Document:

Exhibit 10.6

 

THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON STOCK 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 UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO APOGEE TECHNOLOGY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

Right to Purchase up to the Applicable Warrant Share
Amount referred to below of Common Stock of

Apogee Technology, Inc. 

(subject to adjustment as provided herein)

 

COMMON STOCK
PURCHASE WARRANT

 

	
  No.

  	
   

  	
   

  	
  Issue Date:
  August 9, 2005

  

 

APOGEE TECHNOLOGY, INC.,
a corporation organized under the laws of the State of Delaware (the “Company”),
hereby certifies that, for value received, BISCAYNE CAPITAL MARKETS, INC., or
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New
York time, through the close of business August 9, 2012 (the “Expiration
Date”), up to the Applicable Warrant Share Amount (as defined below) of fully
paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01
par value per share, at the applicable Exercise Price (as defined below) per
share.  The number and character of such
shares of Common Stock and the applicable Exercise Price per share are subject
to adjustment as provided herein.

 

As used herein the
following terms, unless the context otherwise requires, have the following
respective meanings:

 

(a)           The term “Applicable Warrant Share Amount” shall
mean 8,500 shares of Common Stock (subject to adjustment as provided herein).

 

(b)           The term “Company” shall include Apogee Technology, Inc.
and any corporation which shall succeed, or assume the obligations of, Apogee
Technology, Inc. hereunder.

 

(c)           The term “Common Stock” includes (i) the
Company’s Common Stock, par value $0.01 per share; and (ii) any other
securities into which or for which any of the securities described in the
preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

 

 

(d)           The term “Other Securities” refers to any stock
(other than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 4 or otherwise.

 

(e)           The “Exercise Price” applicable under this Warrant
shall be a price of $1.22 for each share of Common Stock acquired hereunder (subject
to adjustment as provided herein).

 

1.             Exercise
of Warrant.

 

1.1.          Number
of Shares Issuable upon Exercise. 
From and after the date hereof through and including the Expiration
Date, the Holder shall be entitled to receive, upon exercise of this Warrant in
whole or in part, by delivery of an original or fax copy of an exercise notice
in the form attached hereto as Exhibit A (the “Exercise Notice”), 8500
shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

 

1.2.          Fair
Market Value.  For purposes hereof,
the “Fair Market Value” of a share of Common Stock as of a particular date (the
“Determination Date”) shall mean:

 

(a)           If the
Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The Nasdaq
Stock Market, Inc.(“Nasdaq”), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.

 

(b)           If the
Company’s Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD Over the Counter
Bulletin Board then the mean of the average of the closing bid and asked prices
reported for the last business day immediately preceding the Determination
Date.

 

(c)           Except as
provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of
agreement by arbitration in accordance with the rules then in effect of
the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided.

 

(d)           If the
Determination Date is the date of a liquidation, dissolution or winding up, or
any event deemed to be a liquidation, dissolution or winding up pursuant to the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation, dissolution
or winding up, plus all other amounts to be payable per share in respect of the
Common Stock in liquidation under the charter, assuming for the purposes of
this clause (d) that all of the shares of Common Stock then issuable upon
exercise of the Warrant are outstanding at the Determination Date.

 

2

 

1.3.          Company
Acknowledgment.  The Company will, at
the time of the exercise of this Warrant, upon the request of the holder hereof
acknowledge in writing its continuing obligation to afford to such holder any
rights to which such holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant.  If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.

 

1.4.          Trustee
for Warrant Holders.  In the event
that a bank or trust company shall have been appointed as trustee for the
holders of this Warrant pursuant to Subsection 3.2, such bank or trust
company shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.

 

2.             Procedure
for Exercise.

 

2.1.          Delivery
of Stock Certificates, Etc., on Exercise. 
The Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares in accordance
herewith.  As soon as practicable after
the exercise of this Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which such Holder is entitled upon such exercise pursuant to Section 1
or otherwise.

 

2.2.          Exercise.  Payment may be made in cash, wire transfer,
by certified or official bank check payable to the order of the Company equal
to the applicable aggregate Exercise Price, for the number of Common Shares
specified in such Exercise Notices (as such number shall be adjusted to reflect
any adjustment in the total number of shares of Common Stock issuable to the
Holder per the terms of this Warrant) and the Holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock determined as provided herein.

 

3.             Effect
of Reorganization, Etc.; Adjustment of Exercise Price.

 

3.1.          Reorganization,
Consolidation, Merger, Etc.  In case
at any time or from time to time, the Company shall: (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other person
pursuant to a specific plan or arrangement to dissolve the Company, then, in
each such case, as a condition to the consummation of such a transaction,
proper and adequate provision

 

3

 

shall be made by the Company
whereby the Holder, on the exercise hereof as provided in Section 1 at any
time after the consummation of such reorganization, consolidation or merger or
the effective date of such dissolution, as the case may be, shall receive, in
lieu of the Common Stock (or Other Securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.

 

3.2.          Dissolution.  In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to the
Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder 
pursuant to Section 3.1, or, if the Holder shall so instruct the
Company, to a bank or trust company specified by the Holder and having its
principal office in New York, NY as trustee for the Holder  (the “Trustee”).

 

3.3.          Continuation
of Terms.  Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4.  In the event this
Warrant does not continue in full force and effect after the consummation of
the transactions described in this Section 3, then the Company’s
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

 

4.             Extraordinary
Events Regarding Common Stock.  In
the event that the Company shall (a) issue additional shares of the Common
Stock as a dividend or other distribution on outstanding Common Stock or any
preferred stock issued by the Company, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock, then, in each
such event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Exercise Price then in effect.
The Exercise Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section 4.  The number of shares of Common Stock set
forth in the definition of Applicable Warrant Share Amount above that the
Holder shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive shall be adjusted to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction
of

 

4

 

which (a) the numerator is
the Exercise Price that would otherwise (but for the provisions of this Section 4)
be in effect, and (b) the denominator is the Exercise Price in effect on the
date of such exercise (taking into account the provisions of this Section 4).

 

5.             Certificate
as to Adjustments.  In each case of
any adjustment or readjustment of the shares of Common Stock (or Other
Securities) issuable on the exercise of this Warrant as set forth in the
definition of Applicable Warrant Share Amount above, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee
to compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Common Stock (or Other
Securities) issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock (or Other Securities) outstanding or deemed to
be outstanding, and (c) the Exercise Price and the number of shares of
Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such adjustment or readjustment and as adjusted or
readjusted as provided in this Warrant. 
The Company will forthwith mail a copy of each such certificate to the
Holder  and any Warrant agent of the
Company (appointed pursuant to Section 9 hereof).

 

6.             Reservation
of Stock, Etc., Issuable on Exercise of Warrant.  The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of this
Warrant, shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of this Warrant.

 

7.             Assignment;
Exchange of Warrant.  Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”)
in whole or in part.  On the surrender
for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B
attached hereto (the “Transferor Endorsement Form”) and together with evidence
reasonably satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, the provision of a
legal opinion from the Transferor’s counsel (at the Company’s expense) that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense (but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each
a “Transferee”), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.

 

8.             Replacement
of Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.

 

5

 

9.             Warrant
Agent.  The Company may, by written
notice to the each Holder of the Warrant, appoint an agent for the purpose of
issuing Common Stock (or Other Securities) on the exercise of this Warrant
pursuant to Section 1, exchanging this Warrant pursuant to Section 7,
and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.

 

10.           Transfer
on the Company’s Books.  Until this
Warrant is transferred on the books of the Company, the Company may treat the
registered Holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

 

11.           Notices,
Etc.  All notices and other
communications from the Company to the Holder 
shall be mailed by first class registered or certified mail, postage prepaid,
at such address as may have been furnished to the Company in writing by such
Holder or, until any such Holder furnishes to the Company an address, then to,
and at the address of, the last Holder 
who has so furnished an address to the Company.

 

12.           Miscellaneous.  This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.  THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION BROUGHT CONCERNING THE
TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK;
PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND
BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. 
The individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to
recover from the other party its reasonable attorneys’ fees and costs.  In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any such provision
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of this Warrant.  The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision hereof. 
The Company acknowledges that legal counsel participated in the
preparation of this Warrant 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 Warrant to favor any party
against the other party.

 

[BALANCE OF PAGE
INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

 

6

 

IN WITNESS WHEREOF, the
Company has executed this Warrant as of the date first written above.

 

 

	
   

  	
  APOGEE TECHNOLOGY, INC.

  
	
   

  	
   

  
	
  WITNESS:

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
					

 

7

 

Exhibit A

 

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

 

TO:         Apogee Technology, Inc.

 

Attention:          Chief Financial Officer

 

The undersigned, pursuant
to the provisions set forth in the attached Warrant (No.    ),
hereby irrevocably elects to purchase (check applicable box):

 

	
  o

  	
              shares
  of the Common Stock covered by such Warrant; or

  
	
   

  	
   

  
	
  o

  	
  the
  maximum number of shares of Common Stock covered by such Warrant pursuant to
  the cashless exercise procedure set forth in Section 2.

  

 

The undersigned herewith
makes payment of the full Exercise Price for such shares at the price per share
provided for in such Warrant, which is $           .  Such payment takes the form of 

 

	
   

  	
  $                in lawful money of the United States

  

 

The undersigned requests
that the certificates for such shares be issued in the name of, and delivered
to                                               
whose address is                                                                            .

 

The undersigned
represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant
to registration of the Common Stock under the Securities Act of 1933, as amended
(the “Securities Act”) or pursuant to an exemption from registration under the
Securities Act.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform to name of holder
  as

  specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  

 

A-1

 

Exhibit B

 

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

 

For value received, the
undersigned hereby sells, assigns, and transfers unto the person(s) named below
under the heading “Transferees” the right represented by the within Warrant to
purchase the percentage and number of shares of Common Stock of Apogee
Technology, Inc. into which the within Warrant relates specified under the
headings “Percentage Transferred” and “Number Transferred,” respectively, opposite
the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of Apogee Technology, Inc. with
full power of substitution in the premises.

 

	
  Transferees

  	
   

  	
  Address

  	
   

  	
  Percentage

  Transferred

  	
   

  	
  Number

  Transferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform to name of holder
  as

  specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIGNED IN THE PRESENCE OF:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  
	
  [TRANSFEREE]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  
						

 

B-1Exhibit 10.7

 

THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS.  THIS NOTE AND THE
COMMON SHARES 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 UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO APOGEE
TECHNOLOGY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

SECURED
CONVERTIBLE TERM NOTE

 

FOR
VALUE RECEIVED, APOGEE TECHNOLOGY, INC., a Delaware corporation (the “Company”), promises to pay to LAURUS MASTER FUND, LTD., c/o
M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080
(the “Holder”) or its registered assigns or
successors in interest, the sum of Two Million Dollars ($2,000,000), together
with any accrued and unpaid interest hereon, on August 9, 2008 (the “Maturity Date”) if not sooner paid.

 

Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof
by and between the Company and the Holder (as amended, modified and/or
supplemented from time to time, the “Purchase Agreement”).

 

The following terms shall apply to this Secured
Convertible Term Note (this “Note”):

 

ARTICLE I

CONTRACT RATE AND AMORTIZATION

 

1.1           Contract Rate.  Subject to Sections 4.2 and 5.10, interest
payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum equal to
the “prime rate” published in The Wall Street Journal from time to time
(the “Prime Rate”), plus two percent (2%)
(the “Contract Rate”).  The Contract Rate shall be increased or
decreased as the case may be for each increase or decrease in the Prime Rate in
an amount equal to such increase or decrease in the Prime Rate; each change to
be effective as of the day of the change in the Prime Rate.  Subject to Section 1.2, the Contract
Rate shall not at any time be less than six percent (6%).  Interest shall be (i) calculated on the
basis of a 360 day year, and (ii) payable monthly, in arrears, commencing
on September 1, 2005, on the first business day of each consecutive
calendar month thereafter through and including the Maturity Date, and on the
Maturity Date, whether by acceleration or otherwise.

 

1.2           Contract Rate Adjustments and
Payments.  The Contract Rate shall be
calculated on the last business day of each calendar month hereafter (other
than for increases or decreases in the Prime Rate which shall be calculated and
become effective in accordance with the terms of Section 1.1) until the
Maturity Date (each a “Determination Date”)
and shall be subject to adjustment as set forth herein.  If (i) the Company shall have registered
the shares of

 

 

the Common Stock underlying the conversion of this Note and each
Warrant on a registration statement declared effective by the Securities and
Exchange Commission (the “SEC”), and (ii) the
market price (the “Market Price”)
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for
the five (5) trading days immediately preceding a Determination Date
exceeds the then applicable Fixed Conversion Price by at least twenty-five
percent (25%), the Contract Rate for the succeeding calendar month shall
automatically be reduced by 200 basis points (200 b.p.) (2%) for each
incremental twenty-five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price.  Notwithstanding the foregoing (and anything
to the contrary contained herein), in no event shall the Contract Rate at any
time be less than zero percent (0%).

 

1.3           Principal Payments.  Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the “Principal Amount”) shall be made by the Company on January 1,
2006 and on the first business day of each succeeding month thereafter through
and including the Maturity Date (each, an “Amortization Date”).  Subject to Article III below, commencing
on the first Amortization Date, the Company shall make monthly payments to the
Holder on each Repayment Date, each such payment in the amount of $62,500
together with any accrued and unpaid interest on such portion of the Principal
Amount plus any and all other unpaid amounts which are then owing under this
Note, the Purchase Agreement and/or any other Related Agreement (collectively,
the “Monthly Amount”).  Any outstanding Principal Amount together
with any accrued and unpaid interest and any and all other unpaid amounts which
are then owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement shall be due and payable on the
Maturity Date.

 

ARTICLE II

CONVERSION AND REDEMPTION

 

2.1           Payment of Monthly Amount.

 

(a)           Payment in Cash or Common Stock.  If the Monthly Amount (or a portion of such
Monthly Amount if not all of the Monthly Amount may be converted into shares of
Common Stock pursuant to Section 3.2) is required to be paid in cash
pursuant to Section 2.1(b), then the Company shall pay the Holder an
amount in cash equal to 103% of the Monthly Amount (or such portion of such
Monthly Amount to be paid in cash) due and owing to the Holder on the
Amortization Date.  If such repayment in
cash is required, in whole or part, the underlying data as reported by
Bloomberg, L.P. used to support such calculations, will be provided to the
Company upon request.  If the Monthly
Amount (or a portion of such Monthly Amount if not all of the Monthly Amount
may be converted into shares of Common Stock pursuant to Section 3.2) is
required to be paid in shares of Common Stock pursuant to Section 2.1(b),
the number of such shares to be issued by the Company to the Holder on such
Amortization Date (in respect of such portion of the Monthly Amount converted
into shares of Common Stock pursuant to Section 2.1(b)), shall be the
number determined by dividing (i) the portion of the Monthly Amount
converted into shares of Common Stock, by (ii) the then applicable Fixed
Conversion Price.  For purposes hereof,
subject to Section 3.6 hereof, the initial “Fixed
Conversion Price” means $ 1.05 [which has been determined on the
date of this Note as an amount equal to 103% of the average closing price of
the Common Stock for the ten (10)

 

2

 

trading days immediately prior to the Closing Date; provided that the
Fixed Conversion Price shall not exceed 110% of the closing price on the date
immediately prior to the Closing Date].

 

(b)           Monthly Amount Conversion
Conditions.  Subject to
Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares
of Common Stock all or a portion of the Monthly Amount due on each Amortization
Date if the following conditions (the “Conversion Criteria”)
are satisfied: (i) the average closing price of the Common Stock as
reported by Bloomberg, L.P. on the Principal Market for the five (5) trading
days immediately preceding such Amortization Date shall be greater than or
equal to 115% of the Fixed Conversion Price and (ii) the amount of such
conversion does not exceed twenty five percent (25%) of the aggregate dollar
trading volume of the Common Stock for the period of twenty-two (22) trading
days immediately preceding such Amortization Date.  If subsection (i) of the Conversion
Criteria is met but subsection (ii) of the Conversion Criteria is not
met as to the entire Monthly Amount, the Holder shall convert only such part of
the Monthly Amount that meets subsection (ii) of the Conversion
Criteria.  Any portion of the Monthly
Amount due on an Amortization Date that the Holder has not been able to convert
into shares of Common Stock due to the failure to meet the Conversion Criteria,
shall be paid in cash by the Company at the rate of 103% of the Monthly Amount
otherwise due on such Amortization Date, within five (5) business days of
such Amortization Date.

 

2.2           No Effective Registration.  Notwithstanding anything to the contrary
herein, the Holder acknowledges that the Company has not, as of the date
hereof, registered any securities issued or issuable pursuant to this Note, and
none of the Company’s obligations to the Holder may be converted into Common
Stock unless (a) either (i) an effective current Registration
Statement (as defined in the Registration Rights Agreement) covering the shares
of Common Stock to be issued in connection with satisfaction of such
obligations exists or (ii) an exemption from registration for resale of
all of the Common Stock issued and issuable is available pursuant to Rule 144
of the Securities Act and (b) no Event of Default (as hereinafter defined)
exists and is continuing, unless such Event of Default is cured within any
applicable cure period or otherwise waived in writing by the Holder.

 

2.3           Optional Redemption in Cash.  The Company may prepay the outstanding
principal amount of this Note in its entirety in cash (“Optional
Redemption”) by paying to the Holder a sum of money equal to (x) in
the event that the Redemption Payment Date (as defined below) occurs on or
prior to the one hundred twentieth (120) day after the date hereof, one hundred
five percent (105%) and (y) in the event that the Redemption Payment Date
occurs after the one hundred twentieth (120) day after the date hereof, one
hundred twenty five percent (125%), in each case, of the entire Principal
Amount outstanding at such time together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder
arising under this Note, the Purchase Agreement or any other Related Agreement
(the “Redemption Amount”) outstanding on the
Redemption Payment Date (as defined below). 
The Company shall deliver to the Holder a written notice of redemption
(the “Notice of Redemption”) specifying the
date for such Optional Redemption (the “Redemption Payment Date”),
which date shall be seven (7) business days after the date of the Notice
of Redemption (the “Redemption Period”).  A Notice of Redemption shall not be effective
with respect to any portion of this Note for which the Holder has previously
delivered a Notice of Conversion (as hereinafter defined) or for conversions
elected to be made by the Holder pursuant to Article III

 

3

 

during the Redemption Period. 
The Redemption Amount shall be determined as if the Holder’s conversion
elections had been completed immediately prior to the date of the Notice of
Redemption.  On the Redemption Payment
Date, the Redemption Amount must be paid in good funds to the Holder.  In the event the Company fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then such
Redemption Notice will be null and void.

 

ARTICLE III

HOLDER’S CONVERSION RIGHTS

 

3.1           Optional Conversion.  Subject to the terms set forth in this Article III,
the Holder shall have the right, but not the obligation, to convert all or any
portion of the issued and outstanding Principal Amount and/or accrued interest
and fees due and payable into fully paid and nonassessable shares of Common
Stock at the Fixed Conversion Price; provided that, notwithstanding any
representation to the contrary in this Note, the Purchase Agreement or any of the
Related Agreements, the Holder shall not have the right, unless an Event of
Default has occurred and is continuing, to convert any portion of the issued
and outstanding Principal Amount and/or accrued interest and fees on or prior
to the one hundred twentieth (120) day after the date hereof (it being
understood that nothing contained in this Section 3.1 shall affect the
Company’s obligation to register any of the Conversion Shares (as defined
below) sooner than as set forth in the Registration Rights Agreement.  The shares of Common Stock to be issued upon
such conversion are herein referred to as, the “Conversion
Shares.”

 

3.2           Conversion Limitation.  Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between (i) 4.99% of the issued
and outstanding shares of Common Stock and (ii) the number of shares of
Common Stock beneficially owned by the Holder. 
For purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder.  The
Conversion Share limitation described in this Section 3.2 shall
automatically become null and void following notice to the Company upon the
occurrence and during the continuance of an Event of Default, or upon 75 days
prior notice to the Company, except that at no time shall the number of shares
of Common Stock beneficially owned by the Holder a exceed 19.99% of the
outstanding shares of Common Stock. 
Notwithstanding anything contained herein to the contrary, the number of
shares of Common Stock issuable by the Company and acquirable by the Holder at
a price below $0.95 per share pursuant to the terms of this Note, the Purchase
Agreement or any other Related Agreement, shall not exceed an aggregate of
2,367,666 shares of Common Stock (subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations affecting the
Common Stock) (the “Maximum Common Stock
Issuance”), unless the issuance of Common Stock hereunder in excess
of the Maximum Common Stock Issuance shall first be approved by the Company’s
shareholders.  If at any point in time
and from time to time the number of shares of Common Stock issued pursuant to
the terms of this Note, the Purchase Agreement or any other Related Agreement,
together with the number of shares of Common Stock that would then be issuable
by the Company to the Holder in the event of a conversion or exercise pursuant
to the terms of this Note, the Purchase Agreement or any other Related
Agreement, would exceed the Maximum Common Stock Issuance but for this Section 3.2,
the

 

4

 

Company shall promptly call a shareholders meeting to solicit
shareholder approval for the issuance of the shares of Common Stock hereunder
in excess of the Maximum Common Stock Issuance. 
Notwithstanding anything contained herein to the contrary, the
provisions of this Section 3.2 are irrevocable and may not be waived by
the Holder or the Company.

 

3.3           Mechanics
of Holder’s Conversion.  In the event
that the Holder elects to convert this Note into Common Stock, the Holder shall
give notice of such election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit A hereto (appropriate
completed)  (“Notice of
Conversion”) to the Company and such Notice of Conversion shall provide
a breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted.  On each
Conversion Date (as hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Company within two (2) business days after
the Conversion Date.  Each date on which
a Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date (the “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 three (3) business days 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 Holder’s designated broker with the Depository Trust Corporation
(“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”).  In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Company of the
Notice of Conversion.  The Holder shall
be treated for all purposes as the record holder of the Conversion Shares,
unless the Holder provides the Company written instructions to the contrary.

 

3.4           Late Payments.  The Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to this Article beyond
the Delivery Date could result in economic loss to the Holder.  As compensation to the Holder for such loss,
in addition to all other rights and remedies which the Holder may have under
this Note, applicable law or otherwise, the Company shall pay late payments to
the Holder for any late issuance of Conversion Shares in the form required
pursuant to this Article II upon conversion of this Note, in the amount
equal to $250 per business day after the Delivery Date.  The Company shall make any payments incurred
under this Section in immediately available funds upon demand.

 

3.5           Conversion Mechanics.  The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing that
portion of the principal and interest and fees to be converted, if any, by the
then applicable Fixed Conversion Price. 
In the event of any conversions of a portion of the outstanding
Principal Amount pursuant to this Article III, such conversions shall be
deemed to constitute conversions of the outstanding Principal Amount applying
to Monthly Amounts for the remaining Amortization Dates in chronological order.

 

5

 

3.6           Adjustment Provisions.  The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to this Note shall be subject to adjustment from time to time upon the
occurrence of certain events during the period that this conversion right
remains outstanding, as follows:

 

(a)           Reclassification.  If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase an adjusted number of such securities
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock (i) immediately prior to or (ii) immediately
after, such reclassification or other change at the sole election of the
Holder.

 

(b)           Stock Splits, Combinations and
Dividends.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock or any preferred
stock issued by the Company in shares of Common Stock, the Fixed Conversion
Price shall be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.

 

(c)           Share Issuances.  Subject to the provisions of this Section 3.6,
if the Company shall at any time prior to the conversion or repayment in full
of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a Person other than the Holder (except (i) pursuant
to Sections 3.6(a) or (b) above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof
as disclosed to the Holder in writing; or (iii) pursuant to options that
may be issued under any employee incentive stock option and/or any qualified
stock option plan adopted by the Company) for a consideration per share (the “Offer Price”) less than the Fixed Conversion Price in effect
at the time of such issuance, then the Fixed Conversion Price shall be
immediately reset to such lower Offer Price. 
For purposes hereof, the issuance of any security of the Company
convertible into or exercisable or exchangeable for Common Stock shall result
in an adjustment to the Fixed Conversion Price upon the issuance of such
securities.

 

(d)           Computation of Consideration.  For purposes of any computation respecting
consideration received pursuant to Section 3.6(c) above, the
following shall apply:

 

(i)            in
the case of the issuance of shares of Common Stock for cash, the consideration
shall be the amount of such cash, provided that in no case shall any deduction
be made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection therewith;

 

(ii)           in
the case of the issuance of shares of Common Stock for a consideration in whole
or in part other than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting treatment thereof);

 

6

 

(iii)          upon
any such exercise, the aggregate consideration received for such securities
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided in
subsections (i) and (ii) of this Section 3.6(d)); and

 

(iv)          to
the extent there are fractional shares, or dollar values smaller than one (1) cent,
they shall be rounded to the nearest share or cent.

 

3.7           Reservation of Shares.  During the period the conversion right
exists, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note and the Warrant.  The Company represents that upon issuance,
the Conversion Shares will be duly authorized validly issued, fully paid and
non-assessable.  The Company agrees that
its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
the Conversion Shares upon the conversion of this Note.

 

3.8           Registration Rights.  The Holder has been granted registration
rights with respect to the Conversion Shares as set forth in the Registration
Rights Agreement.

 

3.9           Issuance of New Note.  Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Company to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid.  Subject to the provisions of Article IV
of this Note, the Company shall not pay any costs, fees or any other
consideration to the Holder for the production and issuance of a new Note.

 

ARTICLE IV

EVENTS OF DEFAULT

 

4.1           Events of Default.  The occurrence of any of the following events
set forth in this Section 4.1, in excess of the applicable cure or grace
period, shall constitute an event of default (“Event of
Default”) hereunder:

 

(a)           Failure to Pay.  The Company fails to pay when due any
installment of principal, interest or other fees hereon in accordance herewith,
or the Company fails to pay any of the other Obligations (under and as defined
in the Master Security Agreement) when due, and, in any such case, such failure
shall continue for a period of five (5) days following the date upon which
any such payment was due.

 

(b)           Breach of Covenant.  The Company or any of its Subsidiaries
breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof.

 

7

 

(c)           Breach of Representations and
Warranties.  Any representation,
warranty or statement made or furnished by the Company or any of its
Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect on
the date as of which made or deemed made.

 

(d)           Default Under Other Agreements.  The occurrence of any default (or similar
term) in the observance or performance of any other agreement or condition
relating to any indebtedness or contingent obligation of the Company or any of
its Subsidiaries, (i) in excess of $100,000 at any time outstanding with
respect to any individual indebtedness or obligation or (ii) in excess
of  $300,000 in the aggregate at any time
outstanding, in each case, beyond the period of grace (if any), the effect of
which default is to cause, or permit the holder or holders of such indebtedness
or beneficiary or beneficiaries of such contingent obligation to cause, such
indebtedness to become due prior to its stated maturity or such contingent
obligation to become payable;

 

(e)           Material Adverse Effect.  Any change or the occurrence of any event
which could reasonably be expected to have a Material Adverse Effect.

 

(f)            Bankruptcy.  The Company or any of its Subsidiaries shall (i) apply
for, consent to or suffer to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (iv) be
adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) acquiesce
to, without challenge within ten (10) days of the filing thereof, or
failure to have dismissed, within thirty (30) days, any petition filed against
it in any involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing.

 

(g)           Judgments.  Attachments or levies in excess of $100,000
in the aggregate are made upon the Company or any of its Subsidiary’s assets or
a judgment is rendered against the Company’s property involving a liability of
more than $100,000 which shall not have been vacated, discharged, stayed or
bonded within forty five (45) days from the entry thereof.

 

(h)           Insolvency.  The Company or any of its Subsidiaries shall
admit in writing its inability, or be generally unable, to pay its debts as
they become due or cease operations of its present business.

 

(i)            Change of Control.  A Change of Control (as defined below) shall
occur with respect to the Company, unless Holder shall have expressly consented
to such Change of Control in writing.  A “Change
of Control” shall mean any event or circumstance as a result of which (i) any
“Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of
the Exchange Act, as in effect on the date hereof), other than the Holder, is
or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5
under the Exchange Act), directly or indirectly, of 40% or more on a fully
diluted basis of the then outstanding voting equity interest of the Company, (ii) the
Board of Directors of the Company shall cease to consist of a majority of the Parent’s
board of directors on the date hereof (or directors appointed by a majority of

 

8

 

the board of directors in effect immediately prior to such appointment)
or (iii) the Company or any of its Subsidiaries merges or consolidates
with any other person or entity.

 

(j)            Indictment; Proceedings.  The indictment of the Company or any of its
Subsidiaries or any executive officer of the Company or any of its Subsidiaries
under any criminal statute, or commencement of criminal proceedings against the
Company or any of its Subsidiaries or any executive officer of the Company or
any of its Subsidiaries pursuant to which statute or proceeding penalties or
remedies sought or available include forfeiture of any of the property of the
Company or any of its Subsidiaries.

 

(k)           The Purchase Agreement and Related
Agreements.  (i) An Event of
Default shall occur under and as defined in the Purchase Agreement or any other
Related Agreement, (ii) the Company or any of its Subsidiaries shall
breach any term or provision of the Purchase Agreement or any other Related
Agreement in a material respect and such breach, if capable of cure, continues
unremedied for a period of fifteen (15) days after the occurrence thereof, (iii) the
Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, the Purchase Agreement or any Related
Agreement, (iv) any proceeding shall be brought to challenge the validity,
binding effect of the Purchase Agreement or any Related Agreement or (v) the
Purchase Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Company or any of its Subsidiaries (to the extent
such persons or entities are a party thereto).

 

(l)            Stop Trade.  An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for six (6) consecutive
days or six (6) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
provided that the Company shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Common
Stock on another Principal Market within sixty (60) days of such notice.

 

(m)          Failure to Deliver Common Stock or
Replacement Note.  The Company’s
failure to deliver Common Stock to the Holder pursuant to and in the form
required by this Note and the Purchase Agreement and, if such failure to
deliver Common Stock shall not be cured within two (2) business days or
the Company is required to issue a replacement Note to the Holder and the
Company shall fail to deliver such replacement Note within seven (7) business
days.

 

4.2           Default Interest.  Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest
on this Note in an amount equal to four percent (4.0%) per annum, and all
outstanding obligations under this Note, the Purchase Agreement and each other
Related Agreement, including unpaid interest, shall continue to accrue interest
at such additional interest rate from the date of such Event of Default until
the date such Event of Default is cured or waived.

 

4.3           Default Payment.  Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may demand
repayment in full of all obligations and liabilities owing by Company to the
Holder under this Note, the Purchase Agreement and/or any other Related
Agreement and/or may elect, in addition to all rights and remedies of the

 

9

 

Holder under the Purchase Agreement and the other Related Agreements
and all obligations and liabilities of the Company under the Purchase Agreement
and the other Related Agreements, to require the Company to make a Default
Payment (“Default Payment”).  The Default Payment shall be 125% of the
outstanding principal amount of the Note, plus accrued but unpaid interest, all
other fees then remaining unpaid, and all other amounts payable hereunder.  The Default Payment shall be applied first to
any fees due and payable to the Holder pursuant to this Note, the Purchase
Agreement, and/or the other Related Agreements, then to accrued and unpaid
interest due on this Note and then to the outstanding principal balance of this
Note.  The Default Payment shall be due
and payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 4.3.

 

ARTICLE V

MISCELLANEOUS

 

5.1           Conversion Privileges.  The conversion privileges set forth in Article III
shall remain in full force and effect immediately from the date hereof until
the date this Note is indefeasibly paid in full.

 

5.2           Cumulative Remedies.  The remedies under this Note shall be
cumulative.

 

5.3           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder
hereof in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege.  All
rights and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

 

5.4           Notices.  Any notice herein required or permitted to be
given shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party notified, (b) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d) one
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.  All communications shall be sent to the
Company at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile
number (212) 541-4434, or at such other address as the Company or the Holder
may designate by ten days advance written notice to the other parties
hereto.  A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.

 

5.5           Amendment Provision.  The term “Note” and all references thereto,
as used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.

 

10

 

5.6           Assignability.  This Note shall be binding upon the Company
and its successors and assigns, and shall inure to the benefit of the Holder
and its successors and assigns, and may be assigned or transferred by the
Holder in accordance with the requirements of the Purchase Agreement; provided
that, to the extent requested by the Company, the Holder’s counsel shall, to
the extent an Event of Default has not occurred and is continuing, be required
to provide to the Company a customary legal opinion stating that such
assignment or transfer is occurring pursuant to an exemption from the
registration provisions of the federal and state securities laws.  The Company may not assign any of its
obligations under this Note without the prior written consent of the Holder,
any such purported assignment without such consent being null and void.

 

5.7           Cost of Collection.  In case of any Event of Default under this Note,
the Company shall pay the Holder reasonable costs of collection, including
reasonable attorneys’ fees.

 

5.8           Governing Law, Jurisdiction and
Waiver of Jury Trial.

 

(a)           THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

(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 HOLDER, ON THE
OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED
AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES 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 NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER.  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 THE PURCHASE AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE

 

11

 

EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

 

(c)           THE COMPANY DESIRES THAT ITS 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 COMPANY HERETO
WAIVES 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 HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.

 

5.9           Severability.  In the event that any provision of this Note
is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any such provision
which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of this Note.

 

5.10         Maximum Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Company to the Holder and thus refunded to
the Company.

 

5.11         Security Interest.  The Holder, as of the date hereof, has been
granted a security interest in certain assets of the Company as more fully
described in the Master Security Agreement dated as of the date hereof.

 

5.12         Construction.  Each party acknowledges that its legal
counsel participated in the preparation of this Note 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 Note to
favor any party against the other.

 

5.13         Registered Obligation. This Note
is intended to be a registered obligation within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent)
shall register the Note (and thereafter shall maintain such registration) as to
both principal and any stated interest. 
Notwithstanding any document, instrument or agreement relating to this
Note to the contrary, transfer of this Note (or the right to any payments of
principal or stated interest thereunder) may only be effected by (i) surrender
of this Note and either the reissuance by the Company of this Note to the new
holder or the issuance by the Company of a new instrument to the new holder, or
(ii) transfer through a book entry system maintained by the Company (or
its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

 

[Balance of page intentionally left blank;
signature page follows]

 

12

 

IN WITNESS WHEREOF,
the Company has caused this Secured Convertible Term Note to be signed in its
name effective as of this 9th day of August, 2005.

 

 

	
   

  	
  APOGEE TECHNOLOGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/

  	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

13

 

EXHIBIT A

 

NOTICE OF
CONVERSION

 

(To be executed by the Holder in order to convert all
or part of

the Secured Convertible Term Note into Common Stock)

 

[Name
and Address of Company]

 

The undersigned hereby converts $                 
of the principal due on [specify applicable Repayment Date] under the Secured
Convertible Term Note dated as of August    , 2005 (the “Note”) issued by Apogee Technology, Inc. (the “Company”) by delivery of shares of Common Stock of the
Company (“Shares”) on and subject
to the conditions set forth in the Note.

 

	
  1.

  	
   

  	
  Date
  of Conversion

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Shares
  To Be Delivered:

  

 

	
   

  	
  [HOLDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}]]