Document:

EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated
as of August 24, 2004, among Apogee Technology, Inc., a Delaware corporation
(the “Company”), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and
collectively the “Purchasers”); and

 

WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined
below), and Rule 506 promulgated thereunder, the Company desires to issue and
sell to each Purchaser, and each Purchaser, severally and not jointly, desires
to purchase from the Company in the aggregate, up to $4,000,000 of shares of
Common Stock and Warrants on the Closing Date.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.

 

“Closing”
means the closing of the purchase and sale of the Common Stock and the Warrants
pursuant to Section 2.1.

 

“Closing
Date” means the Trading Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities have been satisfied or
waived.

 

“Closing Price” means on any particular date
(a) the last reported closing bid price per share of Common Stock on such date
on the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York time)
as the last reported closing bid price for regular session trading on such
day), or (b) if there is no such price on such date, then the closing bid price
on the Trading Market on the date nearest preceding such date (as reported by
Bloomberg L.P. at 4:15 PM (New York time) as the closing bid price for regular
session trading on such day), or (c)  if
the Common Stock is not then listed or quoted on

 

 

the
Trading Market and if prices for the Common Stock are then reported in the
“pink sheets” published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported,
or (d) if the shares of Common Stock are not then publicly traded the fair
market value of a share of Common Stock as determined by an appraiser selected
in good faith by the Purchasers of a majority in interest of the Shares then
outstanding.

 

“Commission” means the Securities and
Exchange Commission.

 

“Common
Stock” means the common stock of the Company, par value $0.01 per share,
and any securities into which such common stock may hereafter be reclassified.

 

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

 

“Company
Counsel” means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

 

“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“Effective
Date” means the date that the Registration Statement is first declared
effective by the Commission.

 

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

 

“Exempt Issuance” means the issuance of (a)
shares of Common Stock or options to employees, officers or directors of the
Company pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise of or conversion of any securities
issued hereunder, convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of
such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions, provided any such issuance shall only be to a Person
which is, itself or through its subsidiaries, an operating company in the same
or a similar industry to that of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.

 

“FW” means Feldman
Weinstein LLP with offices located at 420 Lexington Avenue, Suite 2620, New
York, New York 10170-0002.

 

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section
3.1(o).

 

“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.

 

“Material
Adverse Effect” shall have the meaning ascribed to such term in Section
3.1(b).

 

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

2

 

“Per Share
Purchase Price” equals $4.75, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.

 

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

 

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

 

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

 

“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.

 

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

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

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities”
means the Shares, the Warrants and the Warrant Shares.

 

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

 

“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant
to this Agreement.

 

“Subscription
Amount” means, as to each Purchaser, the amounts set forth below such
Purchaser’s signature block on the signature page hereto, in United States
dollars and in immediately available funds.

 

“Subsidiary”
shall mean the subsidiaries of the Company, if any, set forth on Schedule
3.1(a).

 

“Trading
Day” means a day on which the Common Stock is traded on a Trading Market.

 

“Trading
Market” means the following markets or exchanges on which the Common Stock
is listed or quoted for trading on the date in question: the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market.

 

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

 

“Warrants” means the Common Stock Purchase
Warrants, in the form of Exhibit B, delivered to the Purchasers at the
Closing in accordance with Section 2.2(a)(iii) hereof, which warrants shall be

 

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exercisable
immediately upon issuance for a term of 5 years and have an exercise price
equal to $5.70(1), subject to adjustment as provided therein.

 

“Warrant Shares” means the shares of
Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II.

PURCHASE AND
SALE

 

2.1           Closing.  On the Closing Date, each Purchaser shall
purchase from the Company, severally and not jointly with the other Purchasers,
and the Company shall issue and sell to each Purchaser, (a) a number of Shares
equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase
Price and (b) the Warrants as determined pursuant to Section 2.2(a)(iii).  The aggregate Subscription Amounts for the
Shares sold hereunder shall be no less than $1,750,000 and up to $4,000,000.  Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at the offices of FW or such other
location as the parties shall mutually agree.

 

2.2           Deliveries.

 

(a)           On the Closing Date,
the Company shall deliver or cause to be delivered to each Purchaser the
following:

 

(i)            this
Agreement duly executed by the Company;

 

(ii)           a
copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver, on an expedited basis, a certificate
evidencing a number of Shares equal to such Purchaser’s Subscription Amount
divided by the Per Share Purchase Price, registered in the name of such
Purchaser;

 

(iii)          within
3 Trading Days of the date hereof, a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire up
to the number of shares of Common Stock equal to 50% of the Shares to be issued
to such Purchaser;

 

(iv)          intentionally
omitted;

 

(v)           the
Registration Rights Agreement duly executed by the Company; and

 

(vi)          a
legal opinion of Company Counsel, in the form of Exhibit C attached
hereto.

 

(b)           On the Closing Date,
each Purchaser shall deliver or cause to be delivered to the Company the
following:

 

(i)            this
Agreement duly executed by such Purchaser;

 

(ii)           such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and

 

(1)           120%
of the Per Share Purchase Price.

 

4

 

(iii)          the
Registration Rights Agreement duly executed by such Purchaser.

 

2.3           Closing
Conditions.

 

(a)           The obligations of
the Company hereunder in connection with the Closing are subject to the
following conditions being met:

 

(i)            the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;

 

(ii)           all
obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii)          the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.

 

(b)           The respective
obligations of the Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i)            the
accuracy in all material respects on the Closing Date of the representations
and warranties of the Company contained herein;

 

(ii)           all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;

 

(iii)          the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

 

(iv)          there
shall have been no Material Adverse Effect with respect to the Company since
the date hereof; and

 

(v)           From
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of each
Purchaser, makes it impracticable or inadvisable to purchase the Shares at the
Closing.

 

ARTICLE III.

REPRESENTATIONS
AND WARRANTIES

 

3.1           Representations
and Warranties of the Company.

Except as set forth under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to each
Purchaser:

 

(a)           Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and clear
of any Liens, and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of

 

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preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no
subsidiaries, then references in the Transaction Documents to the Subsidiaries
will be disregarded.

 

(b)           Organization and Qualification.  Each of the Company and the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted.  Neither the Company
nor any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational
or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect on
the results of operations, assets, business or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”) and the Company has not received
notice of the institution of any Proceeding in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.

 

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

 

(d)           No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company, the issuance and sale of the Shares
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others
any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or result
in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

6

 

(e)           Filings, Consents and Approvals.  The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the
filing with the Commission of the Registration Statement, (iii) application(s)
to each applicable Trading Market for the listing of the Shares and Warrant
Shares for trading thereon in the time and manner required thereby, and (iv)
the filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).

 

(f)            Issuance of the Securities.  The Shares and Warrants are duly authorized
and, when issued and paid for in accordance with the Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer
provided for in the Transaction Documents. 
The Warrant Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.

 

(g)           Capitalization.  The capitalization of the Company is as
described in the Company’s most recent periodic report filed with the
Commission.  The Company has not issued
any capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, and pursuant to
the conversion or exercise of outstanding Common Stock Equivalents.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale
of the Securities and except as set forth in the SEC Reports, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common
Stock.  The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares.  Except as disclosed in the SEC Reports, there
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

(h)           SEC Reports; Financial Statements.  The Company has filed all reports required to
be filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials, including the exhibits thereto, being
collectively referred to herein as the “SEC Reports”) on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact

 

7

 

or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

 

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

 

(j)            Litigation.  Except as set forth in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. 
Neither the Company nor any Subsidiary, nor any current director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current director or officer of the Company. 
The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

 

(k)           Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.

 

(l)            Compliance.  Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any

 

8

 

order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business except in each case as could not have a
Material Adverse Effect.

 

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

 

(n)           Title to Assets.  The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all tangible personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries and Liens for
the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties.  Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in material compliance.

 

(o)           Patents and Trademarks.  To the knowledge of the Company, the Company
and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for use in
connection with their respective businesses as described in the SEC Reports and
which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person.  To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of
the Company.

 

(p)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.  To the best of Company’s knowledge, such
insurance contracts and policies are accurate and complete in all material
respects.  Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

 

(q)           Transactions With Affiliates and
Employees.  Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.

 

9

 

(r)            Sarbanes-Oxley; Internal
Accounting Controls.  The Company is
in material compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company’s most recently filed periodic report under the
Exchange Act  was being prepared. 
The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures as of the end of the period covered by
the most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”).  The Company
presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation
Date, there have been no significant changes in the Company’s internal control
over financial reporting (as such term is defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal control over financial
reporting.

 

(s)           Certain Fees.  No brokerage or finder’s fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
other than Jesup & Lamont Securities Corporation (the “Placement Agent”)
with respect to the transactions contemplated by this Agreement.  The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.

 

(t)            Private Placement. Assuming
the accuracy of the Purchasers representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Trading Market.

 

(u)           Investment Company. The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Shares, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

 

(v)           Registration Rights.  No Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the
Company.

 

(w)          Listing and Maintenance
Requirements.  The Company’s Common
Stock is registered pursuant to Section 12(b) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. 
The Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance requirements.

 

10

 

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

 

(y)           Disclosure.  The Company confirms that, neither the
Company nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or might
constitute material, non-public information. 
The Company understands and confirms that the Purchasers will rely on
the foregoing representations and covenants in effecting transactions in
securities of the Company.  All
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with respect to
such representations and warranties and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof and/or on the Purchasers’ respective signature pages to this
Agreement.

 

(z)            No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, neither the Company, nor any of its 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 this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.  

 

(aa)         Solvency.  Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the
Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; and (ii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into
account all currently anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its debt when such amounts are required to be
paid.  The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its
debt).

 

(bb)         Form S-3 Eligibility.  The Company is eligible to register the
resale of its Common Stock by the Purchasers under Form S-3 promulgated under
the Securities Act and the Company hereby covenants and agrees to use its
commercially reasonable efforts to maintain its eligibility to use Form S-3
until the Registration Statement covering the resale of the Shares shall have
been filed with, and declared effective by, the Commission.

 

(cc)         Taxes.  Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary has filed all
necessary federal, state and foreign income and franchise tax returns, or has
filed appropriate

 

11

 

extensions for the filing of such returns, and has paid or accrued all
taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which has been asserted or threatened against the Company or any
Subsidiary.

 

(dd)         General Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. 
The Company has offered the Shares for sale only to the Purchasers and
certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.

 

(ee)         Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.

 

(ff)           Accountants.  The Company’s accountants are set forth on Schedule
3.1(ff) of the Disclosure Schedule. 
To the Company’s knowledge, such accountants, who the Company expects
will express their opinion with respect to the financial statements to be
included in the Company’s Annual Report on Form 10-K for the year ending
December 31, 2004, are an independent registered public accounting firm as
required by the Securities Act.

 

(gg)         Acknowledgment Regarding Purchasers’
Purchase of Shares.  The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby. 
The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by any Purchaser or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Purchasers’ purchase of the Shares.  The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

 

3.2           Representations and
Warranties of the Purchasers.  Each
Purchaser hereby, for itself and for no other Purchaser, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:

 

(a)           Organization; Authority.  Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. 
Each Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.

 

12

 

(b)           Investment Intent.  Such Purchaser understands that the
Securities are “restricted securities” and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof, has no present intention of
distributing any of such Securities and has no arrangement or understanding
with any other persons regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

 

(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants, it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.  Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

 

(d)           Experience of Such Purchaser.  Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. 
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.

 

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

 

(f)            Short Sales.  Each Purchaser represents that from the date
that it was approached to participate in the transaction contemplated by this
Agreement through the Closing Date, neither it nor its affiliates have engaged
in any trades with respect to, or made any net short sales of, or granted any
option for the purchase of or entered into any hedging or similar transaction
with the same economic effect as a net short sale of the Common Stock.

 

(g)           Registration Required.  Each Purchaser hereby covenants with the
Company not to make any sale of the Shares or Warrant Shares without complying
with the provisions hereof and of the Registration Rights Agreement, and
without effectively causing the prospectus delivery requirement under the
Securities Act to be satisfied (unless such Purchaser is selling such Shares or
Warrant Shares in a transaction not subject to the prospectus delivery
requirement), and such Purchaser acknowledges that the certificates evidencing
the Shares or Warrant Shares will be imprinted with a legend that prohibits
their transfer except in accordance therewith.

 

(h)           No Tax or Legal Advice.  Such Purchaser understands that nothing in
this Agreement, any other Transaction Document or any other materials presented
to such Purchaser in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. 
Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of Securities.

 

The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
this Section 3.2.

 

13

 

ARTICLE
IV.

OTHER
AGREEMENTS OF THE PARTIES

 

4.1           Transfer
Restrictions.

 

(a)           The Securities may
only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.  As a condition of
transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.

 

(b)           The Purchasers agree
to the imprinting, so long as is required by this Section 4.1(b), of a legend
on any of the Securities in the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT.

 

The Company acknowledges and agrees that a
Purchaser may from time to time pledge pursuant to a bona fide margin agreement
with a registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be
required of such pledge.  At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities, including,
if the Securities are subject to registration pursuant to the Registration
Rights Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

 

(c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Shares or Warrant Shares pursuant to Rule 144, or (iii) if such Shares or
Warrant Shares are eligible for sale under Rule 144(k), or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and

 

14

 

pronouncements issued by the Staff of the Commission).  The Company shall cause its counsel to issue
a legal opinion to the Company’s transfer agent promptly after the Effective
Date if required by the Company’s transfer agent to effect the removal of the
legend hereunder.  If all or any portion
of a Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Warrant Shares, such Warrant Shares shall
be issued free of

 

15

 

all legends.  The Company agrees
that following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a certificate representing Shares or Warrant Shares, as the case may
be, issued with a restrictive legend (such date, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and other legends.  The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.

 

(d)           In addition to such
Purchaser’s other available remedies, the Company shall pay to a Purchaser, in
cash, as partial liquidated damages and not as a penalty, for each $1,000 of
Shares or Warrant Shares (based on the Closing Price of the Common Stock on the
date such Securities are submitted to the Company’s transfer agent) subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day
after the Legend Removal Date until such certificate is delivered. Nothing
herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.

 

(e)           Each Purchaser,
severally and not jointly with the other Purchasers, agrees that the removal of
the restrictive legend from certificates representing Securities as set forth
in this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.

 

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

 

4.3           Integration.  The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.

 

4.4           Securities Laws
Disclosure; Publicity.  The Company
shall, by 8:30 a.m. Eastern time on the Trading Day following the date hereof,
issue a press release or file a Current Report on Form 8-K, in each case
reasonably acceptable to the Placement Agent on behalf of the Purchasers,
disclosing the material terms of the transactions contemplated hereby.  The Company and the Placement Agent shall
consult with each other

 

16

 

in issuing any
other press releases with respect to the transactions contemplated hereby, and
neither the Company nor the Placement Agent shall issue any such press release
or otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of the Placement Agent, or without
the prior consent of the Placement Agent, with respect to any press release of
the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement
and (ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).

 

4.5           Shareholder
Rights Plan.  No claim will be made
or enforced by the Company or, to the knowledge of the Company, any other
Person that any Purchaser is an “Acquiring Person” under any shareholder rights
plan or similar plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

 

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

 

4.7           Use of Proceeds.  Except as set forth on Schedule 4.7
attached hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s debt (other than payment of trade payables in
the ordinary course of the Company’s business and prior practices), to redeem
any Company equity or equity-equivalent securities or to settle any outstanding
litigation.

 

4.8           No Liability of
Purchaser.  The Company agrees that
neither the Purchasers nor any such affiliates, partners, directors, agents,
employees or controlling persons of a Purchaser shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company
solely as a result of acquiring the Securities under this Agreement.

 

4.9           Indemnification
of Purchasers.  Subject to the
provisions of this Section 4.9, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any
of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the other Transaction Documents or (b) any action
instituted against a Purchaser, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of such Purchaser,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Purchaser may have with any such stockholder
or any violations by the Purchaser of state or federal securities laws or any
conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance).  If any action
shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right to

 

17

 

assume the defense
thereof with counsel of its own choosing. 
Any Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable
period of time to assume such defense and to employ counsel or (iii) in such
action there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party.  The
Company will not be liable to any Purchaser Party under this Agreement (i) for
any settlement by a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (ii)
to the extent, but only to the extent that a loss, claim, damage or liability
is attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement or
in the other Transaction Documents.

 

4.10         Reservation of
Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue Shares pursuant to this Agreement and
Warrant Shares pursuant to any exercise of the Warrants.

 

4.11         Listing of Common Stock.  The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on a Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. 
The Company will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Trading Market.

 

4.12         Equal Treatment of
Purchasers.  No consideration shall
be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction
Documents.  For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended to treat
the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

4.13         Participation in Future Financing.  From the date hereof until 12 months after
the Effective Date, upon any financing by the Company of its Common Stock or
Common Stock Equivalents (a “Subsequent Financing”), each Purchaser shall have
the right to participate in up to 100% of such Subsequent Financing (the “Participation
Maximum”).  At least 5 Trading Days
prior to the closing of the Subsequent Financing, the Company shall deliver to
each Purchaser a written notice of its intention to effect a Subsequent
Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if
it wants to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”).  Upon the request
of a Purchaser, and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than 1 Trading Day
after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto.  If by 6:30 p.m. (New York City time) on the
second Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice.  If the Company receives no notice from a
Purchaser as of such 2nd Trading Day, such Purchaser shall be deemed
to have notified the Company that it does not elect to participate.  The Company must provide the Purchasers with
a second Subsequent Financing Notice, and the Purchasers will again have the
right of participation set forth above in this Section 4.13, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice
within 60 Trading Days after the date of the initial Subsequent Financing
Notice.  In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Subsequent Financing, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Participation Maximum.  “Pro
Rata Portion” is the ratio of (x) the Subscription Amount of Securities
purchased by a participating Purchaser and (y) the sum of the aggregate
Subscription Amount of all participating Purchasers.  Notwithstanding the foregoing, this Section
4.13 shall not apply in respect of an Exempt Issuance.

 

4.14         Subsequent Equity
Sales.  From the date hereof until 90
days after the Effective Date, neither the Company nor any Subsidiary shall
issue shares of Common Stock or Common Stock Equivalents; provided, however,
the 90 day period set forth in this Section 4.14 shall be extended for the
number of Trading Days during such period in which (y) trading in the Common
Stock is suspended by any Trading Market, or (z) following the Effective Date,
the Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Shares and Warrant Shares. 
Notwithstanding the foregoing, this Section 4.14 shall not apply in
respect of an Exempt Issuance. In addition to the limitations set forth herein,
from the date hereof until such time as no Purchaser holds any of the
Securities, the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a “Variable Rate
Transaction” or an “MFN Transaction” (each as defined below).  The term “Variable Rate Transaction”
shall mean a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for,
or include the right to receive additional shares of Common Stock either (A) at
a conversion,

 

18

 

exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock.  The term “MFN Transaction” shall mean
a transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions which grants to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to such investor in
such offering.

 

4.15         Delivery of
Securities After Closing.  The
Company shall deliver, or cause to be delivered, the respective Shares and
Warrants purchased by each Purchaser to such Purchaser within 3 Trading Days of
the Closing Date.

 

ARTICLE V.

MISCELLANEOUS

 

5.1           Fees and Expenses.  The Company shall reimburse Bonanza Capital
Ltd. (“Bonanza”) the sum of $10,000, of which receipt is acknowledged,
and the Placement Agent, the sum of $15,000 plus $500 per state for blue sky
filings, for their respective legal fees and expenses. Bonanza may pay itself
such fees by set-off from the amount of its investment. The Company shall
deliver, prior to the Closing, a completed and executed copy of the Closing
Statement, attached hereto as Annex A. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The
Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Securities.

 

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

 

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

 

5.4           Amendments;
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by the Company and each Purchaser or, in the case of
a waiver, by the party against whom enforcement of any such waiver is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right.

 

5.5           Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The
language used in this

 

19

 

Agreement will
be deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

5.6           Successors and
Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser.  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Purchasers”.

 

5.7           No Third-Party
Beneficiaries.  This Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.9.

 

5.8           Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed
by and construed and enforced in accordance with the internal laws of the State
of New York, without regard to the principles of conflicts of law thereof.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  The parties hereby waive
all rights to a trial by jury.  If either
party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

5.9           Survival.  The representations and warranties herein
shall survive the Closing and delivery of the Shares and Warrant Shares.

 

5.10         Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 
In the event that any signature is delivered by facsimile transmission,
such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile signature page were an original thereof.

 

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

 

5.12         Rescission and
Withdrawal Right.  Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole

 

20

 

discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.

 

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

 

5.14         Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be entitled to specific performance under
the Transaction Documents.  The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

 

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

 

5.16         Independent Nature
of Purchasers’ Obligations and Rights. 
The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under any Transaction Document.  Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser has been represented by its
own separate legal counsel in their review and negotiation of the Transaction
Documents.  For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through FW. 
FW does not represent all of the Purchasers but only Bonanza, who has
acted as placement agent to the transaction. 
The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

 

5.17         Liquidated Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

 

(Signature Page Follows)

 

21

 

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

 

 

	
  APOGEE TECHNOLOGY, INC.

  	
  Address for Notice:

  
	
   

  	
   

  
	
  By:

  	
  /s/ Herbert M. Stein

  	
   

  	
  129
  Morgan Drive

  
	
   

  	
  Name: Herbert M. Stein

  	
  Norwood,
  MA 02062

  
	
   

  	
  Title: President and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  With a copy to (which shall not constitute notice):  

  	
   

  
	
   

  	
   

  
	
  Mintz,
  Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

  One Financial Center

  Boston, MA 02111

  Attn:  Megan N. Gates, Esq.

  Tel:  617-348-4443

  Fax: 617-542-2241

  	
   

  
				

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

22

 

[PURCHASER SIGNATURE PAGES TO ATA SECURITIES PURCHASE AGREEMENT]

 

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

 

	
  Name
  of Investing Entity:

  	
   

  	
   

  	 

	
  Signature of Authorized Signatory of Investing Entity:

  	
   

  	
   

  	 

	
  Name
  of Authorized Signatory:

  	
   

  	
   

  	 

	
  Title
  of Authorized Signatory:

  	
   

  	
   

  
	
  Email
  Address of Authorized Entity:

  	
   

  	
   

  	 

								

 

 

Address
for Notice of Investing Entity:

 

 

Address
for Delivery of Securities for Investing Entity (if not same as above):

 

 

Subscription
Amount:

Shares:

Warrant
Shares:

EIN
Number: 
[PROVIDE THIS UNDER SEPARATE COVER]

 

[SIGNATURE PAGES CONTINUE]

 

23

 

Annex A

 

CLOSING STATEMENT

 

Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto, the
purchasers shall purchase up to $4,000,000 of Common Stock and Warrants from
Apogee Technology, Inc. (the “Company”). 
All funds will be wired into a trust account maintained by Continental
Stock Transfer & Trust Company, the escrow agent for the transaction.  All funds will be disbursed in accordance with
this Closing Statement.

 

Disbursement Date:           August ____, 2004

 

 

	
  I. PURCHASE PRICE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gross Proceeds to be Received in Trust

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  II. DISBURSEMENTS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Amount Disbursed:

  	
   

  	
  $

  	
   

  

 

WIRE INSTRUCTIONS:

 

	
  To:

  	
   

  	
   

  
	
  To:

  	
   

  	
   

  

 

24EXHIBIT 10.2

 

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made
and entered into as of August 24, 2004, by and among Apogee Technology, Inc., a
Delaware corporation (the “Company”), and the purchasers signatory hereto
(each such purchaser, a “Purchaser” and collectively, the “Purchasers”).

 

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

 

The Company and the Purchasers hereby agree as follows:

 

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

 

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

 

“Effectiveness Date” means, with
respect to the Registration Statement required to be filed hereunder, the
earlier of (a) the 90th calendar day following the date of the Purchase
Agreement (which shall be extended to 120 days in the event of a full review by
the Commission), and (b) the fifth Trading Day following the date on which the
Company is notified by the Commission that the Registration Statement will not
be reviewed or is no longer subject to further review and comments.

 

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

 

“Event” shall have the meaning set
forth in Section 2(b).

 

“Event Date” shall have the meaning
set forth in Section 2(b).

 

“Filing Date” means, with respect to
the Registration Statement required to be filed hereunder, the 30th
calendar day following the date of the Purchase Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Prospectus” means the prospectus
included in the Registration Statement (including, without limitation, a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance

 

1

 

upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means all of
the Shares and the Warrant Shares issued in connection with the Purchase
Agreement, together with any shares of Common Stock issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.

 

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

 

“Rule 415” means Rule 415 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.

 

2.                                       Registration.

 

(a)                                  On
or prior to the Filing Date, the Company shall prepare and file with the
Commission the Registration Statement covering the resale of all of the
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415.  The Registration
Statement required hereunder shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3, in
which case the Registration shall be on another appropriate form in accordance
herewith).  The Registration Statement
required hereunder shall contain (except if otherwise directed by the Holders)
substantially the “Plan of Distribution” attached hereto as Annex A.  Subject to the terms of this Agreement, the
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act
until the date which is two years after the Closing Date or such later date
when all Registrable Securities covered by the Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s transfer agent and
the affected Holders (the “Effectiveness Period”).

 

2

 

(b)                                 If:
(i) a Registration Statement is not filed on or prior to the Filing Date (provided,
however, that if a Holder fails to provide the Company with any
information that is required to be provided in the Registration Statement with
respect to such Holder, then the Filing Date shall be extended until three (3)
Trading Days following the date of receipt by the Company of such required
information; and provided, further, that if the Company files a
Registration Statement without affording the Holder the opportunity to review
and comment on the same as required by Section 3(a), the Company shall not be
deemed to have satisfied this clause (i)), or (ii) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days of the date that
the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be “reviewed,” or is not
subject to further review, or (iii) prior to the date when such Registration
Statement is first declared effective by the Commission, the Company fails to
file a pre-effective amendment and otherwise respond in writing to comments
made by the Commission in respect of such Registration Statement within 10
calendar days after the receipt of comments by or notice from the Commission
that such amendment is required in order for a Registration Statement to be
declared effective, or (iv) a Registration Statement filed or required to be
filed hereunder is not declared effective by the Commission on or before the
Effectiveness Date, or (v) after a Registration Statement is first declared
effective by the Commission, it ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the Prospectus therein
to resell such Registrable Securities, for in any such case 10 consecutive
calendar  days but no more than an aggregate of 15 calendar days during
any 12 month period (which need not be consecutive Trading Days) (any such
failure or breach being referred to as an “Event,” and for purposes of
clause (i) or (iv) the date on which such Event occurs, or for purposes of
clause (ii) the date on which such five Trading Day period is exceeded, or for
purposes of clause (iii) the date which such 10 calendar day period is
exceeded, or for purposes of clause (v) the date on which such 10 or 15
calendar day period, as applicable, is exceeded being referred to as “Event
Date”), then in addition to any other rights the Holders may have hereunder
or under applicable law, then, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have
been cured by such date) until the applicable Event is cured,  the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
1.5% of the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement for any Registrable Securities then held by such
Holder.  If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.  The partial liquidated
damages pursuant to the terms hereof shall apply on a daily pro-rata basis for
any portion of a month prior to the cure of an Event.

 

3

 

3.                                       Registration
Procedures

 

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

 

(a)                                  Not
less than five Trading Days prior to the filing of the Registration Statement
or any related Prospectus or any amendment or supplement thereto, the Company
shall, (i) furnish to the Holders copies of all such documents proposed to be
filed (including documents incorporated or deemed incorporated by reference to
the extent requested by such Person) which documents will be subject to the
review of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act.  The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities shall reasonably
object in good faith, provided that the Company is notified of such objection
in writing no later than 5 Trading Days after the Holders have been so
furnished copies of such documents.  Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Holder Questionnaire”)
not less than two Trading Days prior to the Filing Date or by the end of the
fourth Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.

 

(b)                                 (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to the Registration
Statement or any amendment thereto and, as promptly as reasonably possible,
upon request, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.

 

(c)                                  Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
possible and (if requested by any such Person) confirm such notice in writing
promptly following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether
there will be a “review” of the Registration Statement and whenever the
Commission comments in writing on the Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with

 

4

 

respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation
of any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the  circumstances
under which they were made, not misleading.

 

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

 

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

 

(f)                                    Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection with
resales by the Holder of Registrable Securities.  Subject to the terms of this Agreement, the
Company hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section
3(c).

 

(g)                                 Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder

 

5

 

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

 

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

 

(i)                                     Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If
the Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(c) above to suspend the use of any Prospectus until the requisite
changes to such Prospectus have been made, then the Holders shall suspend use
of such Prospectus.  The Company will use
its commercially reasonable to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. 
The Company shall be entitled to exercise its right under this Section
3(i) to suspend the availability of a Registration Statement and Prospectus,
subject to the payment of liquidated damages pursuant to Section 2(b), for a
period not to exceed 60 days (which need not be consecutive days) in any 12
month period.

 

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

 

(k)                                  The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such
Holder and, if required by the Commission, the person thereof that has voting
and dispositive control over the Shares. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to furnish such
information within three Trading Days of the Company’s request, any liquidated damages
that are accruing at such time as to such Holder only shall be tolled and any
Event that may otherwise occur solely because of such delay shall be suspended
as to such Holder only, until such information is delivered to the Company.

 

6

 

4.                                       Registration
Expenses.  All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to the Registration Statement. 
The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with the Trading Market on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. 
In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange as required hereunder. In no event shall the Company be responsible
for any broker or similar commissions or, except to the extent provided for in
the Transaction Documents, any legal fees or other costs of the Holders.

 

5.                                       Indemnification

 

(a)                                  Indemnification by
the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto (it being understood
that the Holder has approved Annex A hereto for this purpose) or (ii) in the
case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an

 

7

 

outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.

 

(b)                                 Indemnification by
Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
to the extent arising out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or (ii) to the extent that (1) such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement (it being understood that the Holder has approved Annex
A hereto for this purpose), such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

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

 

8

 

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

 

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

 

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

 

9

 

party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

 

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

 

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

 

6.                                       Miscellaneous

 

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

 

(b)                                 No Piggyback on
Registrations.  Except as set forth
on Schedule 6(b) attached hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in a Registration Statement other than the
Registrable Securities.  No Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company. 
The Company shall not file any other registration statement until after
the Effective Date.

 

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

 

(d)                                 Discontinued
Disposition.  Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in
Section 3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the “Advice”)
by the Company

 

10

 

that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus
or Registration Statement.  The Company
will use its commercially reasonable efforts to ensure that the use of the
Prospectus may be resumed as promptly as it practicable.  The Company agrees and acknowledges that any
periods during which the Holder is required to discontinue the disposition of
the Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).

 

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

 

(f)                                    Amendments and
Waivers.  The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and each Holder of the then outstanding Registrable
Securities.

 

(g)                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.

 

(h)                                 Successors and
Assigns.  This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder.  Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted under the
Purchase Agreement.

 

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

 

11

 

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

 

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

 

(l)                                     Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

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

 

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

 

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

 

12

 

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

 

	
   

  	
  APOGEE TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert M. Stein

  	
   

  
	
   

  	
  Name: Herbert M. Stein

  
	
   

  	
  Title: President and Chief Executive Officer

  

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

13

 

[PURCHASER’S SIGNATURE PAGE TO ATA RRA]

 

	
  Name
  of Investing Entity:

  	
   

  	
   

  	 

	
  Signature of Authorized Signatory of Investing Entity:

  	
   

  	
   

  
	
  Name
  of Authorized Signatory:

  	
   

  	
   

  
	
  Title
  of Authorized Signatory:

  	
   

  	
   

  
							

 

[SIGNATURE PAGES CONTINUE]

 

14

 

ANNEX A

 

Plan of Distribution

 

The Selling Stockholders (the “Selling Stockholders”) of the
common stock (“Common Stock”) of Apogee Technology, Inc., a Delaware
corporation (the “Company”) and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. 
These sales may be at fixed or negotiated prices.  The Selling Stockholders may use any one or
more of the following methods when selling shares:

 

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

 

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

 

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

 

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

 

•                  privately
negotiated transactions;

 

•                  settlement of
short sales entered into after the date of this prospectus;

 

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

 

•                  a combination of
any such methods of sale;

 

•                  through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise; or

 

•                  any other method
permitted pursuant to applicable law.

 

The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available,
rather than under this prospectus.

 

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

 

15

 

In connection with the sale of our common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume.  The Selling Stockholders may
also sell shares of our common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. 
The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to
such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

 

The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales.  In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.  Each Selling
Stockholder has informed the Company that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock.

 

The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares.  The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters” within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. 
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144
rather than under this prospectus.  Each
Selling Stockholder has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the resale shares.  There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.

 

We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect.  The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to our common stock for a
period of two business days prior to the commencement

 

16

 

of the distribution.  In
addition, the Selling Stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of shares of our common
stock by the Selling Stockholders or any other person.  We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.

 

17

 

Annex
B

 

APOGEE
TECHNOLOGY, INC.

 

Selling Securityholder Notice and
Questionnaire

 

The undersigned beneficial owner of common stock, par value $0.01 per
share (the “Common Stock”), of Apogee Technology, Inc, a Delaware
corporation (the “Company”), (the “Registrable Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement on
Form S-3 (the “Registration Statement”) for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the “Securities
Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of August ___, 2004 (the “Registration
Rights Agreement”), among the Company and the Purchasers named
therein.  A copy of the Registration
Rights Agreement is available from the Company upon request at the address set
forth below.  All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Registration
Rights Agreement.

 

Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Securityholder”)
of Registrable Securities hereby elects to include the Registrable Securities
owned by it and listed below in Item 3 (unless otherwise specified under such
Item 3) in the Registration Statement.

 

18

 

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

 

QUESTIONNAIRE

 

	
  1. 
  Name.

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (a)

  	
   

  	
  Full Legal
  Name of Selling Securityholder

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (b)

  	
   

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

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (c)

  	
   

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

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  2. 
  Address for Notices to Selling Securityholder:

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
  Telephone:

  	
   

  	
   

  	 

	
  Fax:

  	
   

  	
   

  	 

	
  Contact
  Person:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	 

	
  3. 
  Beneficial Ownership of Registrable Securities:

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (a)

  	
   

  	
  Type and Principal Amount of Registrable Securities beneficially
  owned:

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

												

 

19

 

4.  Broker-Dealer Status:

 

(a)                                  Are
you a broker-dealer?

 

Yes o                                                                                                             No
o

 

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

 

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

 

Yes o                                                                                                             No
o

 

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

 

Yes o                                                                                                             No
o

 

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

 

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

 

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

 

	
   

  	
  (a)

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

20

 

6.  Relationships with the Company:

 

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

 

	
   

  	
  State any
  exceptions here:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
							

 

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

 

21

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