Document:

Exhibit 10.30

 

EXECUTION COPY

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

AGREEMENT
dated as of August 10, 2005 between InSight Health Services Corp., a
Delaware corporation (“Company”), and Louis E. Hallman, III (“Executive”).  InSight Health Services Holdings Corp., a
Delaware corporation (“Parent”) is a party to this Agreement solely for the
purposes of Section 3.07.

 

Company
wishes to employ Executive, and Executive wishes to accept such employment, in
each case subject to the terms and conditions hereof.  Accordingly, Company and Executive hereby
agree as follows:

 

I.                                         TERM

 

Commencing
as of the first date of Executive’s employment with Company, Executive is to be
employed by Company for rolling twelve (12) month periods, whereby Executive’s
term of employment is twelve (12) months on a continuing basis, unless earlier
terminated in accordance with Article IV below.

 

II.                                     EMPLOYMENT

 

SECTION 2.01  Employment by Company.  Company, for itself and its subsidiaries and
affiliates, employs Executive for the term of this Agreement to render full
time services as Company’s Executive Vice President and Chief Strategy Officer
and in such other capacities as the Board of Directors of Company (“Board”) may
assign and, in connection therewith, to perform such duties as are reasonably
consistent with Executive’s position and as the Board shall direct.  Executive agrees to perform such duties as
are reasonably consistent with the duties normally pertaining to the office to
which Executive has been elected or appointed, subject always to the direction
of the Board.  Subject to Section 5.01
hereof, Executive’s expenditure of reasonable amounts of time for personal
business, charitable or professional activities will not be deemed a breach of
Executive’s undertaking to provide full time services hereunder, provided that
such activities do not interfere materially with Executive’s rendering of such
services.

 

SECTION 2.02  Acceptance of Employment
by Executive.  Executive
accepts such employment and shall render the services required by this
Agreement to be rendered by Executive. 
Executive shall also serve on request during all or any part of the term
of this Agreement as an officer of Company and of any of its subsidiaries or
affiliates without any compensation therefor other than as specified in this
Agreement.

 

SECTION 2.03  Place of Employment.  Executive’s principal place of employment
shall be located at 26250 Enterprise Court, Suite 100, Lake Forest,
California 92630.  In the event that the
principal place of employment of Executive is relocated to a site that is more
than 80 miles from Executive’s principal residence, subject to Section 4.05(a) hereof,
Company may require Executive to relocate Executive’s principal residence to
within 80 miles of such site. 
Notwithstanding the foregoing, Executive acknowledges that the duties to
be performed by 

 

 

Executive
hereunder are such that Executive may be required to travel extensively,
principally within the United States, in connection with Company Business (as
defined below).

 

III.                                 COMPENSATION

 

SECTION 3.01  Salary, Bonuses, Life
Insurance.  As
compensation for the services to be rendered pursuant to this Agreement,
Company shall pay Executive, and Executive shall accept, a salary of  $275,000.00 per annum (“Annual Salary”),
payable in accordance with the payroll policies of Company for senior
executives as from time to time in effect, less such amounts as may be required
to be withheld by applicable federal, state and local law and regulations (the “Payroll
Policies”).

 

In addition to the Annual
Salary, Executive shall be eligible to receive and Company shall pay an annual
bonus based on a percentage of Executive’s Annual Salary agreed upon by the
Executive and the Company’s President and Chief Executive Officer (“Bonus”) (a)
75% of which Bonus shall be based upon Company achieving the goals set forth in
a budget prepared by Company management and adopted or approved by the Board;
and (b) 25% of which Bonus shall be based upon the achievement of other goals
mutually agreed upon by Executive and the President and Chief Executive Officer
of Company and approved by the Board. 
Such Bonuses are payable on the earlier to occur of the date Parent’s
(i) annual report on Form 10-K is filed with the Securities and Exchange
Commission (“SEC”) for such year and (ii) year-end audit has been completed for
such year.

 

For the fiscal year
ending June 30, 2006, Executive shall be eligible to receive a Bonus, which
shall equal 40% of Executive’s Annual Salary, prorated from the first date of
employment through June 30, 2006, 50% of which is guaranteed.

 

Company
shall purchase and maintain in full force and effect at all times during the
term of this Agreement a policy of term insurance on the life of Executive
payable to such beneficiary or beneficiaries as Executive may designate in an
amount equal to three (3) times the amount of the Annual Salary; provided
Executive shall comply with the issuing insurance company’s requirements for
issuance of the policy.

 

SECTION 3.02  Performance Review.
Executive’s performance shall be reviewed and evaluated by the Board annually
during the term of this Agreement.

 

SECTION 3.03  Participation in Employee
Benefit Plans.  Executive
shall be entitled during the term of this Agreement, if and to the extent
eligible, to participate in any life insurance, medical, health and accident
and disability plan or program, pension plan or similar benefit plan of
Company, which may be available to senior executives of Company generally, on
the same terms as such other executives.

 

SECTION 3.04  Expenses.  Subject to such policies as may from time to
time be established by Company for senior executives of Company generally,
Company shall pay or reimburse Executive for all reasonable business expenses
actually incurred or paid by Executive during the term of this Agreement in the
performance by Executive of services under this Agreement, upon 

 

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presentation
of expense statements or vouchers or such other supporting information as
Company may reasonably require.

 

SECTION 3.05  Automobile Allowance.  Company shall pay Executive $750 per month
and all reasonable expenses of operating an automobile subject to such policies
as may from time to time be established and amended by Company.

 

SECTION 3.06  Vacation.  Executive shall be entitled to three (3) weeks
of paid vacation each year during the term of this Agreement, which Executive
may accumulate up to six (6) weeks, to be taken at a time or times which
do not unreasonably interfere with Executive’s duties hereunder.

 

SECTION 3.07  Stock Options.  Parent shall grant stock options to
Executive, pursuant to the terms of the Stock Option Agreement substantially in
the form of Exhibit A, to purchase shares of Parent common stock in an
amount to be determined by the President and Chief Executive Officer of Company
and approved by the board of directors of Parent.

 

IV.                                TERMINATION

 

SECTION 4.01  Termination upon Death.  If Executive dies during the term of this
Agreement, this Agreement shall terminate as of the date of Executive’s death.

 

SECTION 4.02  Termination upon
Disability.  Executive’s
employment may be terminated by Company due to Executive’s permanent and total
disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended) (“Disability”), so that Executive is unable
substantially to perform Executive’s services required by this Agreement to be
rendered by Executive for (i) a period of three (3) consecutive
months or (ii) for shorter periods aggregating three (3) months
during any twelve (12) month period. 
Company may, at any time after the last day of the three (3) consecutive
months of Disability or the day on which the shorter periods of Disability
equal an aggregate of three (3) months, by 30 days’ written notice to
Executive, terminate this Agreement and Executive’s employment hereunder.  Any such determination of Disability shall be
made by a physician chosen by a majority of the members of the Board in its
sole and unfettered discretion.  Nothing in
this Section 4.02 shall be deemed to extend the term of this Agreement or
of Executive’s employment hereunder, beyond the term specified in Article I
hereof.

 

SECTION 4.03  Termination for Cause.  If the Board decides that Cause (as defined
below) exists, it may remove Executive for Cause and terminate this Agreement
and the term of Executive’s employment hereunder on the date specified in
written notice to Executive.  If
terminated for Cause, Executive shall have no right to receive any monetary
compensation or benefit hereunder with respect to any period after the date
specified in such notice.  Such notice
may also terminate Executive’s right to enter Company’s premises.  For purposes of this Agreement, the term “Cause”
means any of the following:

 

(a)                                  Executive
has been convicted or pled guilty or no contest to any crime or offense (other
than any crime or offense relating to the operation of a motor vehicle) which
is likely to 

 

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have
a material adverse impact on the business operations or financial or other
condition of Company, or any felony offense;

 

(b)                                 Executive
has committed fraud or embezzlement;

 

(c)                                  Executive
has breached any of Executive’s obligations under this Agreement and Executive
has failed to cure the breach within 30 business days following receipt of
written notice of such breach from Company;

 

(d)                                 Company,
after reasonable investigation, finds that Executive has violated material
written policies and procedures of Company, including but not necessarily
limited to, policies and procedures pertaining to harassment and
discrimination;

 

(e)                                  Executive
has failed to obey a specific written direction from the Board (unless such
specific written instruction represents an illegal act), provided that (i) such
failure continues for a period of 30 business days after receipt of such
specific written direction, and (ii) such specific written direction
includes a statement that the failure to comply therewith will be a basis for
termination hereunder; or

 

(f)            any willful act or omission on
Executive’s part which is materially injurious to the financial condition or
business reputation of Company or any of its subsidiaries.

 

SECTION 4.04  Termination in Discretion
of Company.  Company may,
at any time thereafter by 30 days’ written notice to Executive, terminate
this Agreement and the term of Executive’s employment hereunder, and Executive
thereafter shall have only such rights to receive monetary compensation or
benefits hereunder in respect of any period after the effective date of
termination as are provided in Section 4.07 hereof.  Such notice may also terminate Executive’s
right to enter Company’s premises.

 

SECTION 4.05  Voluntary Termination for
Good Reason.  During the
period commencing upon the occurrence of Good Reason (as defined below) and
continuing for 60 days thereafter, Executive shall have the right to terminate
Executive’s employment for Good Reason (as defined below), whereupon Executive
shall become entitled to receive compensation as provided in Section 4.07
hereof.  Termination by the Executive
pursuant to the preceding sentence shall be effective upon 60 days written
notice to Company.  For purposes of this
Agreement, “Good Reason” means any of the following:

 

(a)                                  the
movement by Company, without Executive’s consent, of Executive’s principal
place of employment to a site that is more than 80 miles from Executive’s
principal residence;

 

(b)                                 a
reduction by Company, without Executive’s consent, in Executive’s Annual
Salary, duties and responsibilities, and title, as they may exist from time to
time; or

 

(c)                                  a
failure by Company to comply with any material provisions of this Agreement
which has not been cured within 30 days after notice of such noncompliance has
been given by 

 

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Executive
to Company, or if such failure is not capable of being cured in such time, for
which a cure shall not have been diligently initiated by Company within the 30
day period.

 

SECTION 4.06  Voluntary Termination
Without Good Reason.  Executive
shall have the right to terminate this Agreement upon 60 days’ written notice
to Company and, upon such termination, Executive shall not have the right to
receive any monetary compensation or benefit hereunder with respect to any
period after the date specified in such notice.

 

SECTION 4.07  Compensation on
Termination.

 

(a)                                  If
the term of Executive’s employment hereunder is terminated pursuant to Section 4.01
hereof, Company shall pay to the executors or administrators of Executive’s
estate or Executive’s heirs or legatees (as the case may be) all compensation
accrued and unpaid up to the date of Executive’s death.

 

(b)                                 If
the term of Executive’s employment hereunder is terminated pursuant to Section 4.02,
4.04, 4.05, or 4.07(c) hereof, Company shall (i) pay to Executive all
compensation accrued and unpaid up to the effective date of termination; (ii) pay
to Executive additional compensation in an amount equal to twelve (12) months
of compensation at the Annual Salary rate then in effect, payable in accordance
with the Payroll Policies; and (iii) maintain, at Company’s expense, in
full force and effect, for Executive’s continued benefit until the earlier of
(x) twelve (12) months after the effective date of termination or (y) commencement
of Executive’s benefits pursuant to full time employment with a new employer
under such employer’s standard benefits program, all life insurance, medical,
health and accident, and disability plans or programs, in which Executive was
entitled to participate immediately prior to the effective date of termination;
provided, that Executive’s continued participation is permissible under the
general terms and provisions of such plans or programs and provided further,
that Company shall be entitled to amend or terminate any employee benefit plans
which are applicable generally to Company’s employees.  In the event that Executive’s participation
in any such plan or program is prohibited, Company shall arrange to provide
Executive with benefits substantially similar to those which Executive was
entitled to receive under such plans or programs.  Any amounts paid by Company to Executive
under (i) and (ii) above may be reduced, in the case of termination
pursuant to Section 4.02, by the amount which Executive is entitled to
receive under the terms of Company’s long-term disability insurance policy for
senior executives as and if in effect at the effective date of
termination.  Any payments made pursuant
to this Section 4.07 shall be reduced by such amounts as are required by
law to be withheld or deducted.

 

(c)           Notwithstanding
any provision herein to the contrary, if Executive is terminated by Company
without Cause, or Executive terminates Executive’s employment for Good Reason,
within twelve (12) months of a Change in Control (as defined herein) which
occurs after the Effective Time, Executive shall be entitled to the payments
and benefits set forth in Section 4.07(b). 
For purposes hereof, a “Change in Control” shall be deemed to have
occurred if (i) any person, or any two or more persons acting as a group, and
all affiliates of such person or persons (a “Group”), who prior to such time
beneficially owned less than 50% of the then outstanding capital stock of
Company or Parent, shall acquire shares of Company’s or Parent’s capital stock

 

5

 

in
one or more transactions or series of transactions, including by merger, and
after such transaction or transactions such person or group and affiliates
beneficially own 50% or more of Company’s or Parent’s outstanding capital
stock, or (ii) Company or Parent shall sell all or substantially all of its
assets to any Group which, immediately prior to the time of such transaction,
beneficially owned less than 50% of the then outstanding capital stock of
Company or Parent.

 

(d)                                 The
compensation rights provided for Executive in this Section 4.07 shall be
Executive’s sole and exclusive remedies with respect to Section 4.01,
4.02, 4.04, 4.05, or 4.07(c) hereof, and Executive, the executors or
administrators of Executive’s estate or Executive’s heirs or legatees (as the
case may be) shall not be entitled to any other compensation, damages or relief
in connection therewith.

 

V.                                    CERTAIN COVENANTS OF EXECUTIVE

 

SECTION 5.01  Covenants Against Unfair
Competition.

 

(a)                                  Acknowledgments.  Executive acknowledges that, as of the date
hereof (i) the principal business of Company and its affiliates is the
provision of diagnostic imaging, treatment and related management services
through a network of mobile magnetic resonance imaging (“MRI”) and positron
emission tomography (“PET”) facilities, fixed-site MRI and PET facilities and
multi-modality centers, at times, together with other healthcare providers,
utilizing the related equipment and computer programs and “software” and
various corporate investment structures (“Company Business”); (ii) Company
Business is primarily national in scope; (iii) the industry is highly
competitive; and (iv) Executive’s duties hereunder will cause Executive to
have access to and be entrusted with various trade secrets not readily
available to the public or competitors, consisting of business accounts, lists
of customers and other business contacts, information concerning Company’s
relationships with actual or potential clients or customers and the needs or
requirements of such clients or customers, budgets, business and financial
plans, employee lists, financial information, artwork, designs, graphics,
marketing plans and techniques, business strategy and development, know-how or
other matters connected with Company Business, computer software programs and
specifications (some of which may be developed in part by Executive under this
Agreement), which items are owned exclusively by Company and used in the
operation of Company Business (“Trade Secrets”).  Notwithstanding the foregoing, the parties
agree that the term “Trade Secrets” shall not include information which (i) is
or becomes generally available to the public, without violation of any
obligation of confidentiality by Executive, (ii) is or becomes available
from a third party on a nonconfidential basis, provided that such third party
is not bound by a confidentiality agreement concerning the Trade Secrets and (iii) is
or has been independently acquired or developed by Executive without violating
the provisions of this Section.

 

Executive
further acknowledges that the Trade Secrets will be disclosed to Executive or
obtained by Executive and received in confidence and trust for the sole purpose
of using the same for the sole benefit of Company Business.  Executive also acknowledges that such Trade
Secrets are valuable to Company, of a unique and special nature, and important
to Company in competing in the marketplace.

 

6

 

During
and after the term of this Agreement (otherwise than in the performance of this
Agreement), without Company’s prior written consent, Executive shall not
divulge or use all or any of the Trade Secrets to or for any person or entity
except (i) for the benefit of Company and as necessary to perform
Executive’s services under this Agreement; and (ii) when required by law,
and then only after consultation with Company or unless such information is in
the public domain.  In the event that
Executive, becomes or is legally compelled (whether by deposition,
interrogatories, request for documents, subpoena, civil investigative demand or
similar process) to disclose any Trade Secrets, Executive shall provide Company
with prompt, prior written notice of such requirement so that Company may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section.  Executive
agrees that Executive’s obligations under this Section 5.01 shall be
absolute and unconditional.

 

(b)                                 Breach.  Executive understands and agrees that
Executive’s employment with Company may be terminated if Executive breaches
this Agreement or in any way divulges such Trade Secrets.  Executive further understands and agrees that
Company may be irreparably harmed by any violation or threatened violation of
this Agreement and, therefore, Company may be entitled to injunctive relief to
enforce any of the provisions contained herein.

 

(c)                                  Non-Compete.  During the period of Executive’s employment,
Executive will not directly or indirectly either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer,
director, or in any other individual or representative capacity, engage or
participate in any activity or business which Company shall determine in good
faith to be in competition in any substantial way with Company Business within
any metropolitan area in the United States or elsewhere in which Company is
then engaged in Company Business.  The
parties acknowledge that in California and some states post-employment
non-compete clauses may be generally unenforceable, but that other states and
jurisdictions permit such agreements. 
Executive hereby agrees that Executive will not directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any activity or business
which Company shall determine in good faith to be in competition in any
substantial way with Company Business as conducted at the effective date of
termination of Executive’s employment by Company for or a period of twelve (12)
months after the termination of Executive’s employment and that this Section will
be enforceable to the greatest extent of the law.

 

(d)                                 No Solicitation of Employees.  During Executive’s employment and for a
period of twelve (12) months after the termination of Executive’s employment,
Executive will not, either directly or indirectly, either alone or in concert
with others, solicit or entice or participate in the solicitation or attempt to
solicit or in any manner encourage employees of Company to leave Company or
work for anyone that is in competition in any substantial way with Company
Business (which in the case of the period following Executive’s termination,
shall mean Company Business as conducted as of the effective date of
termination of Executive’s employment with Company); provided, however, that
the public listing, advertising or posting of an available position shall not
constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall
not preclude Executive from hiring an individual pursuant thereto.

 

7

 

(e)                                  No Solicitation of Customers.  Executive will not during the course of
Executive’s employment, or for twelve (12) months thereafter, either directly
or indirectly call on, solicit, or take away, or attempt to call on, solicit or
take away any of Company’s customers on behalf of any business that is in
competition in any substantial way with Company.  Executive promises and agrees not to engage
in any unfair competition with Company. 
During Executive’s employment, Executive agrees not to plan or otherwise
take any preliminary steps, either alone or in concert with others, to set up
or engage in any business enterprise that would be in competition with Company
Business.  In the event of the
termination of Executive’s employment and for a period of twelve (12) months
thereafter, Executive will not accept any employment or engage in any
activities which Company shall determine in good faith to be competitive with
Company, if the fulfillment of the duties of the competitive employment or
activities would inherently require Executive to reveal Trade Secrets to which
Executive has access or learned during Executive’s employment on behalf of any
business that is in competition in any substantial way with Company.

 

(f)                                    Return of Company Property.  In the event of the termination of Executive’s
employment, Executive will deliver to Company all devices, records, sketches,
reports, proposals, files, customer lists, mailing or contact lists,
correspondence, computer tapes, discs and design and other document and data
storage and retrieval materials (and all copies, compilations and summaries
thereof), equipment, documents, duplicates, notes, drawings, specifications,
research tape or other electronic recordings, programs, data and other
materials or property of any nature belonging to Company or relating to Company
Business, and Executive will not take with Executive or allow a third party to
take, any of the foregoing or any reproduction of any of the foregoing.  Company property includes personal property,
made or compiled by Executive, in whole or in part and alone or with others, or
in any way coming into Executive’s possession concerning Company Business or
other affairs of Company or any of its affiliates.

 

(g)                                 Disclosure and Assignment of Rights.  (i)  Executive shall promptly disclose
and assign to Company and its affiliates or its nominee(s), to the maximum
extent permitted by Section 2870 of the California Labor Code, as it may
be hereafter amended from time to time, all right, title and interest of
Executive in and to any and all ideas, inventions, discoveries, secret
processes and methods and improvements, together with any and all patents that
may be issued thereon in the United States and in all foreign countries, which
Executive may invent, develop or improve, or cause to be invented, developed or
improved, during the term of this Agreement or which are (1) conceived and
developed during normal working hours, and (2) related to the scope of
Company Business.  As used in this
Agreement, the term “invent” includes “make”, “discover”, “develop”, “manufacture”
or “produce”, or any of them; “invention” includes the phrase “any new or
useful original art, machine, methods of manufacture, process, composition of
matter, design, or configuration of any kind”; “improvement” includes “discovery”
or “production”; and “patent” includes “Letters Patent” and “all the
extensions, renewals, modifications, improvements and reissues of such patents”.

 

(ii)                                  Executive
shall disclose immediately to duly authorized representatives of Company any
ideas, inventions, discoveries, secret processes and methods and improvements
covered by the provisions of paragraph (i) above, and execute all
documents reasonably required 

 

8

 

in
connection with the application for an issuance of Letters Patent in the United
States and in any foreign country and the assignment thereof to Company and its
affiliates or its nominee(s).

 

SECTION 5.02 
Rights and Remedies Upon Breach.  If Executive breaches, or threatens to
breach, in any material respect any of the provisions of Section 5.01 hereof
(“Restrictive Covenants”), Company shall, in addition to all its other rights
hereunder and under applicable law and in equity, have the right to seek
specific enforcement of the Restrictive Covenants by any court having
jurisdiction, including, without limitation, the granting of a preliminary
injunction which may be granted without the necessity of proving damages or the
posting of a bond or other security, it being acknowledged that any such breach
or threatened breach may cause irreparable injury to Company and that money
damages may not provide an adequate remedy to Company.  In addition to and not in lieu of any other
remedy that Company may have pursuant to this Agreement or otherwise, in the
event of any breach of any provision of Section 5.01 during the period which
Executive is entitled to receive payments and benefits pursuant to Section
4.07, such period shall terminate as of the date of such breach and Executive
shall not thereafter be entitled to receive any salary or other payments or
benefits under this Agreement, including, but not limited to, any stock options
granted to Executive.

 

SECTION 5.03 
Severability and Modification of Covenants.  Company and Executive agree and acknowledge
that the duration, scope and geographic area of the Restrictive Covenants
described in this Section 5.01 are fair, reasonable and necessary in order to
protect the good will and other legitimate interests of Company, that adequate
consideration has been received by Executive for such obligations, and that
these obligations do not prevent Executive from earning a livelihood.  If any court of competent jurisdiction
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.  If any court of
competent jurisdiction construes any of the Restrictive Covenants, or any part thereof,
to be unenforceable because of the duration or geographic scope of such
provision or otherwise, such provision shall be deemed amended to the minimum
extent required to make it enforceable and, in its reduced form, such provision
shall then be enforceable and enforced.

 

VI.                                CERTAIN AGREEMENTS

 

SECTION 6.01    (a)   Customers, Suppliers.  Executive does not have, and at any time
during the term of this Agreement shall not have, any employment with or any
direct or indirect interest in (as owner, partner, shareholder, employee,
director, officer, agent, consultant or otherwise) any customer of or supplier
to Company.

 

(b)                                 Certain Activities.  Executive during the term of this Agreement
shall not (i) give or agree to give, any gift or similar benefit of more
than nominal value to any customer, supplier, or governmental employee or
official or any other person who is or may be in a position to assist or hinder
Company in connection with any proposed transaction, which gift or similar
benefit, if not given or continued in the future, might adversely affect the
business or prospects of Company, (ii) use any corporate or other funds
for unlawful contributions, payments, gifts or entertainment, (iii) make
any unlawful expenditures relating to political activity to government 

 

9

 

officials
or others, (iv) establish or maintain any unlawful or unrecorded funds in
violation of Section 30A of the Securities Exchange Act of 1934, as
amended, and (v) accept or receive any unlawful contributions, payments,
gifts, or expenditures.

 

VII.                            MISCELLANEOUS

 

SECTION 7.01  Notices.  Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed or faxed, or sent by certified, registered or
express mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed, telexed or faxed, or if mailed, two (2) days
after the date of mailing, as follows:

 

	
   

  	
  (i)

  	
  If
  to Company, addressed to it at:

  	
  InSight
  Health Services Corp.

  
	
   

  	
   

  	
   

  	
  26250
  Enterprise Court, Suite 100

  
	
   

  	
   

  	
   

  	
  Lake
  Forest, CA 92630

  
	
   

  	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.: (949) 462-3703

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  If
  to Parent, addressed to it at:

  	
  InSight
  Health Services Holdings Corp.

  
	
   

  	
   

  	
   

  	
  c/o
  J.W. Childs Associates, L.P.

  
	
   

  	
   

  	
   

  	
  111
  Huntington Avenue, Suite 2900

  
	
   

  	
   

  	
   

  	
  Boston,
  MA 02199

  
	
   

  	
   

  	
   

  	
  Attention:
  Edward D. Yun

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.: (617) 753-1101

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  copies to:

  	
  The
  Halifax Group, L.L.C.

  
	
   

  	
   

  	
   

  	
  1133
  Connecticut Avenue, N.W., Suite 700

  
	
   

  	
   

  	
   

  	
  Washington,
  D.C. 20036

  
	
   

  	
   

  	
   

  	
  Attention:
  David Dupree

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.: (202) 296-7133

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Kaye
  Scholer LLP

  
	
   

  	
   

  	
   

  	
  425
  Park Avenue

  
	
   

  	
   

  	
   

  	
  New
  York, NY 10022

  
	
   

  	
   

  	
   

  	
  Attention:
  Stephen C. Koval, Esq.

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.: (212) 836-8689

  

 

(iii)                               If
to Executive, to the address or facsimile set forth below Executive’s signature
hereto.  Any party hereto may, by notice
to the other, change its address for receipt of notices hereunder.

 

SECTION 7.02  Entire Agreement.  This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements, written or oral, with respect thereto.

 

10

 

SECTION 7.03  Waivers and Amendments.  This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, amended, modified, superseded, canceled, renewed or extended,
only by a written instrument signed by Executive, Company and Parent.  No waiver of any provision of this Agreement
shall be deemed to be a waiver of any other provision, whether or not
similar.  No such waiver shall constitute
a continuing waiver.  No delay on the
part of either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of either party
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.

 

SECTION 7.04  Assignment.  This Agreement is personal to Executive, and
Executive’s rights and obligations hereunder may not be assigned by
Executive.  Company may assign this
Agreement and its rights, together with its obligations, hereunder (i) in
connection with any sale, transfer or other disposition of all or substantially
all of its assets or business(s), whether by merger, consolidation or
otherwise; or (ii) to any wholly owned subsidiary of Company, provided
that Company shall remain liable for all of its obligations under this
Agreement.

 

SECTION 7.05  Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

SECTION 7.06  Headings.  The article and section headings in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.

 

SECTION 7.07  Number.  Unless the context of this Agreement
otherwise requires, words using the singular or plural number will also include
the plural or singular number.

 

SECTION 7.08  Governing Law.  This Agreement shall be governed by the laws
of the State of California, without regard to any conflicts of law principles
thereof that would call for the application of the laws of any other
jurisdiction.  Subject to Section 7.11
below, any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against either of
the parties in the courts of the State of California, or if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of California, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.  Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world,
whether within or without the State of California.

 

SECTION 7.09  Expenses.  Should either party institute an action to
enforce this Agreement or any provision hereof, or for damages by reason of any
alleged breach of this Agreement or any provisions hereof, Executive shall be
entitled to receive from Company Executive’s reasonable travel and living
expenses, incurred by Executive in connection with preparation for and
participation in any proceeding relating to the action if Executive is the
prevailing party or such portion thereof as the court may award.

 

SECTION 7.10  Effective Date.  This Agreement shall be effective as of the
date hereof.

 

11

 

SECTION 7.11  
(a)   Resolution of Disputes.   Executive and Company mutually
agree and understand that as an inducement for Company to enter into this
Agreement, Executive and Company agree and consent to the resolution by
arbitration of all claims or controversies, past, present or future, whether
arising out of the employment relationship (or its termination) or relating to
this Agreement that Company may have against Executive or that Executive may
have against Company or against its officers, directors, employees or agents in
their capacity as such or otherwise. The only claims that are arbitrable are those
that, in the absence of this arbitration provision, would have been justiciable
under applicable state or federal law. The claims covered by this arbitration
provision, include, but are not limited to, claims for wages or other
compensation due; claims for breach of any contract or covenant (express or
implied); tort claims; claims for discrimination, retaliation or harassment
(including, but not limited to, race, sex, sexual orientation, religion,
national origin, age, marital status, or medical condition, handicap or
disability); claims for benefits (except claims under an employee benefit or
pension plan that either (i) specifies that its claims procedure shall
culminate in an arbitration procedure different from this one, or (ii) is
underwritten by a commercial insurer which decides the claims); and claims for
violation of any federal, state, or other governmental law, statute, regulation
or ordinance, except claims excluded in Section 7.10 (b) below.

 

Except
as otherwise provided in this arbitration provision, both Company and Executive
agree that neither of them shall initiate or prosecute any lawsuit or
administrative action (other than an administrative charge of discrimination)
in any way related to any claim covered by this arbitration provision.

 

(b)                                 Claims Excluded From Arbitration.
Claims Executive may have for workers’ compensation or unemployment
compensation benefits are not covered by this arbitration provision. Also not
covered are claims by Company for injunctive and/or other equitable relief,
including but not limited to those for unfair competition and/or the use and/or
unauthorized disclosure of Trade Secrets or confidential information, as to
which Executive understands and agrees that Company may seek and obtain relief
from a court of competent jurisdiction.

 

(c)                                  Arbitration Procedures.
Executive and Company understand and agree that the arbitration will take place
in Orange County, California, in accordance with the California Employment
Dispute Resolution Rules of the American Arbitration Association then in
effect in the State of California, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
decision of the arbitrator(s) shall be bound by generally accepted legal principles,
including, but not limited to, all rules of law and legal principles
concerning potential liability, burdens of proof, and measure of damages found
in all applicable California statutes and administrative rules and codes,
and all California case law.

 

12

 

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

 

	
   

  	
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INSIGHT
  HEALTH SERVICES CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bret W. Jorgensen

  	
   

  	
   

  	 

	
   

  	
   

  	
  Name: 
  Bret W. Jorgensen

  	
   

  	 

	
   

  	
   

  	
  Title: 
  President and Chief Executive

  	
   

  	 

	
   

  	
   

  	
  Officer

  	
   

  	 

	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Louis E. Hallman, III

  	
   

  
	
   

  	
  Name:
  Louis E. Hallman, III

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address
  and Facsimile Number:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  118
  Brookdale Place

  	
   

  
	
   

  	
  Solana
  Beach, CA 92075

  	
   

  
	
   

  	
  Fax:
  (858) 755-6485

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PARENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INSIGHT
  HEALTH SERVICES 

  HOLDINGS CORP.

  
	
   

  	
  (solely
  for the purpose of Section 3.07)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bret W. Jorgensen

  	
   

  
	
   

  	
   

  	
  Name: 
  Bret W. Jorgensen

  	
   

  
	
   

  	
   

  	
  Title: 
  President and Chief Executive

  	
   

  
	
   

  	
   

  	
  Officer

  	
   

  
									

 

13

 

EXHIBIT A

 

STOCK OPTION AGREEMENT

 

14Exhibit 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

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