included in this definition of  (an “Additional Financing”).  The Company and/or any Subsidiary of the
Company, as the


 


24





















 


case may
be, shall notify the Purchaser of its intention to enter into such Additional
Financing.  In connection therewith, the
Company and/or the applicable Subsidiary thereof shall submit a fully executed
term sheet (a “Proposed Term Sheet”) to the Purchaser setting forth the terms,
conditions and pricing of any such Additional Financing (such financing to be
negotiated on “arm’s length” terms and the terms thereof to be negotiated in
good faith) proposed to be entered into by the Company and/or such
Subsidiary.  The Purchaser shall have the
right, but not the obligation, to deliver its own proposed term sheet (the “Purchaser
Term Sheet”) setting forth the terms and conditions upon which the Purchaser
would be willing to provide such Additional Financing to the Company and/or
such Subsidiary.  The Purchaser Term
Sheet shall contain terms no less favorable to the Company and/or such
Subsidiary than those outlined in Proposed Term Sheet.  The Purchaser shall deliver such Purchaser
Term Sheet  within ten business days of
receipt of each such Proposed Term Sheet. 
If the provisions of the Purchaser Term Sheet are at least as favorable
to the Company and/or such Subsidiary, as the case may be, as the provisions of
the Proposed Term Sheet, the Company and/or such Subsidiary shall enter into
and consummate the Additional Financing transaction outlined in the Purchaser
Term Sheet.


 


(b)           The Company
will not, and will not permit its Subsidiaries to, while the Note remains
outstanding, agree, directly or indirectly, to any restriction with any person
or entity which limits the ability of the Purchaser to consummate an Additional
Financing with the Company or any of its Subsidiaries.


 


6.17         Authorization and Reservation of
Shares.  The Company shall at all
times have authorized and reserved a sufficient number of shares of Common
Stock to provide for the conversion of the Note and exercise of the Warrants.


 


6.18         *************************************************************************************

***********************************************************************************************************************************


 


7.                                       Covenants of the Purchaser.  The Purchaser covenants and agrees with the
Company as follows:


 


7.1           Confidentiality.  The Purchaser will not disclose, and will not
include in any public announcement, the name of the Company, unless expressly
agreed to by the Company or unless such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.


 


7.2           Non-Public Information.  The Purchaser will not effect any sales in
the shares of the Company’s Common Stock while in possession of material,
non-public information regarding the Company if such sales would violate U.S.
securities law.


 


7.3           Limitation on Acquisition of
Common Stock of the Company. 
Notwithstanding anything to the contrary contained in this Agreement,
any Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions


 


25





















 


between
the Purchaser and the Company, the Purchaser may not acquire stock in the
Company (including, without limitation, pursuant to a contract to purchase, by
exercising an option or warrant, by converting any other security or
instrument, by acquiring or exercising any other right to acquire, shares of
stock or other security convertible into shares of stock in the Company, or
otherwise, and such contracts, options, warrants, conversion or other rights
shall not be enforceable or exercisable) to the extent such stock acquisition
would cause any interest (including any original issue discount) payable by the
Company to the Purchaser not to qualify as “portfolio interest” within the
meaning of Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of
the Code, taking into account the constructive ownership rules under Section 871(h)(3)(C) of
the Code (the “Stock Acquisition Limitation”). 
The Stock Acquisition Limitation shall automatically become null and
void without any notice to the Company upon the earlier to occur of either (a) the
Company’s delivery to the Purchaser of a Notice of Redemption (as defined in
the Note) or (b) the existence of an Event of Default (as defined in the
Note) at a time when the average closing price of the Company’s common stock as
reported by Bloomberg, L.P. on the Principal Market for the immediately
preceding five trading days is greater than or equal to 150% of the Fixed
Conversion Price (as defined in the Note).


 


8.             Covenants
of the Company and the Purchaser Regarding Indemnification.


 


8.1           Company Indemnification.  The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser’s officers,
directors, agents, affiliates, control persons, and principal shareholders,
against all claims, costs, expenses, liabilities, obligations, losses or
damages (including reasonable legal fees) of any nature, incurred by or imposed
upon the Purchaser which result, arise out of or are based upon: (i) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any other
Related Agreement or in any exhibits or schedules attached hereto or thereto;
or (ii) any breach or default in performance by Company or any of its
Subsidiaries of any covenant or undertaking to be performed by Company or any
of its Subsidiaries hereunder, under any other Related Agreement or any other
agreement entered into by the Company and/or any of its Subsidiaries and the
Purchaser relating hereto or thereto.


 


8.2           Purchaser’s Indemnification.  The Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company’s officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claims, costs, expenses, liabilities, obligations, losses
or damages (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which result, arise out of or are based upon:  (i) any misrepresentation by the
Purchaser or breach of any warranty by the Purchaser in this Agreement or in
any exhibits or schedules attached hereto or any Related Agreement; or (ii) any
breach or default in performance by the Purchaser of any covenant or
undertaking to be performed by the Purchaser hereunder, or any other agreement
entered into by the Company and the Purchaser relating hereto.


 


26





















 


9.             Conversion of
Convertible Note.


 


9.1           Mechanics of Conversion.


 


(a)           Provided
the Purchaser has notified the Company of the Purchaser’s intention to sell the
Note Shares and the Note Shares are included in an effective registration
statement or are otherwise exempt from registration when sold:  (i) upon the conversion of the Note or
part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel reasonably
acceptable to the Purchaser following a request by the Purchaser) to assure
that the Company’s transfer agent shall issue shares of the Company’s Common
Stock in the name of the Purchaser (or its nominee) or such other persons as
designated by the Purchaser in accordance with Section 9.1(b) hereof
and in such denominations to be specified representing the number of Note
Shares issuable upon such conversion; and (ii) the Company warrants that
no instructions other than these instructions have been or will be given to the
transfer agent of the Company’s Common Stock and that after the Effectiveness
Date (as defined in the Registration Rights Agreement) the Note Shares issued
will be freely transferable subject to the prospectus delivery requirements of
the Securities Act and the provisions of this Agreement, and will not contain a
legend restricting the resale or transferability of the Note Shares.


 


(b)           The
Purchaser will give notice of its decision to exercise its right to convert the
Note or part thereof by telecopying or otherwise delivering an executed and
completed notice of the number of shares to be converted to the Company (the “Notice
of Conversion”).  The Purchaser will not
be required to surrender the Note until the Purchaser receives a credit to the
account of the Purchaser’s prime broker through the DWAC system (as defined
below), representing the Note Shares or until the Note has been fully
satisfied.  Each date on which a Notice
of Conversion is telecopied or delivered to the Company in accordance with the
provisions hereof shall be deemed a “Conversion Date.”  Pursuant to the terms of the Notice of
Conversion, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to the Company of the 
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Purchaser’s prime broker with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business
days after receipt by the Company of the Notice of Conversion (the “Delivery
Date”).


 


(c)           The
Company understands that a delay in the delivery of the Note Shares in the form
required pursuant to Section 9 hereof beyond the Delivery Date could
result in economic loss to the Purchaser. 
In the event that the Company fails to direct its transfer agent to
deliver the Note Shares to the Purchaser via the DWAC system within the time
frame set forth in Section 9.1(b) above and the Note Shares are not
delivered to the Purchaser by the Delivery Date, as compensation to the
Purchaser for such loss, the Company agrees to pay late payments to the
Purchaser for late issuance of the Note


 


27





















 


Shares in the form required pursuant to Section 9 hereof upon
conversion of the Note in the amount equal to: $250 per business day after the
Delivery Date.  The Company shall pay any
payments incurred under this Section in immediately available funds upon
demand.


 


10.           Registration
Rights.


 


10.1         Registration Rights Granted.  The Company hereby grants registration rights
to the Purchaser pursuant to the Registration Rights Agreement.


 


10.2         Offering Restrictions.  Except as previously disclosed in the SEC
Reports, or stock or stock options granted to employees or directors of the
Company (these exceptions hereinafter referred to as the “Excepted Issuances”),
neither the Company nor any of its Subsidiaries will, prior to the full
repayment or conversion of the Note (together with all accrued and unpaid
interest and fees related thereto), (x) enter into any equity line of credit
agreement or similar agreement or (y) issue, or enter into any agreement to
issue, any securities with a variable/floating conversion and/or pricing
feature which are or could be (by conversion or registration) free-trading
securities (i.e.  common stock subject to
a registration statement).


 


11.           Miscellaneous.


 


11.1         Governing Law, Jurisdiction and
Waiver of Jury Trial.


 


(a)           THIS AGREEMENT
AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.


 


(b)           THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE
PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
YORK; AND FURTHER  PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL
BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO
REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY
OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY
AGREEMENT), OR


 


28





















 


TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER.  THE COMPANY EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS.  THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.


 


(c)           THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS.  THEREFORE, TO ACHIEVE
THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT,
OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED
WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS
RELATED HERETO OR THERETO.


 


11.2         Severability.  Wherever possible each provision of this
Agreement and the Related Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or illegal
under applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity or illegality, without invalidating the remainder of
such provision or the remaining provisions thereof which shall not in any way
be affected or impaired thereby.


 


11.3         Survival. 
The representations, warranties, covenants and agreements made herein
shall survive any investigation made by the Purchaser and the closing of the
transactions contemplated hereby to the extent provided therein.  All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.  All indemnities set forth herein shall
survive the execution, delivery and termination of this Agreement and the Note and
the making and repayment of the obligations arising hereunder, under the Note
and under the other Related Agreements.


 


29





















 


11.4         Successors.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person or entity
which shall be a holder of the Securities from time to time, other than the
holders of Common Stock which has been sold by the Purchaser pursuant to Rule 144
or an effective registration statement. 
The Purchaser shall not be permitted to assign its rights hereunder or
under any Related Agreement to a competitor of the Company unless an Event of
Default (as defined in the Note) has occurred and is continuing.


 


11.5         Entire Agreement; Maximum Interest.  This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and
therein.  Nothing contained in this
Agreement, any Related Agreement or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum rate
permitted by applicable law.  In the
event that the rate of interest or dividends required to be paid or other
charges hereunder exceed the maximum rate permitted by such law, any payments
in excess of such maximum shall be credited against amounts owed by the Company
to the Purchaser and thus refunded to the Company.


 


11.6         Amendment and Waiver.


 


(a)           This
Agreement may be amended or modified only upon the written consent of the
Company and the Purchaser.


 


(b)           The
obligations of the Company and the rights of the Purchaser under this Agreement
may be waived only with the written consent of the Purchaser.


 


(c)           The
obligations of the Purchaser and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.


 


11.7         Delays or Omissions.  It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring.  All remedies,
either under this Agreement or the Related Agreements, by law or otherwise
afforded to any party, shall be cumulative and not alternative.


 


11.8         Notices. 
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given:


 


(a)           upon
personal delivery to the party to be notified;


 


30





















 


(b)           when
sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day;


 


(c)           five
(5) business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or


 


(d)           one
(1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.


 


All communications shall be sent as follows:


 


	
  If to the Company, to:

  	
   

  	
  Apogee
  Technology, Inc.

  129 Morgan Drive

  Norwood, MA 02062

  Telephone: 781-551-9450

  Facsimile: 781-440-9528

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Herbert M. Stein, Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Theodore M.
  Grannatt, Esq.

  Mintz Levin Cohn Ferris Glovsky and Popeo PC

  One Financial Center

  Boston, MA 02111 

  
	
   

  	
   

  	
  Facsimile:

  	
  617-542-2241

  
	
   

  	
   

  	
   

  
	
  If to the Purchaser, to:

  	
   

  	
  Laurus Master Fund,
  Ltd.

  c/o M&C Corporate Services Limited

  P.O. Box 309 GT

  Ugland House George Town

  South Church Street

  Grand Cayman, Cayman Islands

  
	
   

  	
   

  	
  Facsimile:

  	
  345-949-8080

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  John E. Tucker, Esq.

  825 Third Avenue 14th Floor

  New York, NY 10022

  
	
   

  	
   

  	
  Facsimile:

  	
  212-541-4434

  



 


31





















 


or at such other address as the Company or the
Purchaser may designate by written notice to the other parties hereto given in
accordance herewith.


 


11.9         Attorneys’ Fees.  In the event that any suit or action is
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement and/or such Related
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.


 


11.10       Titles and Subtitles.  The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.


 


11.11       Facsimile Signatures; Counterparts.  This Agreement may be executed by facsimile
signatures and in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one agreement.


 


11.12       Broker’s Fees.  Except as set forth on Schedule 11.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker’s or finder’s fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein.  Each party hereto
further agrees to indemnify each other party for any claims, losses or expenses
incurred by such other party as a result of the representation in this Section 11.13
being untrue.


 


11.13       Construction.  Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement or any Related Agreement to favor any
party against the other.


 


[THE REMAINDER OF
THIS PAGE IS INTENTIONALLY LEFT BLANK


 


32





















 


IN WITNESS WHEREOF, the parties hereto have executed
the SECURITIES PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.


 


	
  COMPANY:

  	
  PURCHASER:

  
	
   

  	
   

  
	
  APOGEE TECHNOLOGY, INC.

  	
  LAURUS MASTER FUND,
  LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/

  	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										



 


33





















 


EXHIBIT A


 


FORM OF
CONVERTIBLE NOTE


 


A-1





















 


EXHIBIT B


 


FORM OF
WARRANT


 


B-1





















 


EXHIBIT C


 


FORM OF
OPINION


 


C-1





















 


EXHIBIT D


 


FORM OF
ESCROW AGREEMENT


 


D-1